When you set aside a sum, it doesn’t just matter how much it can yield: it also matters when it becomes available again. For some, receiving interest every three months means being able to allocate it to household expenses or add it to savings. Others may prefer not to touch them and find them together with the capital at the end of the journey.
It is on this difference that the comparison between BTP Valore and BTP Valore Insieme is based, the two securities that the Treasury is offering for the first time in the same placement. The offer is scheduled from 19 to 23 October, unless early closure. Both last five years, expire on 27 October 2031 and can be purchased at par, starting from 1,000 euros.
The difference can be seen in the calendar
| BTP Value | BTP Value Together | |
|---|---|---|
| Duration | 5 years | 5 years |
| Interests | Increasing quarterly coupons | A coupon at maturity |
| Scheme | 2+2+1 | Single payment |
| Expiration | October 27, 2031 | October 27, 2031 |
| Minimum subscription | 1,000 euros | 1,000 euros |
The BTP Valore pays every three months: the scheduled dates are January 27, April, July and October. The first coupon will arrive on January 27, 2027. The rate will increase in three steps: it will remain the same for the first two years, it will increase in the following two years and it will increase again in the last year.
The BTP Valore Insieme follows a different rhythm: no intermediate coupons, but a single payment at maturity, together with the capital. Those who choose this formula will therefore have no interest to use or reinvest during the five-year period.
Equivalent returns, different collections
The Treasury indicates yields that are financially equivalent to the issue. This does not mean that the two stocks will distribute the same amount at the same times. With the BTP Valore the interest arrives first; with Together we have to wait until 2031.
It’s the difference between having money available along the way and receiving it all at the end. The BTP Valore coupons can be spent or reinvested, but the return on any reinvestment will depend on the conditions available at that time. The overall rate, precisely because the payment is deferred, will be higher than the simple nominal sum of the coupons of the traditional security.
How much is the interest on 1,000 and 10,000 euros worth?
The minimum guaranteed rates and ISINs will be published today: without those values it is not correct to estimate the actual proceeds of the two securities.
However, each percentage point of the annual rate of the BTP Valore can be translated into euros. On 1,000 euros, one percentage point is worth 2.50 euros gross per quarter, approximately 2.19 euros net after the 12.5% tax. On 10,000 euros it is worth 25 euros gross, approximately 21.88 net per quarter.
| For each annual percentage point | On 1,000 euros | On 10,000 euros |
|---|---|---|
| Gross quarterly coupon | €2.50 | €25.00 |
| Net quarterly coupon | approximately €2.19 | approximately €21.88 |
To calculate all the coupons of the BTP Valore, the three official rates will be used. Indicating them with a, b and c, expressed in percentage points, the overall gross coupons over the five years correspond to 20a + 20b + 10c euros on 1,000 euros; on 10,000 euros the total is ten times greater. For the BTP Valore Insieme, the single coupon amount can be calculated when the official rate is known.
The burden of taxes and the money that comes later
For both bonds, interest is subject to the 12.5% rate established for government bonds. In the BTP Valore the tax withholding accompanies the payment of the coupons; in the BTP Valore Insieme it is applied to the single coupon at maturity. Therefore, the moment in which the tax is paid also changes.
Those who receive periodic coupons and do not spend them can try to reinvest them, but do not know in advance at what rate they will be able to do so. Those who choose the single coupon, however, know the payment schedule, but give up receiving interest in the meantime. These are two methods to be evaluated also thinking about the expected expenses and the liquidity you want to keep available.
If the savings are needed before 2031
Even if the plan is to hold the bond until maturity, it may happen that liquidity is needed sooner. BTPs can be sold on the secondary market, but the price will depend on market conditions: it does not necessarily coincide with the nominal value paid at issue. In general, when rates rise, the price of bonds already issued tends to fall; when they go down, it can go up.
The BTP Valore pays coupons during the life of the security, while the BTP Valore Insieme concentrates the remuneration at maturity. For both, the actual value of an early sale will depend on the market price at the time and any costs applied by the intermediary.
