The new issue of 6-10 May 2024 inaugurates the return of the attention – and interest – of savers towards the Btp Value.
The second issue of the year, fourth since its birth, reserves a special surprise: the BTP Valore loyalty premium is raised from 0.7% to 0.8%, as announced in the MEF press release just a month and a half later from the close of the February-March issue.
Looking forward to meeting you guaranteed minimum rates – which will be published on Friday 3 May – to understand if and how much is it worth buying the new BTP Valuewe present below 3 things you (maybe) don’t know on this government bond dedicated to small savers so loved by Italians.
1) You don’t earn money immediately
The BTP Value it does not allow immediate profit. Since it is aimed at small savers, often without any experience in the world of investments, they may come to think that the BTP Valore allows them to have considerable immediate earnings. Yes, a quarterly coupon is foreseen – therefore every three months you receive the return according to the rates established by the MEF and which will only be known shortly before the new placement – but unless substantial investments are made, in the order of 30-40,000 euros and above – you don’t get rich by buying the BTP Valore, but you can still enjoy a good coupon flow.
To give an example, by investing in Btp Valore at the issue last October you were guaranteed a total net return, also calculating the weight of the loyalty bonus and the taxes to be paid, of approximately 1,907.50 euros (367.50 euros for the first three years and 402.50 euros for the last three years).
The calculation of the return was carried out in the total annual rate, both the minimum guaranteed net rate and the portion of the loyalty bonus, even if the latter is paid only upon maturity.
2) A controversial communication
Another little-known aspect regarding Valore BTPs is a less than immediate communication on their functioning, which could lead to incorrect or misleading interpretations considering the specific target of the security.
The MEF, as well as important newspapers and specialized blogs, promotes the BTP Valore as a particularly advantageous option for small investors, even if to date the return guaranteed by the minimum coupon rates of this specific government bond has been comparable to that offered by other options available on the market.
The lack of clarity in the TV advertisements broadcast in February deserves a separate chapter, where the BTP Valore is presented as an investment that can guarantee immediate benefits, such as to allow significant purchases, such as a cruise. This representation can create false expectations, since a tangible and significant return, such as the example 5,000 euros at maturity in 2030, would require a considerable initial investment, in the order of at least 20,000 euros.
3) It has risks that few people talk about
The risks associated with investments in government bonds, including BTP Valore, are varied and deserve to be explored, even if few highlight them.
A first risk derives from the fluctuations of interest rates. If rates increase, the market value of BTP Valore could decrease, as investors would prefer to opt for BTPs with higher yields. Although the relatively short duration of the BTP Valore in question (6 years) limits this risk, it remains an element to consider, especially for those who may need to liquidate the investment before the deadline set for 2023.
In fact, an investor who holds the security until maturity does not suffer losses, since in the end he recovers the invested capital and continues to benefit from the expected coupons. However, if an investor has a sudden need for liquidity, he could find himself selling the security at a lower price than the issue price (which is equal to the nominal value, 100), thus suffering a loss.
Another risk is the default of the issuer. The BTP Valore is issued by the Italian State, investing in these securities involves the risk, albeit remote, of a country bankruptcy which would compromise an inability to repay creditors.
Italy has one of the highest deficit/GDP ratios in the world and although the risk of default is low it cannot be completely ruled out.
A further risk lies in a possible lack of diversification of the investment portfolio. Purchasing BTP Valore is easily accessible, which could push even less experienced investors to focus on a single type of investment without considering the importance of a diversified portfolio.
The BTP Value of May 2024
Below is a brief summary of the features of the BTP Valore arriving in May:
- Placement period: May 6-10
- Duration: 6 years (2024-2030)
- Coupon: quarterly with 3+3 step up mechanism.
- Loyalty reward: 0.8%.
- Capital gains taxation: 12.5%
Please remember that Btp Valore is reserved for small savers and it is possible to buy it at banks or post offices where you have a securities account. The minimum denomination that can be purchased is 1,000 euros; the subscription price during the placement phase is at par (=100) and there are no commissions.
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