The 19th inflation-protecting Btp Italia is in the works: the race begins
The beginning of the “sprint” For the 19th issue of BTP Italia, government bonds indexed by inflation, which came to market today March 6, 2023: €3.6 billion worth of orders were recorded on the first day, above €3.2 billion for the mid-November issue (for a total of 132,334 contracts signed). The first stage of the underwriting period, which is for individual savers, will take place until Wednesday 8th March 2023, unless early closing takes place (it should be remembered that for those who subscribe to the security at this stage and hold it until the deadline of 14th March 2028, it is envisaged Loyalty bonus of 8 per thousand).
But what is the new government bond that protects against inflation? What are its characteristics and what is new compared to previous positions?
Also read Ferruccio de Bortoli’s analysis: Inflation, will BTP Italia be enough to defend our savings?
New Italy BTP
The new BTP Italia has a (real) annual coupon of minimum 2%.On the other hand, the final version will be created – as Mef explains – with subsequent communication at the opening of the fourth day of the release, on the morning of Thursday 9 March and can be confirmed or revised upwards.
The last bond of this kind, BTP Italia launched in November 2022, has raised about 12 billion euros, confirming the interest in these instruments among the savings public and the families to which they are directed. Also because the cost-of-living index, which erodes the savings that Italians have in their checking accounts, is doing Btp Italia quite well, as evidenced by the returns of the latest issues (example: Btp Italia n. 17, issued in June 2022, at a rate of 1.6%, at the end of year separated monthly coupon by 7.23%). While remaining cautious in the price volatility scenario, one can imagine that with inflation already recorded by the General Price Index (NIC) for 2023 at 5.5% and the Consumer Price Index for households and blue-collar employees, net tobacco (Foi, to which Btp Italia relates ) from a few decimals below, The return for this year on an annual basis will be around 7-8% (most likely 7.2-7.3%), even in the unlikely event of a price freeze in March..
Having said that, let’s now take a closer look at what Btp Italia is, how it differs from “traditional” ones and what are the technical indicators for those who want to buy it.
Technical details: Buy (also) online
Let’s start with the technical details for those who intend to buy Btp Italia.
The security, due March 14, 2023 and due March 14, 2028is – as mentioned – Btp indexed to the Italian inflation rate (Foi Index), with vouchers paid every 6 months with revaluation of capital due to inflation in the same semester.
The first stage From the subscription period, which is intended for individual savers and their equivalents, from Monday 6 March to Wednesday 8 March 2023, unless early closing.
The security Isin code for this first stage is IT0005532715. The inflation index number calculated at the maturity and settlement date of the security is 118.24194. For those who subscribe to the security at this point and hold it until the maturity date (March 14, 2028), there is a loyalty bonus equal to 8 per thousand of the invested capital.
To sign up for Btp ItaliaIn addition to going to the bank or post office, it is possible Also online purchases through home banking (usually with the trading function enabled).
The second phase, intended for institutional investors, on Thursday March 9 from 10 to 12. The issue will take place on Mot (Telematic market for bonds and government securities of Borsa Italiana) by Intesa Sanpaolo spa, UniCredit spa – transaction dealer – Banca Akros spa, Cre’dit Agricole Corp. Inv. Bank – the programmer of the transaction – from March 6 to 9, 2023. The settlement date of all executed purchase orders is unique and coincides with the maturity date.
Yields: Thanks to inflation, they can even fly above 20%
In the past eight years, the total return of Italian BTPs has been remarkable, even exceeding 20% (see table). This is the case of Btp Italia issued in April 2015 and ending in April 2023: those who invested 1,000 euros at the time of signing up will soon find themselves with a total of 210 euros. It’s the good effect, at least for Btp Italia of inflation, that they relate to. In fact, “traditional” BTPs have returned 0.99% in one year, while Italian BTPs have recorded an average annual total return of 2.45% (This is more or less true of all 10 Btp Italia bonds still on the market, and some are even better than that.) Only when inflation goes from 6% to 2% (which is definitely not going to happen in the next few months) will “traditional” BTPs become more profitable again. In the meantime, Btp Italia will continue to protect the purchasing power of its holders.
What are BTPs and what are BTPs Italia?
Every nation has to shoulder expenses: from civil servants to infrastructure, from social assistance to education. These expenditures are partially funded by tax revenue, i.e., taxes paid by taxpayers. The rest is funded by government bonds and bonds that can be purchased by savers as a form of investment. In Italy we have three types of government bonds: Bot (Treasury Bills), Ctz (Zero Coupon Treasury Certificates) and of course Btp (Multi-year Treasury Bills). The last term is between 3 and 50 years and its yield is fixed at the coupon rate. BTPs are always issued at 100 and their price at maturity always goes back to 100 (as is the case for all bonds), the coupon split is gross and is taxed at 12.5% and is paid directly into the investor’s checking account every six months. Right now, there are BTPs maturing between 2025 and 2028 that can be purchased for as little as $100 and with coupons that allow for an annual return of around 2.5-3%. about 4% annually.
Btp Italia is the first government bond rated according to Italian inflation, with vouchers every six months and terms of 4, 5, 6 and 8 years, tailored above all to the needs of retail savers and investors. In fact, it is the first government bond issued by the Treasury using the traditional auction mechanism, but the Mot Italian Stock Exchange. In this way, buying at issue, as well as at the bank, can also be made through any home banking service that has trading functions enabled. Also in this case the term is variable, coupons are semi-annual and can be sold on the secondary market. Further, anyone who holds the purchased securities until their normal maturity date is guaranteed a premium on maturity.
Net payout difference between Btp and Btp Italia
BTPs It has three possible ways to return.
coupon price: It is the semi-annual interest rate that determines the amount of coupons. If you buy BTP for 100 EUR at a coupon rate of 1.20%, you will receive 1.20 EUR every 6 months in the form of a coupon, from which 12.50% tax must be deducted.
Emission discount: Btp is bought for a certain amount (issue value), and when it expires it is not said to be repaid with the same amount it was bought for. In fact, the redemption value can be above the rate, if it is less than the issue value, causing a loss, or equal to, or below the rate, causing a profit.
Sell before expiration: BTP can be sold before expiration. Again, sale value, as in the case of redemption value, can generate a profit or a loss or either.
Minimum return for BTP Italia Known shortly before release. As mentioned, the new Btp Italia was released on March 6, 2023. The minimum guaranteed coupon for the new issue is fixed at 2%, while the final price will be determined with a later communication at the opening of the fourth day of the issue, on March 9. The new BTP Italia has a term of 5 years and envisages a loyalty bonus of 8 per thousand for those who buy it at issue and hold the bond until the maturity date, in 2028. To determine the value of this voucher, consideration was the Istat Foi arrived at the end of January. Warning: in deflation, coupons are by no means calculated on the nominal capital invested, therefore with extended protection not only of principal, but also of interest. The yield tax is 12.5% as is the case for all government bonds.
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