The yield on new BOTs returns to close to 3%. In the auction on 9 September the Treasury placed the new 12-month bond maturing on 14 September 2027 at a gross yield of 2.967%, up from 2.768% recognized in the August auction.
The hammer price was set at 97.08 euros for every 100 euros of nominal value. All have been placed 7.5 billion euros offered, while demand from operators exceeded the amount available.
Together with the new annual security, the BOT was also reopened with maturity on 14 January 2027 and a residual life of four months. In this case the gross return was equal to 2.60%.
How much the new 12 month BOTs yield
BOTs, Treasury Bonds, are zero-coupon securities. The profit comes from the difference between the price paid at the time of purchase and the nominal value refunded at maturity.
In the case of the new annual BOT, identified by the Isin code IT0005730681, anyone who has subscribed to a nominal lot of 1,000 euros pays the title 970.80 euros, before taxes and commissions. At maturity, if you keep the BOT until repayment, you will receive 1,000 euros.
The gross difference is, therefore, equal to 29.20 euros. The preferential taxation of the tax applies to this gain 12.5% reserved for Italian government bonds, corresponding to 3.65 euros.
The result is the following:
| Face value | Cost of the title | Gross profit | Tax 12.5% | Net profit before commissions |
|---|---|---|---|---|
| 1,000 euros | 970.80 euros | 29.20 euros | 3.65 euros | 25.55 euros |
| 5,000 euros | 4,854 euros | 146 euros | 18.25 euros | 127.75 euros |
| 10,000 euros | 9,708 euros | 292 euros | 36.50 euros | 255.50 euros |
The figures refer to the nominal value subscribed and do not yet take into account the commissions applied by the intermediary.
The net profit on 1,000 euros
For a BOT with an annual duration, the commission requested by the bank at the auction cannot exceed 0.15% of the nominal value. On the minimum lot of 1,000 euros the maximum cost is therefore equal to 1.50 euros.
Also considering this item, the actual profit drops from 25.55 to approximately 24.05 euros net.
| Face value | Net profit before commissions | Maximum commission | Final net profit |
|---|---|---|---|
| 1,000 euros | 25.55 euros | 1.50 euros | 24.05 euros |
| 5,000 euros | 127.75 euros | 7.50 euros | 120.25 euros |
| 10,000 euros | 255.50 euros | 15 euros | 240.50 euros |
The total outlay to purchase 1,000 nominal euros, including tax and maximum commission, is approximately 975.95 euros. The saver will receive 1,000 euros at maturity, therefore realizing a monetary gain of approximately 24 euros.
The actual commission requested may be lower and depends on the conditions applied by your bank.
Because the yield has gone up
The new yield of 2.967% exceeds that of the previous auction by almost 0.20 percentage points. The increase reflects the rise recorded in recent weeks in bond yields and the greater caution of investors regarding future central bank decisions.
The price of bonds and their yield normally move in opposite directions: when the price falls, the yield for the buyer increases.
The short maturity limits exposure to rate fluctuations compared to longer duration securities. The BOT remains, however, part of the public debt and falls into the broader category of government bonds issued by the Ministry of Economy to finance public needs.
Can the new BOTs still be bought?
The booking to participate directly in the auction closed on 8 September. Anyone who has not submitted the request to their bank cannot, therefore, obtain the title under the exact conditions defined in the auction.
After the regulation of September 14, the BOT will be able to be bought and sold on the secondary market through banks and authorized platforms. In this case, however, the price will be the one present on the market at the time of the order and the yield could be higher or lower than 2.967%.
Selling before the deadline also exposes you to the risk of receiving a different price than the one paid. The reimbursement of the nominal value of 1,000 euros is expected for those who maintain the title until 14 September 2027.
BOT or deposit account: what to evaluate
The yield of the BOT must be compared with the net yield of deposit accounts and other short-term solutions. Government bonds are taxed at 12.5%, while a tax of 26% is generally applied to interest on deposit accounts.
However, the BOT has purchase costs and possible price fluctuations if it is sold before maturity. Inflation must also be considered: if the increase in prices exceeds the net return, the real value of capital continues to decrease.
The new BOT may therefore be interesting for those who want to use a sum for a year, already know the date on which they might need it and intend to keep the security until maturity. The gain remains limited: out of 1,000 nominal euros we are talking about approx 24 euros net, not almost 30 euros as the gross yield alone might suggest.
