Understanding what is the difference between bots and BTP is important to protect your money, especially in a period in which inflation does not mention to withdraw and geopolitical tensions continue. In fact, these are different products by durability, risk and performance.
Especially now that the European Central Bank is lowering interest rates, understanding their functioning gives the possibility to invest more consciously by maximizing earning opportunities.
What is meant by government bonds
State securities such as Bot and BTP are financial instruments issued by the State to collect economic resources intended for financing public spending.
Buying these products means:
- lend money to the state, which undertakes to return it to the expiry;
- obtain a performance in the form of interest.
Their issue is managed by the MEF or the Ministry of Economy and Finance, which makes use of the collaboration of the Bank of Italy for the organization and the placement auctions.
These qualifications are aimed at both private citizens (retail investors) and institutional ones such as funds, insurance and banks.
There are 7 different types of government bonds that is to say:
- ordinary good treasure (bots);
- Treasury credit certificates (CCTEU);
- Poliennial treasure vouchers (BTP);
- Green poliental treasure vouchers (BTP Green);
- vouchers of the poliental treasure indexed to European inflation (BTP € i);
- vouchers of the polienn treasure indexed to Italian inflation (BTP Italia);
- Step-up poliental treasure vouchers reserved for retail investors (future BTP);
- Poliennial treasure vouchers reserved for retail investors (BTP value).
Which are the bots
Bot are government bonds that have one short duration. The deadline, in fact, does not exceed the year. Those who buy them lends money to the state and earn thanks to the difference between the price paid at the beginning and the value you receive at the expiry.
Here is an example.
The state sells a 6 -month bot with nominal value of 100 euros. The saver buys it at a discounted price of 95 euros. At the end of the 6 months, the state repays the investor with 100 euros and the difference of 5 euros is the earnings he receives.
As for the taxes, Nothing will have to be done as the state will take them from the purchase.
The ordinary vouchers of the treasure are sold through the rods In which only financial companies, banks and other operators authorized according to the law can participate. If a private citizen wants to invest in a bot he can do it, but he must buy it through his own bank or financial intermediary.
The main characteristics of the bot are as follows:
- The currency is in euros;
- The deadlines can be 3, 6, 12 months or of other duration as long as it does not exceed the year;
- The gain is given by the emission waste;
- The auction is competitive on performance;
- The periodicity of the auction is once a month for the half -yearly and annual bots, variable for quarterly and flexible ones;
- The regulation date is two working days both in the private and secondary market;
- The reimbursement mode is on par in a single solution to the deadline.
Is it convenient to invest in bots?
As explained, the bots are government bonds that last a maximum of 1 year and are zero coupon That is, there are no interest in installments. It means that the gain comes all at once as you buy the title by paying it less than its value, while the entire nominal value is received at the deadline. This is useful because:
- less money is invested than what will be collected;
- You will not have to worry about the interests, since there will be no payments during the short life of the title.
If a saver wishes to buy bots at auction, he will have to make a reservation by means of a bank or other intermediary within the working day before the auction.
Another important characteristic of the bots is that they are dematerialized That is, they do not physically exist on paper. Their possession, in fact, is recorded through electronic accounts.
As for the commissions requested by the banks, they are maximum of:
- 0.03% if the bot expires within 80 days;
- 0.05% if the deadline is between 81 and 140 days;
- 0.10% if the bot expires between 141 and 270 days;
- 0.15% if the deadline is after 271 days.
These commissions are added to the weighted average price resulting from the auction set by the intermediaries to the subscribers. If the rates are negative or low, however, the commissions must be reduced or eliminated, as the MEF points out.
What are the BTPs?
BTPs are of the obligations issued by the Italian state to finance public spending that last from 18 months to 50 years. One of the main characteristics of these securities is that the interest pays every 6 months. The latter are called coupons and the amount is fixed so those who buy them already know how much it will collect at any payment.
The main ones characteristics of the BTPs are as follows:
- The currency is in euros;
- The deadlines start from 18 months to 3, 5, 7, 10, 15, 20, 30 and 50 years;
- The gain is given by postponed, half -yearly coupons and a possible emission waste;
- The auction is marginal with a free choice of price and quantity, the price of the securities is decided based on the offers made by investors during the auction;
- The periodicity of the auction is twice a month depending on the deadlines;
- The regulation date is two working days both in the private and secondary market;
- The reimbursement mode is on par in a single solution to the deadline.
Is it worth investing in BTP?
The vouchers of the polienn treasure are fixed income securities as they pay the interests in a regular basis and always of the same amount. In fact, those who have one receives a payment every 6 months And this is useful for those who want to plan safe revenue over the year.
THE small savers they can buy and sell these products:
- on the MOT, or on the electronic market of bonds and government bonds also for small amounts starting from 1,000 euros;
- On platforms where by law they must obtain the best possible price.
THE Great investors As banks, however, they can negotiate BTP:
- on the regulated market MTS for operations of at least 2 million euros;
- on the non -regulated market that is called “Over-the-counter“;
- On platforms where they need to obtain the best price according to what the law establishes.
What to choose between BTP and BOT
If you want safe investments, the first question to ask yourself before shelving your money is: “How long will I need my money?”.
If they serve within a few months or within a year, they could opt for the bots, which last little and give the possibility of obtaining the return of the capital in a short time.
Otherwise you can opt for the BTPs, inquiring first, with precision about:
- the deadline;
- the performance;
- the trend.
Bot, therefore, are preferable for those who want investments to short -term with a minor exposure to the risk. The BTPs, on the other hand, are ideal for those who want to invest in medium-long term And it accepts greater variability of prices in exchange for higher rates.
