The spread between Italian BTPs and German Bunds underwent a sudden increase at the opening on May 12, 2026. The spread between Italian and German bonds reached 79 basis points, with significantly higher growth than that of other European countries. However, yields are increasing across the continent due to Donald Trump’s new statements, which suggest a possible resumption of the active phase of the war in Iran.
In the meantime, the first auction of May government bonds will take place today, which will involve two different annual BOTs, one of which however has a residual life of only two months.
Spreads rising, Trump’s words weigh heavily
The spread between BTPs and Bunds increased by 4 points between the close of Monday 11th and the opening of Tuesday 12th May. The spread went from 75 basis points to 79, returning close to 80 basis points. Yields also increased significantly, reaching 3.87%, while those of German bonds were limited to 3.08%.
Negative data, which brings government bonds back to the levels of the beginning of the month, with a clear growth in yields and therefore in public spending on debt. The reason is always linked to the war in the Middle East. Yesterday, negotiations between the US and Iran stalled, due to a peace proposal from Tehran deemed inadmissible by Trump. This however, strangely considering what we have seen in the recent past, had not particularly shaken the markets.
However, yesterday night the situation worsened. The president of the United States declared that the ceasefire between the two countries is very fragile and that the bombings could resume soon. Iran, for its part, has threatened increasingly harsh retaliation, and these are precisely the threats that scare those who invest in Italian public debt.
Because the spread of France and Spain has not grown
The spreads of France and Spain also grew, but to a more limited extent than those of Italy, both increasing by just two basis points. Yields are increasing, but much closer to German ones than in Italy. A trend that has already been seen during the war in the Middle East.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.08% | – |
| Italian BTPs | 3.87% | 79 |
| French Oats | 3.72% | 64 |
| Spanish bonos | 3.52% | 44 |
From this point of view, Italy suffers from a combination of factors that make it more exposed to this type of crisis:
- a large public debt;
- particular exposure to energy crises due to dependence on gas;
- very weak economic growth;
- growing political instability.
None of the other large European countries combines all three of these risk factors. Germany is exposed to gas like Italy and its economy is in a critical moment, but it is politically stable and minimally indebted.
France has a fragile government and a debt increasingly similar to Italy’s, but its nuclear power plant system protects it from energy shocks. Spain, similarly, is politically fragile, but does not have a heavy debt like Italy’s and above all has invested massively in renewables, limiting the impact of gas on its economy to a minimum.
Today is the first auction of May government bonds
The first Bot auction of May will be held today. There will be two products put on the market by the Treasury:
- 8.5 billion euros in annual Bots, Isin code IT0005709289, expiring in May 2027;
- 1.5 billion euros in annual BOTs with a residual life of two months, ISIN code IT0005660029, expiring in July 2026.
Tomorrow 13 May, however, the first BTP auction of the month will be held. Will be offered:
- up to 3 billion euros in 3-year BTPs, Isin code IT0005704868, with maturity in March 2029 and coupon of 2.40%;
- up to 3.25 billion euros in 7-year BTPs, Isin code IT0005689960, with maturity in June 2033 and 3.30% coupon;
- up to 1.25 billion euros in 20-year BTPs, Isin code IT0005321325, with maturity in September 2038 and 2.95% coupon.
The other auctions in May will be held:
- on May 26th, auction of Short Term BTPs;
- May 27th, Bot auction;
- on May 28th, auction of medium-long term BTPs.
