The spread between the BTP and the Bund reaches 215 points basis (from 191), to the highest since February 2014. At the same time, the yield on the ten-year bond soars, rising from 2,41% at the end of 24 May to 2,53% today.
In closing, the balance is as follows: 206 points for the spread, and a yield of 2,47 percent.
Since this morning the differential had shown signs of nervousness, already clarifying at the beginning what we should have expected: yet another day of passion has opened on the markets.
So it shows no signs of decreasing the tension caused by the Italian political uncertainty which has been going on since last March 4th. The task conferred by the President of the Republic, Sergio Mattarella, on Professor Giuseppe Conte did not serve to calm spirits, just as the reassurances to Europe given by the Prime Minister in charge on the evening of 23 May were not enough, nor the consultations carried out with the parties .
The excesses of Matteo Salvini, who promised that the next government will “the opposite of what the EU has threatened in recent years” have increased distrust in Italy and fears that the Executive which is about to be born will establish a confrontation with Brussels, compromising the already precarious stability of Italy's public finances.
What worries the markets is also the defense to the bitter end of the choice of Paolo Savona as future Minister of Economy. An insistence so strong as to force the Quirinale to raise its voice, reminding Matteo Salvini and Luigi Di Maio that the choice of ministers, on the basis of the same Constitution defended by the two until December 2016, foresees that it is the President of the Republic who appoints "the President of the Council of Ministers and, on the proposal of this, the ministers”. (article 92).
It should also be taken into consideration that, on 24 May, the European Central Bank also intervened on the matter, inviting our country to keep public finances under close scrutiny, deficit and debt in the first place, avoiding taking the same path previously taken by Greece, a path that later proved to be dead-end.
Returning to government bonds, the upward trajectory of the spread now seems hard to ignore. On the eve of the elections, the differential settled at 134 basis points, almost seventy less than today. From the lows of April 24 (113 points), the increase is close to 100 basis points. The surge began on May 16, 24 hours after the publication in the newspapers of the first draft, later modified, of the government contract between the Lega and Movimento 5 Stelle. In just 9 days (7 sessions), the recorded increase is over 80 points. Also noteworthy is the spread of the differential on Spain and Portugal to levels not seen for years (100 and 50 basis points respectively) when until recently it was negative.
The increase can not but worry the banks, the first to pay the price for what is happening. According to a report by Credit Suisse, a 100 basis point increase in the spread could reduce the tangible equity of Italian banks by 1% on average, while Cet1 could suffer a decrease of 15 basis points, considering the exposure valued at fair value. At market values, the contraction would be 7% in tangible equity and 94 basis points in the average Cet1. It is no coincidence that the Ftse Italia Banche dropped 1,7% on the Stock Exchange, falling to the lowest level in the last 11 months and the major banks left between 2 and 6 percent on the ground.
The Ftse Mib is also weak, losing 5,5% of its value in the last month (-4,53% in the last week alone). Until April 30, Piazza Affari was the best stock exchange in Europe.
(Last update at 18.17)
