What is the spread?

Anonim

In the last hours it has come back to be of topical relevance, we read on the front pages of newspapers, on information sites, we hear in the news services: the spread, which in the last hours has grown by several points, arousing the concern of politicians and financial operators .

But what does the spread indicate? And why does the increase in this economic indicator trigger panic in the media and in the markets?

Italy-Germany. The term spread, literally "gap", indicates the difference in yield between 10-year Italian government bonds (BTPs) and equivalent German government bonds . The yield on government bonds is an excellent indicator of the health of a country's economy: the stronger the system, the less risky it is and therefore offer investors lower returns.

In other words, the spread between Italian BTPs and German Bunds indicates how much more risky it is to lend money to Italy compared to Germany, considered particularly reliable thanks to the exceptional solidity of its economy.

The first victim of an increase in the spread is the public debt : the increase in interest rates causes the State to be forced to spend more to finance its debt, that is to pay the interest to those who bought BTP, triggering a negative spiral from which it is increasingly difficult to exit.

Touch everyone. The variations in the spread have therefore quick and concrete repercussions not only on the economic macro-system, but also on the business accounts and on our portfolios .

The increase in interest rates makes it more difficult for Italian companies to access credit, thus making them less competitive than foreign ones.

The same negative effect is likely to increase the cost of mortgages and loans even for private citizens, thus triggering a new tightening on purchases and investments from which our country has just freed itself after the great crisis of 10 years ago.