BTPs, like many other government bonds, are recording higher yields than in the recent past. This can be a problem for states, but also an opportunity for those who want to invest with lower risks than those of the stock market. Three different tranches of BTPs will be auctioned on October 13th, with maturities set at 3, 7 and 15 years.
The State will put 7 billion euros on the market through these instruments. Yields will be influenced by the performance of international bond markets, but there will be rather high and guaranteed coupons.
BTPs at auction on October 13th
BTPs are a short, medium or even long-term investment instrument, which allow you to have fixed returns with a relatively low risk compared to what you have to accept when buying shares. This is because the BTP investment does not focus so much on value, but on coupons.
Every year, the State agrees to give those who invest in BTPs a percentage of the value of their investment, usually every 6 months. The figure indicated in the information on government bonds is gross, but the tax that must be paid is not the 26% on financial income, but a subsidized one, 12.5%.
Three different BTPs will go up for auction on October 13th:
- one expiring in 2029, therefore 3 years;
- one expiring in 2033, therefore 7 years;
- one expiring in 2041, therefore 15 years.
The 3-year BTP
The first security of the auction on 13 October is the seventh tranche of the BTP with ISIN code IT0005716839. It expires in September 2029, therefore three years from issue, and is therefore a short-term security.
This makes it a product suitable above all for protecting capital from inflation. It has an annual coupon of 3%, which is therefore higher than average inflation, but much lower than the current rate of price increase, at 4.2%.
However, that 3% will not be his return. That will depend on the selling price. At the moment, BTPs with the same ISIN code as other tranches are trading at 98.10. The actual yield is therefore around 3.7%.
The 7-year BTP
Even the 7-year BTP is a tranche of an old product, the fifth. The government bond on which this issue is based is the one with Isin code IT0005722845 and maturity in September 2033.
It has an annual coupon of 3.35%, while the price on the market is 94.59. This gives rise to a yield of 4.12%. Even in this case, however, it is more of a security to keep savings protected from inflation.
The 15 year BTP
Things may change with the last security of the auction on 13 October, the BTP with Isin code IT0005694630 and maturity in October 2041, in 15 years. It has a high coupon of 3.95% and a price of 90.52. This gives rise to a yield of 4.58%, which may seem high, but it is the same as what the 10-year BTPs closed at last October 9th.
These securities can also be used in a more risky way by waiting. They can be purchased by waiting for their price to rise during their long expiry period. This could happen, for example, if we return to a situation similar to that before 2020, when interest rates were at zero.
In this way you could earn not only from the coupon, but also from the sale of the BTP. However, it is a much riskier strategy and more similar to an investment in the stock market than to the classic purchase of BTPs made by private individuals.
