The BTP-Bund spread has returned to descend. On the morning of Tuesday 22 April 2025, the differential among the Italian government bonds at 10 years of age (BTP) and the equivalent German ones (Bund) stood at 113.5 Basic pointsdecreasing compared to the 116.6 points recorded at the end of the previous day.
An apparently low drop, but which offers an important starting point to reflect on a key theme: What are the concrete relapses of a drop in the spread for families, businesses and savers? In particular, what effects can we expect on mortgages, loans and, more generally, on prices within the Italian economy?
What is the spread and why it is important
Let’s start with the bases. The BTP-Bund spread It is the indicator that measures the differential between the performance of the Italian and German ten -year government bonds. Germany, in fact, is considered the point of reference for financial solidity within the euro area: the more the spread is widening, the more the market perceives the Italian debt as risky than the German one; Conversely, a narrowing indicates greater trust in the tax sustainability of our country.
The spread incide directly on the cost of money for the state. If the differential rises, Italy must offer higher interest rates to attract BTP buyers. This increase is then reflected, in waterfall, on rates practiced by banks and financial institutions to families and businesses. So when the spread descends, even if the benefits are not immediate, the credit tends to become more accessible.
The effect on fixed and variable rate mortgages
One of the sectors that looks more attention to the performance of the spread is certainly that of mortgages. In particular, who is about to sign a fixed rate mortgage indirectly benefits from a climate of smaller tension on the bond markets, which is reflected in a lowering of IRS rates, that is, the reference rates for fixed mortgages.
In the case of variable rate mortgageon the other hand, the effect is more indirect but no less relevant. Even if the variable rates are linked to the Euribor, a drop in the spread can contribute to Improve General Conditions of the credit market, pushing banks to offer more competitive banking spreads than the reference parameter.
It should be noted that the performance of the Italian ten -year BTP is currently stable around 3.6%, which indicates that the descent of the spread is not yet the result of a particular euphoria towards Italian debt, but rather than the fact that i German bund are gaining value – and therefore make less – due to a greater demand linked to international factors, such as the caution of investors compared to the European economic cycle.
However, even in a context of stable Italian yields, a reduction in the spread increases trust in Italyand this trust translates over time into less rigid credit conditions.
Possible stability for consumer prices
In fact, a drop in the spread can contribute, despite indirectly, to keep prices under control and to avoid new inflationary flames powered by financial tensions.
This is because the spread does not only affect the cost of the debt, but also on inflationary expectations and, consequently, on consumer prices. A low differential tends to cool the tensions on the public financing costs front, making “emergency” tax maneuvers and expansive economic policies less likely.
This It is also reflected on the dynamics of pricesbecause less pressure on public accounts allows more stable policies, without the need for tax uploads or brusque cuts. In addition, in a context of content spread, the ECB may feel less tied to keeping interest rates too high for too long, if inflation in Europe should continue its descent.
Another area in which the drop in the spread can have significant impacts is the business world. A lower perception of the risk of country translates into a Cost of the lowest capital for companieswhich can finance themselves at more favorable conditions and, therefore, not forced to increase the prices of the final product.
The spread remains a volatile indicator
Despite recent improvement, it is good to remember that the spread is an extremely sensitive indicator of external factors: a political crisis, an unexpected decision of the ECB or a geopolitical escalation to see the differential return to climbing sharply. Furthermore, a temporary drop is not enough to structurally modify the rates practiced on mortgages or conditions of access to credit.
Therefore, caution is needed before exulting: the spread must be monitored over timeand its beneficial effects are manifested only if the descent is stable and supported. For now, the BTP performance remains at 3.6%, a sign that the perception of Italy’s risk has improved, but not to the point of talking about a structural change.
