In the first minutes after the opening of the financial markets on 16 September, the spread between Italian BTPs and German Bunds widened again, reaching 89 basis points. The spread has not reached these levels since March, but this time the factors that are causing the growth in yields are less contingent than at the beginning of the war in Iran.
The conflict has in fact caused an energy crisis from which Europe is struggling to emerge and to which Italy is particularly exposed. At the same time, US Treasuries hit a yield of 5%, weighed down by increasingly expensive debt and a faltering economy. Furthermore, the Fed’s ambiguous attitude on rates does not reassure investors.
Spreads increasing but yields stable
The spread between Italian BTPs and German Bunds increased slightly, reaching 89 basis points, due to the slowdown in yields on Berlin bonds. Compared to yesterday, in fact, those of BTPs remained stable, after several consecutive days of increase. However, this is a record high for the last three years, at 4.42%.
Because the returns are so high
Similar spread peaks were seen only in the most acute phase of the war in Iran. Then, what pushed the differential was the fear that the conflict could cause an energy crisis. Those fears turned out to be well-founded. Fuel prices continue to rise in Italy, but it’s not just the economy that’s scaring investors.
In recent days, Treasury Bonds, US government bonds, have reached a yield of 5%. Record debt, an uncertain economy and an undecided Fed on rates are driving these stocks to record highs. To ensure investor interest, European counterparts must try to compete. This factor is therefore also contributing to the run-up in yields.
The situation of European spreads
The spreads of the rest of the EU countries are also affected by this situation. In Spain the Bonos reached a spread of 47 basis points, with yields remaining above 4%.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.53% | – |
| Italian BTPs | 4.42% | 89 |
| French Oats | 4.50% | 97 |
| Spanish bonos | 4.00% | 47 |
The Oat are instead continuing their race towards the 100 point spread. They reached 97 points at the opening, with exactly 4.50% return.
The next auctions of Italian government bonds
Three more auctions for Italian government bonds will be held by the end of the month. The first two concluded at the beginning of the month, confirming the particularly high yields of medium and long-term BOTs and BTPs. Some Short Term BTPs will also be included in the next issues. The dates to note are:
- the auction of Btp Short and Btp€i on 24 September;
- the Bots auction on September 25th;
- the auction of medium and long-term bonds will take place on 26 September.
