The issuance of Valore BTPs concluded with excellent results for the Treasury. The state raised 16.6 billion euros from retail government bonds. The yields are higher than those of regular BTPs with similar durations. For securities with a quarterly coupon they reach 4.75%, while for those with a single coupon they reach 22.70%.
Despite such high interests, these are still convenient securities for the State. Private individuals, in fact, tend not to sell their government bonds and to bring them to maturity in the vast majority of cases. In this way, the Treasury can consolidate a part of the public debt, which becomes less exposed to market variations.
How did the Valore BTP issue go?
The data published by the Ministry of Economy and Finance on the issue of “twin” BTP Valore are rather positive:
- 16,622.518 million euros were raised;
- 560,029 contracts were registered.
This means that the average amount purchased by each individual was just under 30,000 euros. The conclusion of the issue, which ended at 1pm on Friday 23 October, also made it possible to have certain data on the final returns.
Value BTP data
As regards BTP Valore with increasing quarterly coupons, the returns were:
- 3.75% for the 1st and 2nd year;
- 4.20% for the 3rd and 4th year;
- 4.75% for the 5th year.
This product was the favorite of investors, who purchased 12,071.383 million euros through 385,962 contracts. This Btp Valore was cheaper than its twin, the Btp Valore Insieme, only if the person who purchased it plans to reinvest the quarterly coupons.
The BTP data Valore Insieme
The BTP Valore Insieme attracted the remaining 4,551.135 million euros of investments, through 174,067 contracts. This product was cheaper only if you don’t plan to reinvest the coupons. In fact, it has a return of 22.70% in five years, but only detaches the coupon at the time of final repayment.
Are Valore BTPs convenient for investors?
Both Valore BTPs expire in 5 years, in 2031. If you compare them with BTPs on the market with similar maturities, you can see that the yields of the latter are just over 4%. For Valore BTPs, however, the average returns are:
- 4.13% for securities with quarterly coupons;
- of 4.54% for single coupon securities.
Valore BTPs are therefore convenient for investors, who can only be private citizens. However, this does not mean that they are not also convenient for the State.
Because these titles are also “beneficial” to the State
When the State issues securities dedicated to the retail market, it is often very “generous” with returns. This should represent an additional cost for the Treasury, which increases the interest that the State must pay on its public debt every year. However, it is a price that the Government agrees to pay to obtain a result: increasing the percentage of public debt in the hands of Italian private individuals.
Historically, Italians do not sell their BTPs. They bring them to maturity, because they are not very inclined towards financial transactions and because often, due to the amounts that each individual individual invests, the difference between the sale and the reimbursement at maturity is never significant.
In this sense, private individuals are a stabilizing factor for public debt. When government bonds are under pressure, large institutional investors, such as banks and funds, sell them. This decreases its value and, therefore, increases its yield. This is what is happening these days, with BTPs reaching a 10-year yield of almost 4.70%. Private individuals counteract this phenomenon by not selling and therefore stabilizing the market.
