Government bonds, families’ rush to BOTs and BTPs

The quantity of is growing public debt of our country in the hands of families. In fact, in the last two years, the share of BOTs and BTPs held by small savers has more than doubled and during 2023 there has been a noticeable acceleration: in December 2021, with the debt having reached 2,572 billion, the market retail had 6.4% of Treasury-issued bonds outstanding, i.e 685 billion out of a total of 2,234 billion in securities.

Public debt rush

At the end of 2022, with the debt it had touched the 2,757 billion, a first step: the percentage of government bonds in the hands of families had risen to 8.7% (199 billion out of 2,280 billion in bonds). But it is in the first 10 months of last year that, between BTP Italia and BTP Valore, the rush by families to buy public debt became more insistent: in October (last available data, when the debt had reached 2,867 billion), the families had 13.5% of BOTs and BTPs, i.e. 322 billion out of the total 2,389 billion in government issues. This is what emerges from research by the Autonomous Federation of Italian Bankers.

the reasons for success

Inflation contributed to the success of public debt on the one hand and the poor remuneration of deposits and current accounts by banks on the other. A negative mix that pushed account holders to move their liquidity and savings to more profitable forms of investment, still capable of ensuring safety and reliability. The 2023 Treasury issues were part of this scenario and the public securities therefore found favor with the market for which they were intended. In general, a portion of the liquidity that families kept, as a matter of practice, in current accounts (on which the interest rate paid by institutions is on average less than 1%) was probably also diverted to BOTs and BTPs. In the first 10 months of last year, an outflow of 152 billion was recorded from current accounts, from 1,452 billion to 1,300 billion. This decrease is attributable to two factors: the first is the use of reserves, especially by families, but also by businesses, to cope on the one hand with the increase in prices and on the other with the increase in interest rates on loans, which have become too onerous; the second factor is the displacement of a part of the liquidity, on banking instruments that ensure greater remuneration for customers as well as on government bonds.

The prospects for 2024

This is a trend that will likely continue throughout 2024: it is very likely, in fact, that current accounts and deposits will continue to receive remuneration at a rate lower than the cost of money established by the European Central Bank, which is why government bonds will continue to perform a function of safeguarding purchasing power: an effective response to the grip of inflation.

Deposits linked to inflation: Sileoni’s proposal

Also introduce i inflation-linked deposits, as happens in France and Spain, allocating part of the liquidity collected to companies. This is the proposal of the general secretary of Fabi Lando Sileoni. “The increase in investments in government bonds by small savers – explained Sileoni to the microphones of Sportello Italia on Radio Rai Uno – is linked to the fact that the rates on current accounts are below 1% and on deposits between 2 .5 and 3% on average in Italy, are among the lowest in Europe and push families to make different choices”. A phenomenon which, according to him, occurs above all in periods in which “very high inflation erodes savings and the purchasing power of the money left in the bank”, so the savings are diverted to BTPs, which “yield around 4%, according to the various maturities and offers”. To rebalance the situation, Sileoni proposes to start thinking also in Italy “about different forms of investment, as in France and Spain, where banks offer rates on deposits linked to inflation and part of this liquidity is invested in productive activities, that is, loans to businesses intended for investment.”