The spread between Italian BTPs and German Bunds fell to 75 basis points at the opening of the financial markets on Thursday 21 May. The differential had already reduced yesterday, both due to the internal agreement within the EU on the formalization of the tariff pact with the USA, and thanks to some words from Trump on the war in Iran.
Yields dropped significantly, returning to 3.85% for the benchmark 10-year BTPs. The decline in interest on Bunds is less rapid, now at 3.10%, well above the 3% threshold which for months has represented the maximum ceiling for German bonds.
Spread decreasing between BTPs and Bunds
The spread between Italian BTPs and German Bunds began to fall again when the financial markets opened, reaching 75 basis points. The spread benefited above all from two factors. The first is the formalization, made official yesterday morning, of the agreement between the US and the EU on duties. The main institutions of the European Union have drawn up the final text, which should avoid further tariff increases.
The other factor that would have determined the decline in the spread concerns the positive news on a possible agreement between the USA and Iran to end the war in the Middle East and reopen the Strait of Hormuz. After negotiations seemed to collapse last week, the Gulf countries have reportedly brokered a rapprochement between positions.
The effect of these two good news led to a sharp decline in the yields of 10-year Italian BTPs. Interest fell to 3.85%, compared to 3.94% at the opening yesterday 20 May. Bunds also suffered a sharp reduction, going from 3.17% to 3.10%.
Yields are falling across Europe
While remaining well above the pre-war period in Iran, yields on all government bonds in major European countries fell sharply in the early hours of the opening on May 21.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.10% | – |
| Italian BTPs | 3.85% | 75 |
| French Oats | 3.74% | 64 |
| Spanish bonos | 3.54% | 44 |
The Spanish Bonos went from 3.60% yesterday to 3.54%, with a spread of just under 44 basis points, stable compared to 24 hours ago. Similarly, the French Oat went from 3.81% to 3.74%, with a stable spread at 64 basis points.
New issue in June: the BTP Italia Sì arrives
The Ministry of Economy has announced that, from Monday 15th to Friday 19th June, a new BTP dedicated to retail investors, therefore to private citizens, will be issued: the BTP Italia Sì. The characteristics of this government bond will be:
- a duration of 5 years;
- semi-annual coupons linked to the national inflation rate;
- a minimum fixed rate, which will be communicated on June 12;
- an extra final premium of 0.6%.
The minimum investment will be 1,000 euros. The placement will take place through the Mot, the electronic market for bonds and government securities of the Italian Stock Exchange. This issue will be preceded by the regular May auctions, which will be held:
- on May 26th, auction of Short Term BTPs;
- May 27th, Bot auction;
- on May 28th, auction of medium-long term BTPs.
