After a very difficult week for Italian and European government bonds, the spread between BTPs and Bunds opened on Friday 6 March rising to 71 basis points. Yields are rising sharply, but the differential is kept at bay by uncertainty over German bonds, which are not proving to be as competitive as in the past compared to other safe haven assets, such as gold and the yen.
In the meantime, the issue of BTP Valore is about to close. At 1pm today the transactions were concluded and, shortly afterwards, the Treasury communicated the real yields, significantly higher than the minimum ones.
Btp-Bund spread at 71, German stocks wobble
Stable opening for the spread, which reaches 71 points after the 72 reached yesterday 5 March. The first minutes of trading were characterized by rising yields, with the benchmark ten-year BTP reaching 3.56%, the highest figure reached by the stock since last September.
The reason why, despite this increase in yields, the spread has fallen is that interest on German government bonds also rose significantly at the opening on February 6th. The Bund, as reported by an analysis of Reutersthey are experiencing a difficult time. Investors are preferring other safe haven assets, such as the yen and gold, rather than Berlin securities which, historically, have always been a popular product during crises.
The reason why markets valued Bunds so highly in the past was the very strict austerity of the German government, which for years limited public spending to a minimum. However, Friedrich Merz’s government has proven to be much more inclined to spend public money to overcome the period of crisis that has gripped the German economy since the end of the pandemic. Every additional element of instability, from tariffs to war in the Middle East, pushes Berlin into more deficits and, consequently, makes the Bunds slightly less safe.
Yields rising across Europe
Even in the rest of Europe, the trajectory of government bond yields remained the same as in recent days. Spain saw the spread contract slightly at the open on March 6th. The spread reached 45 basis points, with a yield for 10-year bonds standing at around 3.30%.
| Government bonds | Returns | Spreads |
| German Bunds | 2.85% | – |
| Italian BTPs | 3.56% | 71 |
| French Oats | 3.47% | 62 |
| Spanish bonos | 3.30% | 45 |
France also limits the distance from Berlin, with the Oat hovering around a yield of 3.47% and a spread of 62 basis points. A trend that is effectively parallel to that of BTPs.
Real returns of Valore BTPs awaited
The issuance of Valore BTPs will end at 1pm today, March 6, which already exceeded 15 billion euros in requests from the retail market yesterday. With the end of the transactions, the Treasury communicated the real yields. Given the increase in the spread, which for six-year BTPs has reached 28 points since the beginning of the week, the interest on newly issued government bonds has also grown:
- first two years, from 2.50% to 2.60%;
- third and fourth year, from 2.80% to 3.20%;
- fifth and sixth year, from 3.50% to 3.80%.
The next auctions will be held:
- March 11th, Bot auction;
- on 12 March, auction of medium-long term BTPs;
- on 25 March, auction of Btp Short – Btp€i;
- March 26, Bot auction;
- on March 27, auction of medium-long term BTPs.
