The spread between Italian BTPs and German Bunds has started to grow again. The increase in oil prices nullified last week’s progress and brought yields back above 4.50% and the spread to more than 111 basis points.
Issues of Valore BTPs will begin today, with two different options, one with frequent coupons and the other with a single coupon. These are securities dedicated to private individuals.
Because the spread has increased again
It was another disappointing opening for the spread and for Italian government bonds, which appear unable to find stability. After last week’s declines, an increase in the price of oil was enough to bring the spread back above 110 basis points and yields above 4.50%.
The causes of volatility are resilient
The reason why BTPs are unable to stabilize or return to summer levels is complex and, for once, does not have much to do with Italian debt. The enormous deficit of the State remains a risk factor, which for example determines the 50 basis points of difference between the Spanish Bonos and the Italian bonds, but it has no role in these variations.
All the factors fueling this instability are international and have to do with the war unleashed by Israel and the United States against Iran in early March. The resulting energy crisis caused inflation to rise again. As a result, the ECB is expected to raise interest rates and European economies to slow down. All factors that lead to the increase in government bond yields.
Instability also continues for European spreads
In support of this thesis there is data on the spreads of the other main European countries. In Spain, Bonos have returned to 62 basis points from Bunds, with yields above 4%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.41% | – |
| Italian BTPs | 4.52% | 111 |
| French Oats | 4.85% | 144 |
| Spanish bonos | 4.03% | 62 |
France is always the country most in difficulty, shaken by protests and destined for a race for the presidency that seems like a game between the far right and the far left. The markets do not trust either of the two prospects, and pressurize French debt, bringing the spread to 144 basis points.
The issuance of Valore BTPs begins today
While waiting for the next government bond auctions, the issuance of Valore BTPs will begin today, October 19th. These are securities dedicated to retail investors, therefore to private individuals, which offer a higher return than others and two different formulas:
- one with frequent coupons, every three months;
- one with a single coupon at the maturity of the bond.
The regular auctions, however, will be held in the last days of the month:
- 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.
