The spread between Italian BTPs and German Bunds began to decline again at the opening on 29 October. The differential fell to 114 basis points, while yields returned to 4.50%, after moving away from this threshold yesterday. Signals from the markets continue to point to a stabilization of bonds.
The BOT auction ended yesterday, from which the Treasury obtained 4.5 billion euros in the short term. Today there will be the issuance of four medium and long-term bonds, with the last auction in October.
The spread continues to decline, but slowly
Another slightly declining opening for the spread between Italian BTPs and German Bunds. The normalization of the bond markets, after the speculation that had especially affected the French Oat in recent weeks, continues. Yesterday’s hitch at the start, after the uncertain results of the elections in Israel, seems to have been overcome.
The yields on ten-year BTPs confirm this, returning to 4.50%. However, these are high yields, both compared to the recent past and compared to the average of the last 25 years, since the euro was introduced, and it is one percentage point more than the results that BTPs obtained even just a few months ago.
The ECB’s monetary policy decision arrives today
Not much should change even after the ECB’s monetary policy decision is announced. The markets expect the Eurotower to leave interest rates unchanged, postponing any possible further monetary tightening until December. Higher-than-expected inflation is still weighing on Europe, but the reasons are contingent and not structural. The ECB fears that by raising rates further, it will end up slowing down the economy excessively.
The slow decline in European spreads
Even in the rest of Europe, spreads are slowly returning to lower levels compared to last week’s peak. In Spain, Bonos settled at 62 basis points, but yields fell below the 4% threshold.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.35% | – |
| Italian BTPs | 4.50% | 115 |
| French Oats | 4.90% | 155 |
| Spanish bonos | 4.38% | 62 |
France is also slowly recovering, having been targeted by speculation in recent weeks. The spread between Oat and Bund is at 115 basis points, while yields have fallen to 4.90%.
Government bond auctions end today
Yesterday, the issues of two BOTs were concluded, with a residual life of 4 and 1 month, for a total of 4.5 billion euros raised by the Treasury and yields between 2.6 and 2.8%. Today, however, the last October auction of Italian government bonds will be held, with medium and long-term ones, which will make available:
- 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%;
- a CctEu expiring in April 2936 with a current annualized rate of 3.70%.
The auctions will then resume in November. The dates to note are:
- November 11th for the Bot auction;
- November 12 for the auction of medium and long-term bonds;
- November 25th for the auction of Short Term BTPs and BTP€i;
- November 26th for the second Bots auction;
- on November 27 for the second auction of medium and long-term bonds.
