BTP-Bund spread down to 107 basis points, yields at 4.53%

The spread between Italian BTPs and German Bunds showed a decline when the financial markets opened on 14 October. The spread fell to 107 basis points, for the first time below the psychological threshold of 110 points since the opening days. Yields remained stable at 4.53%, while German ones rose.

The auction of medium and long-term BTP bonds ended yesterday, bringing 7 billion euros into state coffers. Yields were quite high, even over 4.8% for longer-dated securities. Despite this, demand was sustained.

The spread is falling, but not the yields

The reduction in the spread that occurred at the opening on October 14 was caused above all by an increase in the yields of German Bunds, not by a decrease in those of BTPs, which remained at 4.53%. This share has been rather stable for a few days now and could be a new point of equilibrium for Italian stocks after the volatility of recent weeks.

The debt crisis on pause

All major elements of the global debt crisis presented no new developments this week. Treasuries and bonds of large companies have remained at previous levels and only French debt continues to show the consequences of the pressure, especially due to the country’s political instability, with the government having great difficulty in approving a new budget law.

How the BTP auction on October 13th went

The auction of medium and long-term BTPs ended yesterday, the second issue of government bonds in the month of October. The Treasury has collected the maximum amount expected, 7 billion euros, divided into:

• 2.5 billion euros of the 3% 3-year BTP expiring on 15 September 2029;
• 3 billion euros of the 3.35% 7-year BTP expiring on 15 September 2033;
• 1.5 billion euros of the 3.95% 15-year BTP expiring on 1 October 2041.

Yields were quite high, particularly those of 15-year bonds:

• the 3% 3-year BTP expiring on 15 September 2029 had a yield of 3.69%, 27 basis points above the last tranche;
• the 3.35% 7-year BTP expiring on 15 September 2033 had a yield of 4.24%, 26 basis points above the last tranche;
• the 3.95% 15-year BTP expiring on 1 October 2041 had a yield of 4.84%, 61 basis points above the last tranche.

The next auctions will be held:

• the auction of Short Term BTPs and BTP€i on Tuesday 27 October;
• the Bot auction on Wednesday 28 October;
• the auction of medium and long-term bonds will be held on Thursday 29 October.

European spreads

Substantial stability for European spreads, with Spain remaining just above 60 basis points of spread and with France returning to 137 after yesterday’s peak, confirming however the large country with the most volatile government bonds in Europe at the moment.