The spread between Italian BTPs and German Bunds increased further on the morning of July 30, returning to 85 basis points, one of the highest levels in recent months. Yields are also growing, reaching record figures again and risk influencing the ongoing government bond auctions.
However, emissions continue to do well. After yesterday’s short-term BTPs, the BOTs collected 7.5 billion euros, with sustained demand but significantly higher yields compared to the past. The July auctions will end today, with that of medium and long-term securities.
Spreads and yields have returned to record levels
The prospects of a widening conflict in the Middle East are shaking government bond markets. In a few days, what was a war between the USA and Iran with the involvement of Israel and Lebanon saw Ukraine, Saudi Arabia and Yemen participate in various types of operations and even reached Egypt. In the meantime, OPEC+ has made it clear that, after September, there will be no further increases in oil production, with related risks for the price increase.
Another record for the spread
The spread between Italian BTPs and German Bunds therefore quickly returned to last week’s levels. The spread hit 85 basis points at the start of July 30, the highest peak on par with the most difficult days of the recent resumption of US military operations in Iran.
Yields towards new records
The increase in the spread is the consequence of that of the yields of the benchmark ten-year BTPs, which suddenly reached 4.04%, after days spent below the 4% threshold. The growth of the spread was limited only by the sudden increase in interest on Bunds, German government bonds, which reached 3.19% in the morning.
Italian bond auctions continue to go well
Yesterday the BOT auction was held, short-term government bonds, in this case with a six-month maturity, without coupons which represent one of the most common financing methods for the Government’s needs. Demand was sustained and all of the planned €7.5 billion were allocated. However, yields increased significantly, reaching 2.567%, almost a tenth more than the last similar product, issued in June.
The last auction of July, tomorrow
Tomorrow, one of the most varied and significant auctions will be held from the point of view of the amount made available, that of medium and long-term securities. Will be auctioned:
- 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%.
