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BTP Bund spread interpretation

Personal Finance & Money Asked on August 16, 2021

I know that the BTP/Bund spread is the spread between the German and Italian 10 year bonds. But I am unsure how we interpret the actual number and more importantly the drivers behind the spread increasing or decreasing. Is anyone able to explain?

I think if say BTP/Bund = 5% then we are saying that Italian debt is at a 5% premium (i.e. seen as 5% more risky by the market) than German debt. But what causes the spread to fluctuate up/down?

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