The spread between Italian BTPs and German Bunds reached 85 basis points in the first minutes of the opening of the financial markets on September 2nd. This is a new peak for government bonds, caused by the continued rise in yields, at rates not seen since the 2022 energy crisis.
This sudden growth in government bond yields is due to a series of factors, both national and international, which are putting pressure on Italian public debt. Even in the rest of Europe, however, the situation is not dissimilar.
Spreads and returns don’t stop growing
The gradual increase in the spread, which grew by another point reaching 85 on the morning of September 2nd, hides a growth in the yields of 10-year BTPs that has not had many comparisons in recent years. There hasn’t been a peak of this type since the invasion of Ukraine, but then the ECB imposed a series of interest rate increases that pushed government bond yields to rise very rapidly.
All the causes of the race in yields which is increasing the spread
The current peak, which led to an increase of 0.7 percentage points, reaching today’s 4.22% of the average yield on ten-year BTPs, has several competing causes:
- as in 2022, ECB interest rate increases are a factor;
- the recent resumption of hostilities in the Middle East has aggravated the energy crisis looming over European economies;
- European states have started running deficits again, albeit through instruments such as Safe, authorized by the EU;
- the Fed is not raising interest rates, and this is driving up Treasury bond yields, which European bonds have to compete with.
The crisis weighs on European spreads
It is therefore not an Italian crisis, but a European one, and this can be seen both from the fact that the spread is experiencing limited increases, a sign that German Bunds are also under pressure, and from the fact that Spanish Bonos also have higher yields than usual. In fact, Madrid’s bonds yield 3.83%, with a spread of 46 basis points.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.37% | – |
| Italian BTPs | 4.22% | 85 |
| French Oats | 4.24% | 87 |
| Spanish bonos | 3.83% | 46 |
France is coming under even greater pressure. Oats reached a spread of 87 basis points and yields reached 4.24%.
When will government bond auctions resume?
This increase in yields could have a significant impact on Italian public debt. The Meloni Government has focused heavily on the stability of the accounts to reduce the spread and cost of the new debt, in order to limit expenses for this item in a period of high interest rates.
There will be no new government bond auctions for a few days. The next issues will in fact be in the second week of September. The dates to note are:
- September 9th for the Bot auction;
- September 10 for the auction of medium and long-term bonds;
- on 24 September for the auction of Btp Short and Btp€i;
- September 25th for the Bot auction;
- on 26 September for the auction of medium and long-term bonds.
