New increase in the spread between Italian BTPs and German Bunds opening on July 14th. The differential exceeded 81 basis points at the opening after a few minutes of great instability in yields. It is the result of a simultaneous increase in almost all interest rates on European government bonds, including German ones.
Above all, the great instability in the Middle East weighs heavily, which led Iran to attack two Emirati oil tankers during the night, killing a sailor. The possibility that the Gulf countries will enter the conflict scares the markets, while oil has exceeded 85 dollars a barrel.
Spread peak at opening: unstable returns
In the first minutes of the opening on July 14th there was an anomalous peak in the spread between Italian BTPs and German Bunds, with some indicators showing as much as 85 points of differential. The situation quickly stabilized, but the spread still remained much higher than in recent days, stopping above 81 basis points.
A significant peak caused by a parallel increase in the yields of both German and, above all, Italian government bonds. For Bunds, an important threshold has been exceeded, the 3.10% interest rate on 10-year benchmark bonds. At the same time, however, BTPs went above 3.92%, one of the highest figures recorded in recent months.
It’s about the consequences of instability in the Middle East. The war between Iran and the USA has officially started again, complete with an official letter from Trump to Congress, and Tehran has hit two oil tankers in Hormuz. The result was a rise in the price of oil, which reached $85 a barrel.
The other European spreads are also growing
The situation is no better in other European countries. In Spain the Bonos exceeded a yield of 3.60%, with the spread with the Bund at the same time approaching 50 points, the psychological threshold for Madrid bonds.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.11% | – |
| Italian BTPs | 3.92% | 81 |
| French Oats | 3.92% | 81 |
| Spanish bonos | 3.60% | 49 |
Similarly, on Republic Day, French Oats are traded on international markets at yields very similar to Italian BTPs, over 3.90%, with a spread of 81 basis points.
The next BTP and BOT auctions
This peak arrives, fortunately for the Treasury, a few days after the conclusion of the first auctions in July, from which the State obtained 15.5 billion euros. BOTs and BTPs had sustained demand, with the exception of shorter-term securities, slightly below the 1.5 threshold, considered the minimum for an issue with high demand.
The next auctions are far away and will be held in the last days of the month:
- 28 July auction of Short Term BTPs and BTP€i;
- July 29th Bot auction;
- July 30 auction of medium and long-term bonds.
