The spread between Italian BTPs and German Bunds reached 111 basis points at the opening. However, BTP yields have fallen, although not at the pace of those of Berlin bonds. The ten-year bonds settled at 4.51%, slightly below yesterday’s results, despite the inflation data in the United States raising fears of a new increase in Treasury Bond rates.
The news on traffic in the Strait of Hormuz above all reassures the market. Despite Iran announcing new attacks on commercial shipping, oil flows out of the Persian Gulf are approaching pre-war levels.
Spreads rising but yields falling
The October 15th open sent spreads and yields in two different directions. The spread between BTPs and Bunds is increasing to 111 basis points, and has returned above the 107 recorded in the first minutes of yesterday. Yields, on the contrary, are slightly decreasing, even if those of German bonds have achieved better results, thus widening the gap.
Btp less under pressure, despite US inflation
Yesterday, a piece of data was released that should have put European government bonds under pressure: inflation in the United States. The price increase was much higher than expected, at 3.7%, and this should lead to a further interest rate hike by the Fed.
However, the markets’ newfound confidence in the Fed’s leadership has neutralized the possible impact of this data. Investors believe that director Kevin Warsh can raise interest rates to counter rising prices even if the White House does not agree.
As a result, the pressure on Treasury Bonds is also easing, with US bonds falling below the 5.1% yield. Thanks to this truce, tensions on some European stocks are also easing.
Instability continues in France
France is an exception to this rule. The country does not appear to be in a position to fend off speculation on its government bonds, which have accumulated a spread of 143 basis points, with another extreme change in one day. Yields rose to 4.83% due to both the ever-higher debt and Parliament’s inability to find a majority to pass a budget law that limits spending.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.40% | – |
| Italian BTPs | 4.51% | 111 |
| French Oats | 4.83% | 143 |
| Spanish bonos | 4.03% | 63 |
Spain, on the other hand, despite the upcoming elections, remains relatively stable at around 60 basis points of spread.
The next auctions of government bonds and BTPs Value
Once the first issues of October have been completed, the Treasury will proceed with the other regular auctions at the end of the month. The next ones will be held:
- 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.
The issue of BTP Valore and BTP Valore Insieme, dedicated to private investors, will also take place between 19 and 23 October.
