New developments in the Middle East have brought instability to the bond markets. After three consecutive days of decline, the spread between BTPs and Bunds began to rise again and reached 83 basis points. On the morning of March 19, BTP yields reached an average of 3.81%, two tenths more than yesterday.
The Governing Council of the European Central Bank will also meet today to decide on interest rates. Analysts predict that the cost of money will remain at 2%, but that the ECB will say it is ready to increase rates if the war in Iran has direct effects on inflation.
Btp Bund spread at 83 points: what’s happening
The spread between Italian BTPs and German Bunds gained ten points at the opening on March 19th, compared to what was recorded in the early hours of yesterday morning. The increase is the result of a very rapid growth in the yields of Italian benchmark securities, which reached 3.81%. At the same time, Bunds proved to be more stable, remaining below 3%.
This instability comes after three consecutive days of narrowing spreads and yields and was caused by a new escalation of the war in the Middle East. Yesterday Israel attacked an important gas field in Iran, hitting the country’s energy infrastructure for the first time.
In retaliation, Tehran struck some oil facilities in Qatar. Oil and gas prices reached new records as a result, with Brent crude reaching $110 a barrel. The stock markets, both European and American, closed in the red and this scared investors.
The situation in Europe and the ECB’s decision
This turning point in the war came between two very important days for the financial markets. Yesterday the Fed decided to leave interest rates unchanged, also due to the conflict. Today it will be the ECB’s turn, which should make a similar decision. However, the speech by Christine Lagarde, president of the European Central Bank, which will clarify the intentions of the Eurotower until the end of the year, is also highly anticipated.
| Government bonds | Returns | Spreads |
| German Bunds | 2.97% | – |
| Italian BTPs | 3.81% | 83 |
| French Oats | 3.66% | 69 |
| Spanish bonos | 3.49% | 52 |
Meanwhile in Europe, Spain and France also reacted badly to the escalation in the Middle East. The Bonos returned to more than 50 basis points from the Bunds, almost reaching a 3.50% yield. French OATs, on the other hand, approached a spread of 70 points, with yields of 3.66%.
The next auctions in March
The increase in yields comes a few days before the start of the end-March auctions of BTPs and BOTs. The Treasury will auction various financial products that will cover all durations on the market, from the very short and short term to the medium and long term. The dates of the next auctions are:
- on March 25th for the auction of BTP Short-BTP€i;
- March 26 for the Bots auction;
- March 27 for the auction of medium-long term BTPs;
- on April 9th for the Bot auction;
- on April 10th for the auction of medium-long term BTPs.
