The spread between Italian BTPs and German Bunds reached 85 basis points at the start of May 5th, returning to growth after the decline recorded on Monday May 4th. The truce lasted a few hours due to the resumption of hostilities in the Middle East, which heightened concerns about a long-term energy crisis in Europe.
Yields have also started to grow again, with 10-year benchmark BTPs above 3.90%, in line with the rest of European government bonds. This last detail is a signal from the markets, which do not seem to consider a budget deviation by Italy likely to address the increases in oil and gas prices.
Spread at 85 points, the energy crisis weighs heavily
The energy crisis weighs on the yields of European government bonds. The spread between Italian BTPs and German Bunds began to increase again, reaching 85 points at the opening of the markets on 5 May. The differential had decreased between Thursday 30 April and Monday 4 May, but began to grow again due to the resumption of hostilities in the Strait of Hormuz.
Yields are also increasing, both on Italian and German government bonds. Benchmark ten-year BTPs returned above 3.90%, reaching 3.92%. Slight growth also for Bunds, which reached 3.07%.
However, BTPs continue to be aligned with other European government bonds, a sign that the markets do not believe in a budget deviation, which would probably bring a lot of pressure on Italian debt. Recently the European Commission rejected a proposal from Economy Minister Giorgetti to use defense safeguard clauses to raise deficit funds against the energy crisis.
Yields rise in Europe
A slight growth in yields also occurred in the other large European countries. Spanish Bonos reached 3.54%, with a spread stable at 47 basis points. Similarly, the French Oat saw the coupon grow to 3.73%, with a spread of 66 points.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.07% | – |
| Italian BTPs | 3.92% | 85 |
| French Oats | 3.73% | 66 |
| Spanish bonos | 3.54% | 47 |
In Europe, as also underlined by the European Commission, the energy crisis is currently not having similar consequences to those of the 2022 crisis. Inflation on the continent is limited and should ease as early as 2027.
The next BTP and BOT auctions
Auctions of Italian government bonds will begin next week. The first to be issued will be the Bots, those with the shortest duration, often less than a year. These are ideal securities for short-term investments, aimed at protecting capital from inflation. This will be followed by medium and long-term BTPs, those with the returns most similar to the benchmarks that determine the spread.
The dates to note for the next auctions are:
- May 12th, Bot auction;
- 13 May, auction of medium-long term BTPs;
- 26 May, Short Term BTP auction;
- May 27, Bot auction;
- May 28, auction of medium-long term BTPs.
