The spread between Italian BTPs and German Bunds drastically reduced at the opening on 9 October. The differential reached 109 basis points against 120 in the early hours of yesterday, signaling a sharp reduction in yields, which in fact settled at 4.55%, against 4.70% the previous day.
The opening on October 9th confirms the high volatility of the international bond market at this time. T-Bonds remain dangerously close to the 5.25% yield threshold and French Oats continue to be under strong pressure.
The spread falls again, volatile markets
Extreme volatility on the bond markets, with the spread losing around ten points in 24 hours for the second time in a week. The opening on Friday 9 October saw the spread move back below 110 basis points and yields fall to 4.55%, 15 basis points less than the previous opening.
T-Bond, Oat and tech bonds still under pressure
This volatility, and in general high spreads and returns, are not Italy’s “fault”. They are the consequence of a critical international situation on the bond market, fueled by some structural factors, such as:
- high interest rates;
- the flight of pension funds from bonds;
- international tensions and the energy crisis.
However, there is also a more contingent situation that worries the markets: that of AI. Big tech companies have piled up trillions of debt over the past year to finance data centers and research, but more and more creditors think their promises of huge revenues and profits aren’t credible.
They then sell their debt, lowering its price and raising its yields. At the same time, both due to this situation and the unclear relationship between the White House and the Fed, US T-Bonds are also in difficulty, with very high yields that “drag” the European ones, above all the French ones.
French Oats in crisis: they yield more than private bonds
The measure of how much the Oats are suffering from France’s critical debt situation was given yesterday, with the publication by Bloomberg of an analysis of the country’s bond market. 38% of large corporate private debt yields less than 10-year government bonds. This means that the markets consider more than a third of large French companies to be more solid than France itself.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.46% | – |
| Italian BTPs | 4.55% | 109 |
| French Oats | 4.83% | 137 |
| Spanish bonos | 4.07% | 61 |
It is no coincidence that the spread between Oat and Bund has reduced much less than that of other European countries, going from 141 to 137 basis points. In Spain the Bonos went from 67 to 61 points differential, a better performance than the French one both in absolute terms and in percentage.
Today the first October auction of Italian government bonds
The auction for 8 billion euros in annual BOTs will be held this morning, the first in October. The issue may have an additional amount of up to 1.2 billion euros. The following auctions will be:
- the auction of medium and long-term bonds on Tuesday 13 October;
- 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.
A new issue of BTP Valore will also be held between 19 and 23 October.
