In the first minutes of the opening on 29 July the spread between Italian BTPs and German Bunds reached 83 basis points, reversing yesterday’s trend and returning to rather high values, especially compared to the recent past, due to fears linked to the war in the Middle East.
The first auction of July government bonds ended yesterday, with Short Term BTPs and BTP€i. The returns stood below 3% for all the securities offered, which however had durations significantly lower than the benchmark.
Spreads and yields rising
The increase in the spread was driven by a new wave of attacks in the Middle East. Iran attempted to surprise US bases in Jordan with several ballistic missiles, all of which were intercepted. However, this has pushed away the peace talks hoped for by US President Donald Trump yesterday and increased concern on the markets.
Spread now stable above 80 points
It now seems that the spread is destined to remain above 80 basis points, around 10 points higher than the levels that had characterized the spread in the previous phase of the war in the Middle East, when it stabilized around 70. It is the indicator of a clear increase in yields, which continue to be close to 4%.
Yields still high for 10-year BTPs
The 10-year BTPs, considered the reference for the health of Italian public debt, reached an average yield of 3.95%, growing by a few hundredths of a point compared to yesterday. Bunds, on the other hand, fell slightly to 3.12%, leading to a widening of the spread.
The results of the July Short Term BTP auction and the yields
The first of the end-of-July auctions took place yesterday, July 28th. The Treasury raised 5.5 billion euros in total, with yields below 3% for all proposed securities. The results of the auction were:
- 1.25 billion euros of 3-year Short Term BTPs maturing on 28 February 2028 and with a gross yield of 2.92%;
- 1.25 billion euros of 7-year BTPs with 2 years of residual life expiring on 28 July 2028 and with a gross yield of 2.89%;
- 3 billion euros of 10-year Btp€ia maturing on 15 February 2037 and with a gross yield of 2.04%.
The yield of the Btp€i is linked to the Eurozone inflation rate, while the others are decided exclusively by market dynamics.
The next auctions of Bots and medium and long-term securities
Tomorrow 7.5 billion euros worth of bots will be auctioned. On July 31, however, the auction of medium and long-term bonds will be held, which includes:
- a 5-year BTP, Isin code IT0005707614, maturing on 1 June 2031 and coupon of 3.15%;
- a 10-year BTP, Isin code IT0005706285, maturing on 1 July 2036 and coupon of 3.80%;
- a 15-year BTP, Isin code IT0005402117, maturing on 1 March 2036 and coupon of 1.45%;
- a CCTeu, Isin code IT0005707689, expiring on 15 April 2036 and an annualized coupon rate of 3.237%.
