Trump’s words about a “short-term” war in the Middle East have calmed the financial markets and also those of government bonds. An effect that was also felt on BTPs, whose yields collapsed at the opening on March 10, bringing the spread with Bunds back to 69 points after yesterday’s peak of 86.
The drop in yields arrives just in time for the first traditional March auctions of Italian government bonds, which follow the extraordinary issue of Btp Valore at the beginning of the month, which was hit hard by the peak in the spread.
The peak of the spread is back, BTPs at 69 points from the Bunds
Together with the rebound of the European stock markets, all positive in the morning, the bond markets also showed a normalization, thanks to Trump’s words on a short-term perspective of the war in the Middle East, but also thanks to the willingness of the G7 to massively use strategic oil reserves to keep prices under control until the crisis involving the Persian Gulf has calmed down.
The result is that the spread between Italian BTPs and German Bunds has collapsed by 17 points compared to the opening yesterday March 9th, returning below the psychological threshold of 70 points. The yields on Italian bonds reached 3.51%, still high compared to the recent past but much more acceptable for the Treasury compared to yesterday’s 3.77%. This is in the face of a significant drop also for Bund yields, which returned to 2.82%.
The drop in interest on government bonds also represents an opening for the Government, which yesterday had received negative news from several analysts on the prospect of emerging from the infringement procedure for excessive deficit already this year. A long-term war in the Middle East would risk having consequences on the economy, lowering the GDP and therefore worsening the relationship with excess expenditure.
France and Spain normalize the differential
Spain does better than Italy, which at the start actually managed to bring its spread back to the levels prior to the crisis caused by the war. The spread between Bonos and Bund returned to 45 points, just two basis points above 43, which for several weeks had represented a point of equilibrium for the spread.
| Government bonds | Returns | Spreads |
| German Bunds | 2.82% | – |
| Italian BTPs | 3.51% | 69 |
| French Oats | 3.43% | 60 |
| Spanish bonos | 3.27% | 43 |
France also brought its spread back to levels similar to those at the end of February, at exactly 60 points. The great activity of Paris in the theaters of war has put the country back at the center of international dynamics, giving the Oat greater visibility, after months of difficulty.
The Treasury is preparing for the March auctions
Having definitively closed the issuance of Value BTPs, with results beyond expectations, the Treasury is now preparing for the regular BTP auctions, which will begin tomorrow. The dates to note for the month of March are:
- March 11th for the Bot auction;
- March 12 for the auction of medium-long term BTPs;
- on March 25th for the Btp Short – Btp€i auction;
- March 26 for the Bots auction;
- on March 27 for the auction of medium-long term BTPs.
