The spread between Italian BTPs and German Bunds increased to 111 basis points, after having reached 104 points yesterday. It is the effect of the collapse on Wall Street, with the Nasdaq losing 5% yesterday following a flight from AI-related stocks. Investors fear the new Congress will regulate data centers and block the exponential growth of tech companies.
At the same time, oil has returned above 90 dollars a barrel, causing fears about inflation to resurface. BTP yields are stuck at yesterday’s opening levels, but Bund yields have fallen, as often happens in moments of uncertainty.
The spread grows again on the fears of the stock markets
The positive effect of the results of the US midterm elections on the bond markets was short-lived. The spread between Italian BTPs and German Bunds began to grow again very quickly, rising from yesterday’s lows, 104 basis points, to 111 points at the opening of the session on 6 November.
Returns followed a similar trajectory. Starting from 4.32% yesterday morning, they fell, and then rose again today at the opening to 4.33%. However, these are levels that are very far from the records of recent weeks, but if you look at the recent average, they are high figures that can put the Treasury in difficulty.
Because escape from AI actions has consequences for BTPs
This slowdown in the decline of the spread appears to be the consequence of the Wall Street collapse that occurred yesterday. The Nasdaq fell 5.5% amid heavy selling in technology stocks. Investors fear that the new Democratic-majority Congress will impose laws to restrict data centers and regulate AI once it takes office.
The reason why these sales also have repercussions on the bond market is that many tech companies have taken on heavy debt in recent months to obtain the money needed to compete in the AI race. Every shake in their shares, which often serve as collateral for these debts, therefore also has repercussions on the government bond market.
The decline in spreads also stops in Europe
For several months now the spread has no longer been an Italian problem only. The European government bond market moves in a fairly synchronized manner between the various countries. Thus, also in Spain, the Bonos interrupted their decline, returning to 59 basis points from the Bunds.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.22% | – |
| Italian BTPs | 4.33% | 111 |
| French Oats | 4.77% | 155 |
| Spanish bonos | 3.83% | 59 |
The Oat are unable to free themselves from the ballast accumulated in the recent crisis, and remain at 155 basis points, with the highest yields among those of the large European countries.
The next government bond auctions in November
The calendar of the next government bond auctions in November reads:
- Bot auction on November 11th;
- November 12th the auction of medium and long-term bonds;
- November 25th the auction of Short Term BTPs and BTP€i;
- November 26th the second Bots auction;
- November 27th the second auction of medium and long-term bonds.
