The spread between Italian BTPs and German Bunds began to decrease again at the start of October 16th. The differential has narrowed to 107 points. Positive signals from yields, which fell below the 4.50% threshold, reaching 4.47% and causing Treasury bonds to move closer to Berlin bonds.
The bond market continues to fluctuate, but yesterday the former ECB president Mario Draghi seems to have ruled out an intervention by Frankfurt to reduce interest rates on the debt of several countries, in particular France, as had happened in the past.
The spread falls again
The period of spread volatility continues. The differential does not seem to be able to set itself on a predictable trajectory, continuing to alternate sudden increases with equally sudden drops. The return below 110 basis points, after yesterday’s difficult opening, remains positive, as does the drop in yields below the 4.50% threshold.
The ECB has no intention of intervening
The opening of the Italian spread is even more significant in light of Mario Draghi’s words yesterday. The former president of the ECB in fact explained that the situation of European government bonds, although critical, does not require intervention by the Eurotower.
In the past, the ECB had in fact made extensive use of the quantitative easing tool to reduce the exposure of some securities to the markets, including Italian ones. However, the economic context has changed and a similar intervention would be much more complex now.
The ECB is in fact implementing a restrictive monetary policy, increasing interest rates to combat inflation. Buying government bonds would mean putting euros on the market, partially diluting the effect of the increase in interest rates and risking accelerating the increase in prices.
The spread falls across Europe
The government bonds of other European countries also reacted well to Draghi’s words, which reduced the pressure on continental debts. In Spain the Bonos remained 60 points away from the Bunds, with a yield of 4.00%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.40% | – |
| Italian BTPs | 4.47% | 107 |
| French Oats | 4.78% | 1138 |
| Spanish Bonos | 4.00% | 60 |
France continues to be the country in greatest difficulty. The Oat spread is equal to 138 basis points, even if yields are progressively moving away from the peaks of recent weeks.
The next auctions of government bonds
Starting from the last week of October, the auctions of Italian government bonds will return. The dates to note are:
- 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.
Between 19 and 23 October there will also be the issue of Btp Valore and Btp Valore Insieme, government bonds reserved for retail investors, i.e. private individuals.
