The Ministry of Economy and Finance has announced that it has started the process for the syndicated issue of a new Green BTP, with a duration of 12 years, expiring in October 2038. This is the first tranche of a new government bond, which will be entrusted in the near future to a group of large banks.
There will not be a normal auction, like those held twice a month. The issuance will take place in a different way and when market conditions are favourable, also given the increase in yields recently recorded by government bonds across Europe.
The Treasury will issue a new Green BTP
The State issued this Green BTP to finance “interventions in favor of the energy efficiency of buildings and the transport category”, in particular railway infrastructures. However, as anticipated, there will be no extraordinary auction. The issue is syndicated, as specified in the press release issued by the Ministry of Economy.
The BTP will have a maturity date of 3 October 2038, and therefore a duration of 12 years. The coupons, and therefore the returns, will be determined at the time of placement. The issuance will take place in the near future, depending on market needs and opportunities, thus taking into account metrics such as spread and yields.
What does it mean that the issue will be syndicated
The state can issue debt securities in two ways. Either it puts them up for auction, publicly surveying investor demand, or it entrusts some specialized banks with the task of finding investors interested in certain products. This second methodology is called syndicated issuing, and is mainly used:
- for very long-term securities;
- for particular securities, such as Btp Green.
The banks involved in the issue
Six large international banks will be responsible for this particular issue:
- Barclays;
- BNP Paribas;
- Deutsche Bank;
- Intesa Sanpaolo;
- JP Morgan;
- Societe Generale.
However, their involvement has no connection with the retail customers of these institutions. Their task is to find institutional investors interested in the product offered by the State, in order to facilitate its placement on the market.
What is a Green BTP
The Green BTP is a government bond that is issued only with the aim of raising funds to finance interventions that have a positive impact on the environment, in particular on the reduction of gas emissions that contribute to global warming.
The State will therefore be obliged to use the funds collected during the issuance of the Green BTP expiring in October 2038 for these purposes, as also explained in the press release from the Ministry of Economy and Finance.
What changes for those who invest
Those who invest therefore have the certainty that their money will be used for sustainable projects. It is a way to control your investments and how they are used, which is impossible with a normal BTP.
There is, however, no change from a practical or economic point of view. Green BTPs, like all other BTPs, have a coupon and a market price that will determine their returns.
