The Ministry of Economy and Finance has communicated the details of the upcoming auctions of government bonds, with details, when possible, also of the expected annual coupons. This is a 12-month Bot and three different medium and long-term BTPs which will be placed on the financial markets between 9 and 10 July.
Specialists in government bonds will participate in the auction, and private individuals will also be able to commission the purchase. The auctions arrive at a delicate moment for BTPs, which on the market are suffering from a very high spread and returns that have not been seen for months.
The Bot auction on July 9th
The first auction to be held will be that of Bots. These are short-term securities which, for this reason, have no expected coupon. The yield will be determined only by the price difference between the purchase and the redemption at maturity. On July 9th, a single security will be auctioned, a 12-month Bot, with the following characteristics:
- ISIN code IT0005722514;
- expires July 14, 2027;
- amount offered of 8 billion euros;
- additional amount for specialists 800 million euros.
Applications can be submitted by 11am for regular placements and by 3.30pm on 10 July for supplementary placements. The settlement of subscriptions will be on July 14th, the date of the actual issue.
The medium and long-term auction on 10 July
The auction of medium and long-term products will be held on 10 July. In this issue there will be no CctEu, the products indexed to the six-month Euribor that often appear in this type of auctions. The Treasury has in fact made three different BTPs available:
- a 3-year BTP, Isin code IT0005716839;
- a 7-year BTP, Isin code yet to be assigned;
- a 15-year BTP, Isin code IT0005694630.
The most important data for each of these products are the expiry date and the annual coupon, which will be added to the price difference to generate the yield:
- the 3-year BTP has a 3% coupon and expires on 15 September 2029;
- the 7-year BTP has a coupon of 3.35% and expires on 15 September 2033;
- the 15-year BTP has a coupon of 3.95% and expires on 1 October 2041.
The maximum total amount offered will be 7.5 billion euros, to which will be added 1.85 billion additional amounts dedicated to specialists. The submission of applications will end at 11am on July 10th, while additional applications can be submitted until the 13th at 3.30pm. The settlement of subscriptions will be on July 15th.
The spread and returns before the auctions
On 8 July, on the eve of the BOT auction, the spread opened higher at 80 basis points due to tensions in the Middle East, which then resulted in Trump’s declarations on the end of the ceasefire between Iran and the USA. Yields also reached 3.90% in the morning, before dropping slightly.
A stressful situation for Italian government bonds, which are particularly suffering from international instability. The markets are aware of the fact that our country is particularly exposed to energy crises and that therefore the economy could slow down further if the situation in the Middle East worsens.
