In the first hours after the markets opened on April 8, the spread between BTPs and German Bunds dropped to 77 points, after having remained close to 90 for almost the entire duration of the war in the Middle East. The announcement of an advanced ceasefire negotiation and a two-week truce between Iran and the US has calmed the bond markets.
News that arrived just before the auctions at the beginning of April. The Treasury can therefore hope for lower yields on the BOTs and BTPs that it will put on the market, with a consequent spending on debt that will generate lower than expectations.
The spread collapses, 77 points after the truce between Iran and the USA
The financial markets were waiting for nothing other than the news of the reopening of the Strait of Hormuz to restart investments. Even if the truce is only partial and apparently fragile, with Israel having already announced that it will not stop operations in Lebanon, the spread between Italian BTPs and German Bunds immediately reduced to 77 points from 88 at the opening yesterday 7 April.
The drop in bond yields was exactly two tenths of a percentage point for the 10-year benchmark BTPs, while for the Bunds it was limited to 9 cents. This allowed a clear recovery by Italian government bonds over German ones.
Italy is particularly exposed to fluctuations on the bond markets, both due to the size of its public debt and, in the specific case of the war in the Middle East, due to its dependence on foreign energy.
The yields of the securities of other European countries
That the extreme variations in the Italian spread are an exception and not the rule is demonstrated by the other government bonds of the large European countries. Spain saw the spread of its Bonos fall by just three basis points, with a decrease in yields much more similar to that of German Bunds.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 2.93% | – |
| Italian BTPs | 3.70% | 77 |
| French Oats | 3.57% | 63 |
| Spanish bonos | 3.39% | 46 |
The same goes for the French Oat, whose spread reduced by seven basis points, reaching 63, with yields of 3.57%. Both Paris and Madrid are more protected than Italy from energy crises thanks to investments in nuclear power and renewable sources in recent years.
The next BOT and BTP auctions
The collapse in government bond yields is excellent news for the Treasury, which from tomorrow 9 April will auction the first government bonds of the month. A high spread would have increased debt spending linked to these products. Now the Mef can hope for more positive emissions than expected. The next auctions will concern:
- on 9 April the 3 and 12 month Bots, for an amount of up to 11 billion euros;
- medium and long-term BTPs on 10 April.
Also held in April will be:
- the auction of Btp Short and Btp€i on the 24th;
- a new BOT auction on the 28th;
- the last auction of the month is on the 29th, again of medium and long-term BTPs.
