BTP-Bund spread at 83 basis points and yields at 4.09%, BOT at 2.6%

Although the spread remained completely stable in the first minutes of the morning of August 28, BTP yields grew to levels not seen for years. A 10-year Italian bond now yields an average of almost 4.10%, compared to the 4.05% recorded yesterday.

A sign of strong pressure on Italian public debt, which also translates into higher yields for the securities at auction these days. In fact, the Bots exceeded a gross return of 2.6%, with the net return standing above 2%. The auctions of medium and long-term bonds will end today.

Btp-Bund spread stable but yields increasing

The spread between Italian BTPs and German Bunds remained stable at 83 basis points. This is a very high share compared to those of recent months, which underlines how much our country’s public debt is under pressure due to the economic conditions following the war in the Middle East.

This is despite the fact that in recent days, the Gulf countries have increased their exports through the passage, trusting in the protection guaranteed by the US military garrison. The increase in traffic was reported by Bloomberg and could have a calming effect on the energy market.

Because yields are rising

Even though the spread remained stable, Italian yields increased sharply, parallel to German ones. On average, 10-year bonds now yield 4.09%. Interest of this type on ten-year BTPs has not been seen since the 2022 energy crisis, the one following the Russian invasion of Ukraine.

Spreads and yields affect auctions

Yesterday the BOT auction ended which allowed the Treasury to place 4.5 billion euros of securities on the market. However, the spread and high yields have influenced the price of the Bots, which do not have a coupon. Their yield is determined entirely by the difference between the nominal value and the cost paid by those who purchase them upon issue.

The price of the Bots expiring in January 2027 was 98.918, generating a yield of more than 2.6%. These are rather high figures, even compared to the most recent auctions. Auctions of medium and long-term bonds are being held today, which start from already quite high coupons:

• 5-year BTP with 3.15% coupon;
• 10-year BTP with 4% coupon;
• CCTeu (residual life 8 years) with an annualized rate of 3.487%;
• CCTeu (residual life 9 years) with an annualized rate of 3.237%.

Is France the new “sick person” of Europe?

As for European spreads, there is a big difference between the two largest countries besides Italy and Germany. Spain, thanks to its sustained economic growth, is limiting the increases, remaining 45 basis points behind Germany.

For France, however, the situation is becoming more complicated. The spread and yields are growing, with a differential of 85 basis points. The Financial Times reported that, among investors, France has replaced Italy as the focal point of the debt crisis among European countries.