The spread Between Btp And Bund opened to 88 points basisthe lowest level from the far away April 2010.
Beyond the symbolic value, the data represents an important signal for Italy’s economic-financial stability, especially at a time when the Eurozone moves towards a more accommodating monetary policy.
Because the spread is going down
The yield of the Italian tenth anniversary fell to 3.449%, confirming a trend in place for weeks and supported by internal factors and outside the national economic system.
The spread is, in fact, a thermometer of the perceived risk by investors on public accounts Italian with respect to the reference point represented by the German titles. High values indicate fears about the sustainability of debt; On the contrary, content levels suggest trust and stability.
For example, to the facts of 2011, when at the height of the sovereign debt crisis, together with strong political instability, the differential exceeded 500 basis points. That situation decreed the end of Silvio Berlusconi’s hegemony, who never managed to count as before in the political chessboard. Today, with the spread under 90 points, Italy approaches the standards of reliability considered pre-crisis.
The drop in the spread today is supported by a combination of positive factors:
- The attenuation of the internal political tensions which, net of the continuous bickering between right and left, does not translate into an effective political crisis;
- the continuity of the budget line;
- But above all, the reversal of the course of the European Central Bank that has started a gradual reduction in interest rates.
In this context, the Italian debt becomes more manageable and attractive in the eyes of international investors.
The effects of the low spread
A low spread produces effects that are reflected directly on the management of public debt. Lower returns imply lower costs for the state when it comes to refinanating the expiring securities. This can free resources to be allocated to investments, welfare or measures tax without having to resort to new taxes oa cuts at the expense.
Furthermore, in a European context where new tax rules are discussed, the credibility earned can offer Italy a wider margin of negotiation. A country that shows that you know how to keep your spread under control becomes more authoritative Even in the European tables where the future structures of the stability pact are decided.
Spreads and mortgages
We then remember the correlation between the trend of the spread and the mortgage market. As for the fixed rate mortgages, the lower tension on the bond markets is reflected in a lowering of IRS rates. As for variable rate mortgages, a drop in the spread can help improve the general conditions of the credit market, pushing banks to offer more competitive conditions.
Remember in this regard the historic “lesson”, dating back to 2018 in the Porta a Porta studios, of Pier Carlo Padoan to the grillin Laura Castelli, undersecretary of the economy.
- Padoan: “If the spread increases the capital value of the banks’ active value and therefore the banks must be redone by raising the cost of the loan”.
- Castelli: “She says this”.
The role of the ECB
The role of the ECB in the decline of the Italian spread has already been mentioned, but it is worth deepening: the start of a monetary locking cycle, with the first cut of the rates implemented in June, contributed to reducing the pressure on the titles of the high debt countries. A further intervention scheduled for July could further strengthen this trend. Still, however, inflation permitting.
Risks for the Italian spread
The situation is favorable, but the risks related to the fragility of the context remain: any geopolitical shocks connected to the wars, negative surprises on inflation or signals of more marked economic slowdown could easily reverse the course. It should be remembered that Italy has a series of Achilles heels:
- problems relating to productivity;
- high cost of energy;
- public debt over 3,000 billion.
