The Ministry of Economy and Finance announced today the issuance of a new ten-year BTP€i bond linked to inflation in the Euro area. For this purpose, the MEF has mandated a pool of investment banks who will handle its issuance.
Mandate to a pool of banks
For the syndicated placement of the new 10-year inflation-indexed benchmark, the Treasury chose Banco Bilbao Vizcaya Argentaria SA, BofA Securities Europe SA, Citibank Europe Plc, HSBC Continental Europe and Société Générale Inv. Banking.
Characteristics of the BTP€i security
The title is indexed to Euro area inflation, with the exclusion of tobacco products. In practice, the benchmark is the Harmonized Index of Consumer Prices (HICP excluding tobacco) recorded by Eurostat, the statistical office of the European Union. This security is intended to assure the investor of the possibility of recovering the cost of living and therefore implies a revaluation of the capital and interest at maturity (principal) or semi-annually (interest).
The date of expiration is set for May 15, 2036. The BTP€i auction is scheduled for March 22, but it could be cancelled, as the Treasury has established that the transaction is carried out in relation to market conditions.
Last auction results
On the occasion of thelast auction held on 25-26 July 2023the BTP€i was placed for an amount of dthe 1.25 billion euros, at a hammer price of 84.38 euros and with a gross yield of 1.86%. The latest award brought the in circulation at almost 17.4 billion of Euro. Specialists were allocated approximately 5.88 billion in securities in supplemental and/or syndicated placements.
Auction type
For the placement of the BTP€i, the Treasury uses the modelmarginal rod, the most used for the placement of medium-long term securities. The marginal auction provides that the requests, if allocated, are all awarded at the same price, called the marginal price. The determination of hammer price and the quantity occurs with a discretionary mechanism. According to this mechanism, the quantity issued is not established a priori, but is between a minimum and a maximum amount announced in the press release that precedes the auction a few days.
For medium-long term government bonds it is a reopening is expected (the so-called supplementary placement) reserved to the Specialists. To access the reopening, each Specialist must have taken part in the main auction with at least one valid bid. The price at which the securities are assigned is the marginal award price determined in the ordinary auction. The maximum amount offered in these reopenings is normally equal to 30% of the quantity offered in the first tranche of each new security and 15% for subsequent reopenings.