The spread between Italian BTPs and German Bunds remained essentially stable compared to yesterday’s opening, at 116 basis points. Yields increased slightly, reaching 4.54%. The markets are uncertain due to the elections in Israel, which did not return a clear winner and therefore raise fears of a new escalation with Iran.
Yesterday the first of the end-of-month government bond auctions concluded, with the BTP Short and BTP€i raising 3.5 billion euros.
Stable spread but rising yields due to the elections in Israel
The normalization of European government bond markets slowed after yesterday’s progress due to the election results in Israel.
With more than 60% of the votes counted, the party of outgoing Prime Minister Benjamin Netanyahu is the most voted, but has lost a fifth of its seats in Parliament. Above all, neither his coalition nor that of the opposition has a majority, due to the excellent result of the Arab parties, who almost doubled their seats.
Because oil and yields are rising
The consequence of these results was an increase in the price of oil. Markets fear a return to hostilities with Iran at a time of instability for Israel, which would result in new difficulties in oil exports from the Persian Gulf. For this reason, government bond yields began to increase again, to 4.54% for Italian ten-year BTPs. However, the spread remained stable at 116 basis points.
Even in the rest of Europe the spread is stable
Even in Spain the spread remained stable at yesterday’s levels. The Bonos are 64 basis points away from the Bunds, with yields only slightly higher than yesterday’s, at 4.02%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.37% | – |
| Italian BTPs | 4.53% | 116 |
| French Oats | 4.95% | 158 |
| Spanish bonos | 4.02% | 65 |
The situation in France is also stable. A novelty for Oat, which in recent weeks has undergone very strong increases due to speculation. Yields remained far from the 5% threshold, with the spread effectively stable at 158 basis points.
Today the BOT auctions, those of the BTP Short concluded successfully
The auctions of Short Term BTPs and BTP€i ended yesterday:
- the 2-year Short Term BTPs expiring in October 2028 reached a yield of 3.55%;
- the Btp€i maturing in 2032 reached a yield of 1.69%;
- the Btp€i maturing in 2035 reached a yield of 2.10%.
Today the BOT auctions, the shorter-term government bonds, will be held. Will be issued:
- a Bot with 4 months of remaining life (ISIN IT0005699340);
- a Bot with 1 month of remaining life (ISIN IT0005684888).
The last auction, that of medium and long-term securities, will be held tomorrow 29 October and will include:
- a BTP maturing in February 2031 with a gross annual coupon of 3.50%;
- a BTP maturing in February 2032 with a gross annual coupon of 3.95%;
- a BTP maturing in October 2036 with a gross annual coupon of 4.00%.
