May 19, 2022

Wire Service Canada

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The spread widens further (190), yields on ten-year BTPs at 2.86%. The dollar “inhales” parity with the euro

The spread, the yield difference between the Italian 10-year government bond and the German equivalent, now close to 190 points, is closing again. 10-year BTP pays 2.86% today, or 08% more than yesterday. Especially nearly 0.8% more than a month ago and 1.9% more than a year ago. Today, yields rose across the Eurozone but there was no rally in the Italian range’s breadth. German stocks also rose by 3 basis points (0.03%), as did French and Greek stocks. For Spain and Portugal, the increase was 4 points. a German Bundas a reference term in calculating spreads as it is theoretically an asset Risk free, pay 0.96% today By 1.1% compared to last year when rates were negative.

Inflationary environment and monetary strategy prospects by European Central Bank. If rates rise, newly issued bonds will be put into the market at higher interest rates. This aligns the outstanding securities that will be traded Lower prices. The interest they provide is actually fixed in absolute terms but is expressed as a percentage of the value of the security. if prolonged, The increase in prices is expected to increase its weight on the public treasury Public debt service, that is, the amount of interest that is paid each year on government bonds in circulation. Thanks to particularly favorable conditions, Italian interest expenditures have fallen in recent years from 75 to Less than 60 billion euros. Helps the recovery of public finance inflation that benefits all debtors. In fact, the amounts to be repaid lose their true value more quickly.

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Another major phenomenon that characterizes markets is the progressive phenomenon dollar strengthening. Since the beginning of the year, the US currency has strengthened by about 12% against the euro, and has also gained value against the yen and the British pound. To buy one euro today you need 1.05 dollars, before the start of the Russian invasion it was 1.13 dollars. The dollar also supports the prospects of an imminent US interest rate hike, which is already expected The next Wednesday. Some traders are of the opinion that it is possible to achieve one in the short term Full parity between the euro and the dollar. The US currency is used in 65% of world trade, followed by the euro, which covers a 20% share.

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