The spread between BTPs and Bunds opened slightly lower on October 26th. However, it did not fall below the 120 basis point threshold, remaining at 122, just one point below Friday’s close. Yields have dropped significantly, falling below 4.60% after last week’s peaks.
After the conclusion of the issue of the Valore BTPs and the Valore BTPs together, the regular auctions will resume tomorrow, with that of the Short Term BTPs and the BTP€i.
The spread does not fall but the returns do
The opening of the bond markets led to a decline in the yields of Italian government bonds but to a substantial stability of the spread, the difference in yield between BTPs and German Bunds. This is a classic sign of an easing of tensions, at least partially, on bond markets in general.
Bund and BTP yields are falling at the same pace, therefore keeping the differential roughly constant. The important data, however, is precisely the reduction in yields, both due to the worrying peaks of last week and the approaching end-of-month auctions.
The price of oil helps the spread
The drop in yields is at the same time as a reduction in the price of oil. The WTI opened the week just above 101 dollars a barrel, while Brent just above 112. High values in an absolute sense, but decreasing compared to last week’s closing and therefore seen as positive by the markets.
Pressure is also decreasing on European stocks
Other European countries are also benefiting from the reduction in tension on international bond markets. Spain saw its spread fall below 70 basis points.
| Government bonds | Returns | Spreads |
|---|---|---|
| German Bunds | 3.36% | – |
| Italian BTPs | 4.58% | 122 |
| French Oats | 4.98% | 162 |
| Spanish bonos | 4.05% | 69 |
France, which at the moment is the country with government bonds most under pressure, has managed to bring the Oat yield back below 5% after last week’s records.
The next auctions of government bonds
The first auction of government bonds among those that will end the month of October will be held tomorrow. This is an auction of Short Term BTPs and BTP€i, which will offer various products:
- a 2-year Short Term BTP with an annual coupon of 3%;
- a 15-year Btp€ia with an annual coupon of 1.25%;
- a 30-year Btp€ia with an annual coupon of 2.35%.
Subsequent auctions will be held:
- the Bot auction on Wednesday 28 October;
- the auction of medium and long-term bonds will be held on Thursday 29 October.
