Ccteu are variable rate Treasury credit certificates issued by the Ministry of Economy and Finance and are part of the family of Italian government bonds. They are instruments indexed to the 6-month Euribor, which is a widely used reference parameter in the European market to determine the cost of money.
But how do these securities really work, what are the main characteristics and in which cases can they be an interesting choice for savers?
What are CCTEUs and how interests work
Ccteu are Italian government bonds that pay variable interest. The latter, in fact, are not established definitively but linked to the trend of market rates. Their full name is Treasury Credit Certificates, they are denominated in euros and have a duration of 3 to 7 years depending on the issue.
Interest is paid every 6 months through coupons that are updated periodically. The calculation is based on the 6-month Euribor to which a spread established at the time of issue is added. In this way the yield follows the trend of interest rates and can vary over the years.
The Ccteu are then placed through a marginal auction and the issues usually take place once a month. After the auction, the settlement, however, is carried out after two working days while the repayment of the capital is expected in a single solution upon expiry and always at par.
The calculation of interest also follows the typical rules of the European financial market which are based on counting the actual days out of 360.
Unlike BTPs which pay a fixed coupon established from the beginning, CCTEUs work differently: interest can increase when rates rise and decrease when rates fall. Precisely this characteristic makes them more linked to market trends.
What is the 6-month Euribor
The 6-month Euribor is the average interest rate at which the main European banks lend money to each other for a period of 6 months. It is calculated every working day based on data provided by the most important banking institutions and represents one of the main indicators of market rates in Europe.
Precisely for this reason it is used as a reference for many financial products including variable rate mortgages and variable rate government bonds such as CCTeus.
How CCTEU indexing works
Treasury credit certificates are variable coupon securities that pay interest every 6 months. The coupon amounts, as already mentioned, are not fixed but are updated based on the trend of market rates.
To calculate them, the 6-month Euribor rate recorded a few days before the interest period is used as a reference. More precisely, the rate published shortly before the start of the reference semester is considered to establish the interest that will be due so as to have an updated value consistent with the market.
A spread is then added to this value, i.e. a small margin established at the time of issue and which remains unchanged for the entire duration.
From the gross annual rate thus obtained, the semi-annual coupon is obtained, applying the count of effective days out of 360, i.e. the convention used in European financial markets. The result is then rounded to the nearest euro cent.
It must also be considered that there is always a time gap of 6 months between the definition of the coupon and the actual payment. It means that the rate is defined in advance but the interest is paid only at the end of the semester.
A final important aspect concerns the cases in which rates become negative. A circular from the Ministry of Economy has established that if the value of the Euribor were to become negative to the point of completely canceling the spread, the coupon will not be able to fall below zero and will therefore simply be reset to zero.
How to calculate the coupon between market conventions and par market
When investing in government bonds such as Ccteu it is not enough to know the value of the coupon, it is also important to understand the system used to calculate it.
For these instruments interest is measured using the convention
actual days/360.
It means that the actual days elapsed between two dates are counted, taking into account all the real days of the period (including holidays and weekends), and this number is divided by 360 instead of 365.
This is a very widespread practice on the money market and in variable rate securities, as it simplifies and standardizes the calculations of accrued interest, especially when the periods considered do not coincide perfectly with an entire year.
The same convention is also used to determine accrued interest or interest accrued if the security is sold before the coupon payment date.
As regards the invested capital, a reimbursement at par is expected. The nominal value of the security is returned in full upon maturity, without increases or discounts. This allows investors to precisely plan the overall return, knowing exactly how much capital will be repaid at the end of the investment period.
What is dematerialisation and how it works with the investment in Ccteu
Ccteu, like other government bonds, can be bought and sold on the Mot, i.e. on the electronic bond and government bond market, which allows transactions even on small amounts, starting from 1,000 euros.
Furthermore, they can also be traded on the MTS, i.e. on the thematic spot market for government bonds, where trading takes place in real time and prices are determined by the market based on supply and demand.
In addition to these regulated markets, securities can be traded on unregulated electronic platforms or in over the counter (OTC) markets, private markets where transactions take place directly between financial operators without passing through an official stock exchange.
The placement of the CCTEU is managed by the Bank of Italy, which receives a commission of 0.15% from the Treasury on the nominal amount subscribed. Part of this commission can be attributed to the operators who participate in the auction while the saver does not incur any additional costs for subscribing to the security.
The Ccteu are also subject to dematerialisation, which means that they no longer exist in paper form but are recorded electronically as accounting entries in favor of the holders.
This process makes investing safer and faster, as there is no risk of loss or theft of paper certificates, transactions are recorded immediately and investment tracking is clearer and more transparent.
Finally, thanks to dematerialisation, the payment of coupons and the repayment of capital also occur quickly and reliably, significantly simplifying the management of securities.
Where to find the bond issue statements and the value of the coupons
The issuance prospectuses of government bonds and therefore also of CCTEUs are made up of decrees published in the Official Journal which define:
- the duration;
- the method of payment of the coupons;
- the placement conditions.
These documents contain all the official information necessary to understand how the securities work and how to verify the terms of the investment.
The value of the individual coupons, which is updated with each issue, can be found in the section Statistical Data of the website of the Ministry of Economy and Finance. Here you can consult:
- the details of the accrued coupons;
- payment dates;
- the corresponding amount for each period.
In this way investors can precisely monitor their returns and plan their investment based on coupon maturities, thus making it easier to compare securities and evaluate the trend in interest rates.
