On the occasion of the auction of annual BOTs being held today, a fundamental question arises for families and small savers looking for a safe use for their liquidity: is it better to subscribe to them immediately or is it better to wait for the next issues?
To answer this question it is necessary to evaluate expectations on interest rates, the duration of the investment and the alternatives currently available on the market for managing savings.
The framework of the BOT auction
12-month Treasury bills continue to attract the interest of private savers thanks to their nature as short-term instruments, characterized by limited issuer risk and facilitated tax management. Among the main elements of the issue are:
- the preferential taxation on returns applied at 12.5%, instead of 26% as for other financial products;
- total exemption from inheritance tax;
- the issue haircut mechanism, in which the yield is given by the difference between the purchase price below par and the redemption value of 100.
Why it is better to buy now
Subscribing to BOTs at auction immediately presents some strategic advantages for those who intend to consolidate returns in the short term:
- protection from the risk of falling rates: blocking a certain 12-month return protects the capital in the event that the European Central Bank decides to continue with monetary easing in the next meetings;
- management of on-demand liquidity: the annual deadline allows you to plan the repayment of sums in the short term without tying up resources over multi-year horizons;
- absence of price risk if held to maturity: unlike medium-long term securities, bringing the BOT to maturity eliminates sensitivity to market fluctuations.
Because it’s better to wait
On the other hand, there are always elements that push towards a more cautious attitude or towards portfolio diversification.
The first concerns the uncertainty about the evolution of inflation. If price pressures show unexpected persistence, the ECB could slow down its rate cuts, potentially making auctions in the following months more generous.
For those who do not need to liquidate the sums within a year, blocking the yield for a longer period of time through medium or long-term BTPs allows you to protect coupon income for longer.
Finally, it is necessary to consider the possibility of unexpected expenses: the need to access immediate liquidity could force you to disinvest the sum before 12 months, finding yourself having to resell the security on the secondary market before the natural maturity with the risk of realizing a lower return.
How to guide your investment choice
The decision between immediately joining the auction and waiting for new opportunities depends primarily on your risk profile and individual liquidity needs.
The immediate purchase responds to the need to secure short-term inventory by stabilizing the yield before any further drops in interest rates. Otherwise, waiting or splitting the capital over different maturities represents a useful waiting strategy for those who wish to monitor the evolution of European monetary policy before committing all their liquidity.
