The spread

Since now we will talk about it (as can be expected …), I propose it again, and in case you are interested in monitoring it I remind you that you can do it for example here .

A little less at hand, but still easily available, are the data on the purchases of government bonds by the ECB. Find them here . I have explained to you here why when a stock's price goes up its interest rate goes down, and vice versa because when a stock's price goes down its interest rate goes up. Obviously, the price of securities, like that of any other good, also depends on supply and demand. We must therefore expect that if the demand for Italian bonds falls, the price of Italian bonds will go down, and therefore the interest rate of Italian bonds will increase, or the spread will go up.

The spread data tells this very story:

We can see very well that the surge in the spread since mid-2018 is linked to the decision (purely technical, ça va sans dire ) of the president of the ECB to strongly reduce net purchases of Italian securities in the context of the PSPP program (Public Sector Purchase Program, would be quantitative easing , for friends). Less demand, the price drops, interest rates go up, and the newspapers take it out on the populists (that is, with you, mind you: I have betrayed and therefore I do not know you)!

Now let's see how the president will behave …

(… the perfidious Borghi told you this several times live, but even if I trust him it seemed right to give you the tools to verify …)

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This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2022/07/lo-spread.html on Thu, 14 Jul 2022 20:33:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.