The upward trend in the yields of Italian government bonds continues (which costs the Treasury 3 billion for each point), after the ten-year BTP reached a yield of almost 5% only to then fall back to around 4.7% in the session Wednesday 10. The upward trend is now manifesting itself on the short-term part of the yield curve, that of the 6 and 12 month BOTs. In today’s placement, the Treasury issued 6 billion 12-month bonds expiring 10/14/2024 with a yield of 3.942%, an increase of 7 cents compared to the auction of the previous month and the highest since June 2012. Good luck demand which stood at 8.717 billion euros, with a supply-demand ratio of 1.45. The auction regulation falls on October 13th. Although the increase compared to the yield of the previous auction is very limited, just 7 cents, it is still a maximum since 2012.
Tornano i «Bot people»?
A rate of return of almost 4% makes Bots a valid investment alternative for savers. Without going back to the “Bot people” of the 80s and 90s, when investing in Bots was a widespread practice among families, the title “short” in these conditions can really come back into fashion. Suffice it to say that the new BTP Valore boasts a coupon (paid quarterly) of 4.10% per year, but the duration of the security is five years. The 12-month BOT, on the other hand, is a much more “liquid” investment. In other words, compared to BTPs (whether value or traditional), to invest in BOTs you need to immobilize capital for a much shorter time, moreover with a decidedly competitive rate of return.
A pause in the spread increases
But after the mistral winds that have blown in recent days, both the stock and fixed income markets seem to have entered a calm phase. Even the BTP Bund spread on 10-year bonds, which last Monday reached a period high of 206 points and which yesterday fell to 194, remains relatively stable at around 195. This determines the further evolution of government bond yields , both short, medium and long term will probably be the inflation data, which in September showed signs of slowing down in Italy to 5.3%, even if the inflation acquired for 2023 is 5.7% for the general index and 5.2% for the underlying component, which excludes energy and food prices. A scenario in which it is difficult to hypothesize a drop in yields but in which it may be reasonable to expect a relative stabilization at current levels, especially if there are no further increases in the cost of money by the ECB or external shocks on the energy market or of a geo-political nature.
Bots and Bunds at 12 months: the difference in returns is minimal (0.27%)
Let us remember that in a country in economic recession (the 2023 GDP growth estimates according to the International Monetary Fund are -0.4 percentage points, at 0.7%) the yield curve is negatively sloped. This means that one-year Bunds offer a yield of 3.67%, while the 10-year Bund pays a coupon of around 2.8%, down from a high of 3.024% in early October. This means that while the spread, i.e. the yield differential, between 10-year BTPs and Bunds is around 195 points (almost 2%), the spread between 1-year BTPs and Bunds is reduced to just 27 basis points, worth that is, to just over a couple of decimal points of a percentage point.
2023-10-11 13:09:16
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