At the close of Friday 20 March, the spread between Italian BTPs and German Bunds closed with a clear increase compared to the opening, at 92 basis points. A level that has not been seen since last June but above all a much more marked increase compared to the other large European countries which have maintained their differential around the average of the last week.
However, the level of increases in BTP yields is better understood if we consider that even Bunds, the German bonds on which the spread is calculated, are in a moment of difficulty. The reason behind this instability is the war in Iran, but it is also necessary to understand why it is affecting various European government bonds so differently.
Spread at 92 points, what’s happening to BTPs
Yesterday, March 20, the spread, the difference in yield between Italian and German government bonds, went from 80 to 92 basis points. A leap that, in recent periods, this measure took weeks to make. In one day, the BTPs canceled out the progress made in a year in moving closer to the Bunds. Yields are now close to 4%, with end-of-month auctions starting next week.
The reason for this sudden instability is the war in Iran. Rising energy prices have destabilized markets and worsened the economic outlook internationally. Italy, which is dependent on gas to produce energy, has suffered this instability more than other countries and therefore investors have assessed the risk of investing in our country’s public debt as higher.
However, there are also structural reasons. Italy has one of the highest public debts in the world in relation to its GDP. Any destabilization of the bond market is felt more in our country for this reason too.
Because even the Bunds are in crisis
The increase in the spread was slightly offset by a growth of almost one tenth of a percentage point in the yields of German government bonds, which serve as a yardstick, being considered the most stable in Europe. This reputation, however, is cracking, as Reuters analysts first noticed at the beginning of the war in Iran.
During past crises, Bund yields used to fall. Investors viewed German bonds as a safe haven, like gold, and therefore redirected their funds into German debt. The reasons for this change are:
- the difficulties of the German economy, which led to greater public spending;
- the dismantling, in the last decade, of the civil nuclear infrastructure and the limited investments in renewables, which have linked the price of energy in the country to gas and other fossil fuels.
France and Spain react better than Italy
France and Spain performed relatively better in this context. Their spreads increased at a much slower pace than Italy’s:
- the French Oat went from 67 to 71 points;
- the Spanish Bonos went from 49 to 53 points.
Four points in one day compared to Italy’s 12. A difference that can be traced back to the lower exposure to the energy crisis of these two states. Thanks to its extensive system of nuclear power plants, France does not use much gas in its energy mix. In 2024 it used 361 TWh, compared to 652 TWh in Italy, and this figure includes gas for heating.
In 2025, Spain produced 55.5% of its energy from renewable sources. This has allowed the country to use gas as an energy source only a few times (15% of hours of consumption, compared to 89% in Italy). The way electricity prices work in Europe, this has a very serious impact on the cost of energy.
