Rising Btp-Bund spreads and European markets: an overview of the financial situation

Today, at the start, the spread between BTPs and Bunds reached 126 points, reaching the highest levels since April 2025, with the yield on the Italian 10-year bond stable at 4.69%. Subsequently, the differential with the German Bunds fell to 118 basis points with the yield at 4.66%, before rising first to 125 and then to 128 points.

In the middle of the day the Milan Stock Exchange erased the initial rise and the Ftse Mib slipped to -0.03% at 50,217 points. Among the other stock exchanges, Frankfurt gains 1%, Paris 0.7%, London +0.27%, Madrid 0.4%. Furthermore, the decline in oil prices continues. Brent fell to 99.2 dollars a barrel, recording a decline of 3%. The WTI lost 4% and fell below 90 dollars a barrel. According to Bloomberg, the drop in crude oil prices is due to rumors according to which some European countries are discussing the release of strategic reserves to mitigate the surge in fuel prices.

The BTP Bund spread is the difference between the yields of bonds from two different countries, in this case Italy and Germany. If one yields 1% and the other 3%, the spread is 2% and - in technical jargon - the spread is said to be 200 basis points. The spread measures the difference in reliability of the states, and if it increases it means that trust in that country is decreasing. Consequently, investors will tend to sell that state's bonds, and the more they sell, the more the spread will continue to rise.

In recent days, it has been oil that has weighed on the bond market above all, with Brent having once again reached above the threshold of 100 dollars a barrel and then extended above 101, marking an increase of more than 3%. Then there is the nervousness about the explosion of public debts, starting with that of the United States, which requires countries to issue bonds to refinance them with yields, inevitably, destined to rise. Finally, fears about inflation due to the increase in energy prices caused by the crisis in the Middle East (with the lack of signs of a solution) are pushing investors to position themselves by already taking new interventions by the Fed and the ECB on rates for granted. And central banks must keep cost pressures at bay by raising rates and pushing yields further. Thus the yields of government bonds are rising, and in Europe the most indebted countries such as Italy and France are paying the price.

On Thursday, before the budget law was presented to the Council of Ministers, the rate on French ten-year bonds reached the highest level since 2002: a sign of growing investor distrust towards transalpine debt. The yield on bonds on the secondary market jumped to 4.92%, a record high in Paris since July 2002, when the rate topped 5%. Furthermore, the spread between German and French yields reached 131 percentage points: the highest level since 2012. Finally, according to data released by Insee (the French National Institute of Statistics), French public debt has reached 3,595 billion euros, equal to 119% of GDP. Investors' fear is therefore that France will have difficulty in restoring its public finances, and this is why the yield on 10-year French OATs has approached 5%.