The opening on October 23rd saw the spread between Italian BTPs and German Bunds reach a new recent record of 124 basis points. The differential has not opened the day at these levels since 2024, but it is still an improvement compared to the peaks reached yesterday.
Yields also improved, returning to 4.60% after yesterday they were close to 4.70%. Today is the last day to purchase Btp Valore and Btp Valore Insieme. The final rates will be known after 1pm, the time at which the issue ends.
The spread continues to increase
Although the situation of the spread between BTPs and Bunds seems similar to that which yesterday led the differential to reach 122 basis points at the opening, in the early hours of October 23rd more complex and in a certain sense opposite movements occurred. Yesterday the pressure on European public debts, determined by various factors, had brought yields to new recent records, while leaving those of Bunds unchanged.
Today, however, all yields are declining. However, those of Bunds decreased more rapidly than those of other European countries, resulting in the widening of the spread.
Why Bund Yields Fall When Things Go Bad
It seems counterintuitive, but in times of crisis, German government bond yields tend to fall. Traditionally, Germany is seen as one of the countries with the most solid and best-controlled public debt. Investors therefore treat their Bunds as a safe haven.
This status is currently undermined both by the country’s economic difficulties, which however appear to be in the process of being resolved, and by the increased public spending of the latest German governments. Nonetheless, in times of crisis, one can still notice greater stability in German yields compared to those of other European countries.
France beyond all records, the pressure on European stocks continues
Despite the drop in yields, the pressure on European stocks has not eased. The Spanish Bonos have reached 70 basis points of spread, but it is in France that the situation is critical.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.36% | – |
| Italian BTPs | 4.60% | 124 |
| French Oats | 5.06% | 170 |
| Spanish Bonos | 4.06% | 70 |
Oats are 170 points behind Bunds, with yields of 5.06%, the highest level since the euro was introduced. It is the result of a combination of factors, ranging from the country’s economic difficulties to an out-of-control public debt, up to a certain level of speculation on Paris securities and political instability which could also compromise the next financial measure.
Last day of the issuance of Valore BTPs, then the regular auctions
The auction of Valore BTPs dedicated to retail investors will end today at 1pm. The Treasury has already raised more than 14 billion euros from this initiative. The final returns will be made public in the afternoon. Regular auctions will begin again from next week. The dates to note are:
- 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.
