Btp-Bund spread at 111 basis points, the yields on the day of the auction

Also on the morning of 13 October the spread between Italian BTPs and German Bunds opened substantially stable, recording 111 basis points in the first minutes of trading activity. The yields on Italian ten-year bonds settled at 4.53%, also stable, but still high compared to the recent average.

The yields are also much higher than the coupons of the BTPs which will be auctioned today and which do not exceed 3.95%. Net returns from these securities are expected for investors of up to over 4%.

The spread is still stable

After days of peaks and instability it seems that the spread between Italian BTPs and German Bunds has reached a point of equilibrium. It is around 110 basis points, which became 111 on the morning of October 13th, around thirty points above September levels and more generally than the previous equilibrium point after the most acute phase of the war in the Middle East.

What keeps spreads and yields steady

Together with the spread, the yields also stopped, today at 4.53%, very high but at least stable compared to the volatility of recent weeks. Contributing to this stalemate phase are several situations of instability that have found a moment of pause:

• US initiatives in the Middle East are not expected to resume before the November midterm elections,
• the price of oil consequently continues to fluctuate around 90 dollars;
• inflation, and consequently interest rates, are stable although high;
• the global debt crisis, which seemed ready to trigger, is stuck in an unstable equilibrium.

This phase of stability, consequently, does not seem destined to last.

The auction of medium and long-term BTPs is being held today

Savers could take advantage of the high yields, and today they could obtain new government bonds from the auction of medium and long-term BTPs. The Treasury has put three new tranches of existing products on the market, for which the expected returns can therefore be calculated:

• a BTP expiring in 2029, therefore 3 years and a 3% coupon;
• a BTP with maturity in 2033, therefore 7 years and a coupon of 3.35%;
• a BTP with maturity in 2041, therefore 15 years and a coupon of 3.95%.

The most convenient BTPs could even reach 4% gross yield. Three more auctions will follow in 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.

Furthermore, between 19 and 23 October, there will also be the issue of BTP Valore, dedicated to savers.

Spreads in Europe

As in Italy, it is also a moment of stability for the spread in the rest of the large European countries. The Spanish Bonos are at 63 basis points, while the French Oat are the only ones to suffer, due to the country’s complex political and debt situation. Paris bonds are 144 basis points away from Bunds.