Spread below 67 points, because the markets return to rewarding Italian debt

The European government bond market began the penultimate session of the year with a reassuring movement for Italy. The spreadthe yield differential between Italian ten-year BTPs and German Bunds of the same duration opened trading with a decline at 66.6 basis points. A value lower than the 67.4 closing points and the 70 opening points of the previous session, confirming a decline in the differential in recent weeks.

The yield picture presents contrasting dynamics between the main countries of the euro area. The annual rate of the 10-year Italian government bond remained unchanged at 3,5%. The securities of the other main euro area countries increased: the German Bund rose by one basis point to 2.84%, while the French one was at 3.53%.

A context of growing stability and trust

The further contraction of the spread below 67 points represents a signal of confidence of international financial markets towards the sustainability of the Italian public debt. As highlighted in previous analyses, a limited spread indicates that investors perceive reduced risk in investing in Italian government bonds. This compared to the German benchmark, traditionally considered the safest in the euro area.

The positive trend is part of a consolidation process that began months ago. After the increases of recent years, where the spread had reached i 130 basis pointsthe decline highlights a return to more normalized market conditions. Factors such as the approval of the budget and the recent positive assessments by some rating agencies have contributed to this improvement.

The implications for the State and for savers

Today’s dynamics have implications distinctand partly opposed, for the two main market players: the issuer (the State) and the investors.

For the Italian State, a smaller differential translates directly into a lower cost of debt. When issuing new bonds, the Treasury can do so by paying lower interest. According to the Parliamentary Budget Office, keeping the spread at moderate levels could generate savings worth billions of euros in the coming years. Resources that could be allocated to other policies or to debt stabilization.

For savers, the picture is more complex. On the one hand, a BTP with a yield of 3.5% remains interesting in an environment where bank deposit rates are lower and stock markets are volatile. On the other hand, it is important to note that the absolute return of the Italian bond remained stable (at 3.5%), while that of the German bond increased.

This means that today’s decline in the spread was mainly driven by the increase in the Bund, not by a decline in the BTP. The relative convenience of investing in Italian government bonds, therefore, remains.

Is it still worth investing in BTPs?

The answer depends on the saver’s objectives and time horizon. For those looking for stability and a periodic income, i Medium-long term BTPs continue to offer a viable opportunity. Locking in a 3.5% yield today may prove to be a shrewd move in a scenario in which the ECB has started a cycle of gradual reduction in interest rates.

For the short-term oriented investor, the risks associated with price fluctuations. If yields were to fall in the future, the price of the security would rise, generating a surplus value for those who decide to resell before maturity. Conversely, an increase would result in a capital loss in the event of an early sale.