Government bond yields are running and continue to run. In Italy, but not only: according to the analysis of Bespoke Investment group, the monetary policy rates practiced by 38 different central banks are at their highest since 1995 when weighted on the basis of gross domestic product. A big problem for the minister Giancarlo Giorgetti, forced to raise at least 14-15 billion euros more to pay the interest. But the consequences for families are no less important, both for those who intend to buy a house and for those who, exhausted by the zero interest policy, are looking for a parking space for their savings. The ideal framework for the Treasury's launch of the second BTP issue Value October 2023, scheduled for Monday 2 October.
Btp Valore: the characteristics of the issue of 2 October
Let's recap the features of the Btp Issue value October 2023, recalling that the title was an extraordinary success with 18,19 billion euros raised on its first appearance last June:
- Minimum investment of 1.000 euros. The offer is scheduled for deal 2 up to and including 6 October, unless early closure.
- The security can be purchased without commissions through home banking, at a bank or at the post office.
- The placement takes place on the Mot platform (Electronic Bond Market).
- The novelty of the new issue is that savers will receive quarterly coupons calculated on the basis of pre-set rates that increase over time.
- As last time, a loyalty bonus of 0,5% is foreseen for those who bring the bond to maturity.
The advantages of the new BTP Value: rate and duration
In anticipation of communication on the initial rate offered by the Mef, the total interest rate is fully underway, i.e. the analysts' race to identify the initial yield offered by the Mef, which will be made public on Friday 29th. Given the strong rise in BTPs on the secondary market (the ten-year at 4,73% is very close to eleven-year highs) it is very likely that the Treasury will be forced to raise yields offered for the June issue. Then the securities (duration four years compared to the five of the new offer) were placed at a rate of 3,25% for the 1st and 2nd year and 4,00% for the 3rd and 4th year, with a final extra loyalty bonus of 0,5%. This time too there will be a loyalty bonus of 0,5% for those who bring the bond to maturity.
This time the initial rate will have to be more generous: the forecasts seem to point towards at least an annual coupon of 4,0/4,1% gross (equal to 3,5-3,6%). although it could be slightly higher.
To remember that taxation is reduced at 12,5% as for government bonds, and it is convenient compared to the 26% of other financial instruments, such as deposit accounts for example.
La duration of 5 years and quarterly coupon growing guarantee an interesting if not irresistible appeal for savers, exhausted by years of almost zero interest.
The risks of the BTP Second issue value
But are things really like this? The rise of the spread over 190 andincrease in returns of the BTPs (50 points more in the last month) tend to remind us that the debtor Italy always walks along a very narrow and slippery path. The rates, although at the highest, may not be sufficient in the event of new emergencies. Not only. Both in the world of corporate bonds and among the governments of other countries, there is no shortage of alternatives. Just think about the US T-Bond: the 2 year offers 5,2% combined with the strength of the dollar, which has been steadily rising for eleven weeks against the euro.
Will rates rise further?
The real question, however, concerns the trend of rates. They will rise further, as the Fed's latest analyzes tend to confirm, meaning the turning point is near. So far, those who have bet on the end of the monetary tightening have only received disappointment. The mistake is to have underestimated the hunger for money of the public administrations, in Europe as in the USA which have supported real rates and promise to do so again for a good part of next year to the detriment of the managers (not a few) who have focused on long-term securities to take advantage of the benefits of lower rates that are not yet seen.
But, as we know, hope is the last to die. The short-term picture remains rather tense and could convince the faint of heart to flee from bonds – he writes Mauro Vicini from Intermonte – But by the same logic we should have gotten rid of the dollar at 1,12 three months ago or oil at 70 dollars four months ago. Or worse, get rid of the Nasdaq at the beginning of the year when it was worth 40% less. We continue to consider this scenario an excellent opportunity to accumulate positions on bonds. As long as there is no rush to make money the next day."
It is the right spirit also for Btp Valore.
