The opening on July 2nd brought a reduction in the spread between Italian BTPs and German Bunds, after yesterday the differential had gained almost 10 basis points. The drop brought the spread to 76 basis points, a figure more in line with last week’s levels and less towards the 80 points threatened by yesterday’s performance.
In Europe, the Spanish spread returned to its previous levels, after having reached below 40 basis points. The French Oat, however, remain stable.
The spread decreases again
The instability of the spread between Italian BTPs and German Bunds continues. The spread lost two points at the start of July 2, after yesterday’s peak which had brought it to 78 basis points. It is the result of a reduction in Italian yields, which dropped to 3.67%. German yields, however, remain completely stable, stuck for three days at 2.89% for the 10-year benchmark Bunds.
The spread therefore remains high compared to the recent past. In the last six months the differential has increased by 18%, while compared to a year ago it has decreased by 14%. In the last month the differential had found stability precisely around 75 basis points to which it has returned today. The peak on July 1st counterbalanced in this sense the collapse of the previous day, when the spread had fallen below 70 points, as had not happened since the beginning of the war in the Middle East.
It is precisely the conflict between the USA, Iran and Israel that determines much of the uncertainty in the financial markets. The higher energy costs caused by the increase in oil prices have undermined growth prospects in Italy, increased inflation and consequently led the ECB to increase interest rates.
Spain returns to last week’s returns, France stable
The morning of July 2 was characterized, on the government bond front, by a return to normality in Spanish Bonos. Yesterday, Madrid bonds followed a similar trajectory to that of BTPs on June 30, with a sudden drop that brought the spread to 39 basis points. Today the rebound, with the differential returning to 47 points, as in recent weeks.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 2.89% | – |
| Italian BTPs | 3.67% | 78 |
| French Oats | 3.57% | 68 |
| Spanish bonos | 3.37% | 47 |
The only European country to have made it through the beginning of the week with relative stability is France. Even on July 2, OATs remained 68 basis points away from Bunds, with yields of 3.57%.
The next auctions of government bonds
New auctions of Italian government bonds will begin next week. The first round will be between 9 and 10 July, with Bots and medium and long-term securities, while the following one will be held in the last days of the month. The dates to note are:
- July 9th Bot auction;
- 10 July auction of medium and long-term bonds;
- 28 July auction of Short Term BTPs and BTP€i;
- July 29th Bot auction;
- July 30 auction of medium and long-term bonds.
