The Ministry of Economy and Finance announced BOTs will be issued at auction on Tuesday, September 12, 2023 And the calendar related to subscriptions: but How much is it worth investing in government bonds?
Government Bonds at Auction: Calendar for Subscription to BOTs
The Ministry of Economy and Finance announced in a press note published on the Ministry of Economy and Finance website 2023 calendar With which BOT subscriptions will begin. That is, these bonds are government bonds, specifically short-term debt securities issued by the government to finance its budget Validity 12 months, which established that with the opening deadline for public reservations set for Monday 11 September, auction bids can be submitted from Tuesday 12 September. However, starting September 13, an additional position will be opened for 6- and 12-month BOTs (3:30 p.m.). Release date September 14, 2023, expiration date September 13, 2023.
Due to the lack of identified cash needs, it was decided on September 12, 2023 not to offer the quarterly BOT.
How does the BOT auction system work?
Bonds are Debt securities issued by companies and governments to raise money. Investors buy bonds by paying an upfront amount as an initial investment, called principal. When the bond matures or matures, called maturity, the principal is returned to investors. vs, Investors usually receive interest payments Fixed and periodic by the entity that issued the bond.
BOTs are auctioned using a competitive auction mode system, with operators’ requests expressed in terms of performance. Each of the operators participating in the auctions can submit a maximum of five purchase orders. Vouchers can be subscribed for a minimum amount of one thousand euros. For each BOT issue, the reference financial price is the weighted average price of the first tranche, calculated based on the corresponding weighted average return. Returns The signal indicated by operators participating in BOT auctions, expressed in percentage, may differ for all types of securities, by a thousandth of a percentage point or a multiple of this number. Orders that do not include an indication of the auction yield will not be accepted.
The amount of each application cannot be less than one and a half million euros (1,500,000 euros). Only operators can participate in the auction “Specialists in government bonds”specified under Article 23 of Ministerial Decree n. 216 dated December 22, 2009And also “Aspiring professionals” In accordance with Articles 5 and 6 of Administrative Decree No. 993039 dated November 11, 2011. In implementation of the provisions Legislative decree n. 213 dated June 24, 1998, and the relevant implementing rules, regarding the dematerialization of government bonds, viz Ordinary treasury bills are represented by accounting entries For the benefit of those who deserve it.
The Bank of Italy automatically lists matches BOTs were subscribed to the auction To be settled in the clearing and settlement service with respect to financial instruments in a currency equal to the settlement currency. Depending on the assignments, winning brokers deposit the relevant amounts into the accounts maintained with the participants. Purchase orders must reach the Bank of Italy, within the conditions described above, exclusively via the National Interbank Network, according to the methods provided for in the Issuance Decree.
As specified by the Ministry For the year 2023Applications not received within the deadline set by the issuance decree will not be considered. Any requests to replace counter-applications already received will only be taken into consideration if received within the above deadline. Furthermore, the same applications can no longer be withdrawn after the aforementioned deadline.
It should also be noted that if each dealer’s orders, even in general, exceed the amount offered by the Treasury, they will be taken into account starting from the one with the lowest return up to the amount offered, unless otherwise stated in the issuance decree.
They can participate in Additional mode for annual BOTs, exclusively operators of “government bond specialists” who participated in the regular auction. The concession will be based on the weighted average return determined in the regular auction. Instead, the additional placement offer is usually quoted at a rate 10% of the nominal amount offered In a regular auction, based on the criteria set forth in the issuance decree. This percentage represents the amount offered in the supplementary deposit, which the Treasury reserves the right to amend after the close of the regular auction, based on the demand needs expressed by the operators. In this case, a press release will be issued in this regard.
Are Treasury bonds a good investment?
When it comes to BOTs, before Understand and determine whether the purchase represents a good investmentSeveral factors must be taken into consideration, including the type of bond, the amount of interest the bond pays, and how long its investment is restricted.
Investors should also evaluate what is called in terminology “Take risks” Regarding the risk of default on the bond, which must be taken into account in the event that the investment is not repaid by the bond issuer.
Bonds, including BOTs, can be a good investment for those looking for a fixed rate of interest payments. However, bonds and treasuries have some cons And the risks associated with them and may not be ideal for everyone.
Treasury bonds are sold by the Treasury Department through an online auction. Once an investor buys the note, he or she is there Two optionsthe. The investor can hold the bond until maturity, in which case the initial amount invested will be repaid when the bond matures. If the investor holds the bonds to maturity, the US government will almost certainly repay the amount invested.
The investor also has a choice Selling a bond before maturity. The bond will be sold through a broker in the secondary market, called the bond market. However, investors should realize that their initial investment is not guaranteed if the bonds are sold early in the bond market. In other words, they may get back less than the amount they initially invested.
Whether bond investing is good or bad depends on your financial goal For the investor and market conditions. If an investor wants a fixed income, Treasury bonds may be a good option. However, if interest rates are rising, buying bonds may not be a good option because the fixed interest rate may underperform the market in the future. Remember, when you buy Treasury bonds, the fixed interest rate on that bond never changes, no matter where the interest rates trade in the market.
As well as investing in bonds and selling them in the secondary market before their maturity It may lead to loss Similar to other investments such as stocks. Therefore, investors should be aware of the risk of losing money by buying and selling bonds before their maturity. If an investor needs the money in the next year or two, Treasury bonds, which have a longer maturity date, may not be a good investment.
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