Ctz are government bonds designed for those looking for simple investments to manage. One of the main characteristics of this product is in fact clarity. From the beginning, in fact, it is possible to know how much you will receive at maturity, without having to worry about collecting and reinvesting periodic interest.
However, compared to other more well-known instruments, such as Bots and BTPs, they are less well known by the general public. Despite this, they continue to be widely used, especially if you are looking for short-term solutions or if you want to diversify your portfolio with government bonds.
But how do they really work? Here are the main features, how auctions take place and what aspects to evaluate to understand if they can be a suitable choice for your needs.
What Ctz are and how they work
Ctz are zero coupon Treasury certificates issued by the Ministry of Economy and Finance, which last a maximum of two years.
They are distinguished from other government bonds because they do not require the payment of periodic coupons.
The yield, in fact, depends only on the issue spread, i.e. the difference between the purchase price and the value of the redemption at maturity, which is always equal to 100.
The mechanism is very similar to that of Bots, in that the securities are purchased at a lower price than the nominal value, but upon maturity the State returns the entire value. The difference with ordinary Treasury bonds is that the duration is longer than twelve months.
How long do Ctz last
Treasury certificates last 24 months. It means that those who purchase this type of securities know from the beginning that they will have to wait two years before receiving the full amount invested.
However, it may happen that, in some circumstances, the Treasury proceeds to reopen, i.e. issues new tranches of the same security already on the market. Those who purchase during these reopenings may have a slightly shorter duration than the initial two years, but the operating mechanism remains the same.
How the refund occurs
The reimbursement of the Ctz occurs in a single solution: the State returns the nominal value of the security without intermediate payments.
There are therefore no periodic coupons to reinvest as happens with BTPs, so these products are even simpler to manage, especially if you want a simple and safe investment.
This makes them particularly suitable for those who want to plan with certainty how much they will receive at the end of the investment, reducing practical management to a minimum.
How much do you earn with Treasury certificates?
The yield on Treasury certificates depends entirely on the issue spread.
The mechanism is as follows: the security is purchased at a lower price than the value that will be repaid at maturity. The difference between these two amounts represents the return on your investment.
If, for example, a Ctz is purchased at 97 and refunded at 100, the profit is given precisely by those 3 euros of difference.
This system is typical of zero coupon securities, i.e. financial instruments that do not pay interest during their duration but concentrate all the return at the end.
For the Treasury Department, this feature makes Ctz easier to manage than other securities, as the yield is already “embedded” in the purchase price.
How much do you have to invest to buy a Ctz?
Treasury certificates can be purchased starting from a minimum amount of 1,000 euros, or multiples of this amount (for example 2,000, 3,000 euros and so on). This aspect also makes them accessible to small savers, who can start investing without having to commit large sums right away.
Regarding purchasing, the user cannot directly participate in Treasury auctions. In fact, it is necessary to contact your bank or an authorized financial intermediary, who will handle the operation both at the time of issue and, possibly, on the secondary market.
There are two ways to buy Ctz:
- during the auction, when the security is issued;
- on the secondary market, when the securities are already in circulation and can be purchased by other investors.
Once issued, the Ctz can be traded on the Mot, or on the electronic bond market, which is managed by Borsa Italiana. Here investors can buy and sell securities easily, just like with shares
The electronic market for government bonds, or the MTS, is different in that the exchanges involve higher amounts. In fact, operations usually start from at least 2.5 million euros, which is why it is a market used in particular by large institutional investors and banks.
How does the Ctz auction work?
The Ctz, or Treasury certificates, are issued through a marginal auction system, which is the same used for other government bonds. As explained, only banks and authorized intermediaries can participate in it. Each of them presents their own requests, indicating two things:
- the amount to invest;
- at what price they are willing to purchase the stock.
Once all the requests have been collected, the Treasury establishes the final award price, which arises from the offers received. It is therefore not decided at random. At the same time, the quantity of securities to be issued is also established so as to adapt the offer to the market situation.
After the main auction, there is also a supplementary placement, which however is reserved only for specialized operators, who are called “government bond specialists”. Only those who took part in the recently concluded ordinary auction can participate. In this phase, a part of the securities is reserved for them, it is usually 30% in the first tranche and 15% in the subsequent ones.
Each intermediary must then follow precise rules: in fact, they can present up to five offers, indicating the amount and price with a minimum difference between one offer and another. Furthermore, each request must be for at least 500 thousand euros, which is why it is a market accessible only to large operators. The operational management of the auctions is then entrusted to the Bank of Italy, which ensures the correct execution of the operations.
Ctz auctions are generally held once a month, following the calendar of BTPs indexed to European inflation, i.e. BTP€i.
Finally, all official information, such as notices on new issues and the results of auctions already held, are published directly on the Treasury Department website. After each auction, important data such as the quantity of securities placed, the yield and the hammer price are also communicated.
Are there any commissions for the purchase?
Unlike other financed instruments, for Ctz you do not pay the placement commission to the bank. The reason is that it is already recognized by the Treasury to intermediaries, and is equal to 0.15% of the subscribed capital.
Precisely for this reason, intermediaries must apply the auction price without additional costs. This principle is also provided for in the general rules relating to the placement of government bonds.
What is the taxation of Ctz?
Ctz, as well as all other Italian government bonds, are subject to the same taxation. The tax rate is 12.50%, a lower percentage than that applied to other financial instruments, such as shares which is 26%.
This taxation applies to the difference between the purchase price of the security and the redemption price. Thanks to this tax regime, therefore, these products are more interesting for relatively prudent investments.
