Compared to early March, the yield on the 10-year Italian Treasury bond has fallen from the 4.6 percent area to 4.2 percent
Should the trend consolidate, it could be interesting to take advantage of opportunities offered by current rates
Medium- and long-term Treasury issues are returning: between April 13 and 14, three new tranches of 3- and 30-year BTP bonds will be placed on the market, as well as a new 7-year bond that is likely to attract more attention from retail investors, who are usually reluctant to commit to very long maturities (and run the risk of an early sale at a loss).
The BTP remains one of the most sought-after investments, at least online. This is evidenced by an ever-increasing curve of interest shown on Google Trends, where the word BTP, at least until the week of Silicon Valley Bank’s bankruptcy (a month ago) had not been so searched since 2004. Compared to the beginning of March, the 10-year Italian Treasury bond yield fell from the 4.6 percent area to 4.2 percent. The expected tightening of bank credit due to the crisis of confidence triggered by the turmoil over Credit Suisse and the possibility that the ECB will decide to moderate its rate hike path, basically following the Federal Reserve’s route, has compressed government bond yields compared to the favorable conditions of a few weeks ago. As a reminder, expectations about the future course of the ECB’s benchmark rates tend to influence government bond yields, with different impacts depending on the maturity of the bond.
But how much is the Treasury offering today for those who decide to buy BTPs?
BTP, here are the coupons for the new April issues
For the three-year bond maturing April 15, 2023, the coupon is 3.8 percent, a bit higher than the 3.7 percent per annum offered by the new seven-year Btp maturing June 15, 2030. The expectation reflected in these yields is that, once the inflation spike observed in the post-covid period is archived, there will be a return to lower inflation and benchmark rates, making this 3.7 percent sufficiently attractive. In fact, according to current European Central Bank forecasts, inflation in the Eurozone will return to 2 percent around the beginning of 2025, making much of the stretch from current high inflation levels during 2023.
Yields offered for the 30-year bond, the 20th tranche with a remaining life of 21 years (maturity 1/9/2044), rise to 4.75 percent. In contrast, for the 31st tranche of the 30-year bond with 14 years remaining life (maturity 1/2/2037), the coupon is 4 percent.
“At this stage on the BTP, both positive and negative aspects can be observed. The positive side is that compared to the government bonds of most other European countries; it offers a higher yield,” independent financial advisor Tommaso Castelli (HCinque Scf) told We Wealth. However, the assumption for which caution should be maintained is the forecast of what inflation will be in the coming years, which may not match the ECB’s estimates. “Historically, the inflation shocks produced by wars have been persistent, which makes us prefer shorter maturities,” said Castelli, for whom the three-year cut, the closest of those in issuance, “is still fine.”
And the alternatives? HCinque, at this time, also looks interested in corporate bonds with maturities that are not too long, benefiting from yields that are attractive at this time, particularly for more extensive portfolios that may have access to corporate bonds with high minimum denominations.
BTP, details of the April issue
The Isin codes of the various issues are:
3-year Btp IT0005538597
30-year Btp (maturity 1/9/2044) IT0004923998
30-year Btp (maturity 1/2/2037) IT0003934657
By 3:30 p.m. on April 14, it will be possible to submit applications for the supplementary auction at one’s intermediary (such as a bank or post office) since the deadline for reservations for the main auction has already passed. “As compensation for the commitment made to collect and manage the public’s reservations, operators are paid a commission commensurate with the nominal amount subscribed, exclusively in the ordinary auctions of the assigned securities,” the Mef specified, “as a result, these entities will not be able to apply any intermediation charge on customers’ subscriptions.”
“Intermediaries will be able to request, as a guarantee of the successful completion of the subscription, the possible payment of an advance on the nominal amount booked.”
