I hear a lot of chatting about BTP/Bund spread recently. I am not familiar with this concept. Could you explain what it is and what it means, in layman's terms?
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BTP are bonds offered by the government of Italy.
Bunds are bonds offered by the government of Germany.
German bonds (bunds) are thought to be the safest bond of all the government bonds in Europe.
The BTP/bund spread is a way to measure the risk of other bonds by comparing their yields to that of the German bund.
For example, if the yield on BTPs are 8% while the yield on bunds is 3% then the BTP/bund spread is 5%.
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