Sudden drop in the spread between BTPs and Bunds opening on May 6th. The spread decreased to 78 basis points mainly in hopes of a long-term reopening of the Strait of Hormuz and a consequent end to the current energy crisis. Yields returned to around 3.80%, moving away from the 4% threshold touched in recent days.
The changes mainly involved Italian BTPs, with smaller reductions in yields in the rest of Europe, starting with the German Bunds themselves, which saw yields reduced by only a few hundredths of a percentage point. A sign of our country’s great exposure to the consequences of the war in Iran.
Spread down to 78 points at opening
Compared to the 85 points at yesterday’s opening, the spread between Italian BTPs and German Bunds has reduced significantly. In the wake of the excellent result of Piazza Affari, which closed as the best in Europe, the differential was reduced to 78 basis points thanks to a collapse in yields. The average yields of the 10-year Benchmark BTPs lost a tenth of a point in one day, thus returning closer to the Bunds.
German stocks in particular showed significantly less dynamism than Italian ones, a mechanism that allowed the differential to decline. The yields of the 10-year German benchmarks reached 3.04% at the opening, with a drop of a few cents compared to yesterday.
The trend of both was determined by the possibility of an agreement between the United States and Iran, with Trump increasingly optimistic about the possibility of a “final” peace.
Yields falling across Europe
Spanish and French government bonds also benefited from a reduction in yields, although less than that of BTPs. The Madrid Bonos went from 3.54% to 3.48%, while the French Oat went from 3.73% to 3.68%. The spreads of both countries decreased to 44 and 64 basis points respectively.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.04% | – |
| Italian BTPs | 3.82% | 78 |
| French Oats | 3.68% | 64 |
| Spanish bonos | 3.48% | 44 |
The difference between the dynamics of BTPs and those of other government bonds depends fundamentally on two factors: a structural one, the Italian public debt, among the highest in Europe, and a contingent one, the energy crisis, to which our country is more exposed as it does not have the French nuclear infrastructure or the strong renewable component that Spain has in the energy mix.
The May auctions of BTPs and BOTs
Starting next week, the traditional auctions of government bonds will begin, which will include various types of BTPs, with different durations, and BOTs, government bonds with a shorter duration. The dates established by the Ministry of Economy 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.
