Btp Value, returns and convenience: simulations

The BTP Valore reaches its fourth issue. The Meloni government insists on “domestic” government bonds to finance public debt, after the record successes of previous versions thanks to high interest rates. According to data from the Ministry of Economy, so far the government has raised 53.6 billion euros just thanks to the three BTP Valore issues. For the fourth, the expected payments are quarterly, lower at the beginning but increasing at the end of the three-year period, with the confirmation of a “loyalty bonus” if you stay until the end of the subscription period. There are advantages compared to other instruments that make the BTP a more convenient value, net of some risks in the future.

Nuovo Btp Valore, May 2024 issue: characteristics and returns

From Monday 6th to Friday 10th May it will be possible to purchase the fourth issue of the BTP Valore. Like the previous one, the new issue will also have a duration of six years. The coupons will be received every three quarterly months with a “step-up” mechanism, i.e. with a payment of a fixed rate for the first three years of the security’s life and a new, higher fixed rate for the remaining three years. As announced by the Ministry of Economy, the minimum guaranteed rates of the BTP Valore will be as follows:

• 3.35% for the 1st, 2nd and 3rd year;
• 3.90% for the 4th, 5th and 6th year.

At the end of the placement, the definitive coupon rates will be announced which may therefore also be higher than announced, based on market performance. The BTP Valore is dedicated exclusively to small savers and if it is maintained until the 6-year deadline it also has a final premium equal to 0.8% of the invested capital.

It can be purchased easily by the saver through their home banking, if enabled for online trading functions, or by contacting the bank or post office where they have a current account and a securities deposit account. The security will be placed on the Mot platform of the Italian Stock Exchange at par (i.e. with a price equal to 100), without constraints or commissions.

Taxation is facilitated, as for all government bonds, at 12.5% ​​on coupons and loyalty premium, in addition to exemption from inheritance taxes. The minimum investment is 1,000 euros and there is no maximum cap. The Ministry of Economy has made available a FAQ with all the most common questions on Btp Valore which can be consulted here.

Who is BTP Valore suitable for: simulation and risks

“However, there are risks associated with this type of instrument – explains Roberto Rossignoli, senior portfolio manager at Moneyfarm – first of all, as with all bonds, rate variations can lead to significant price fluctuations and, despite the guarantee of reimbursement upon maturity of the invested capital, periods of negative performance, even long ones, cannot be ruled out a priori”, underlines the expert.

Consumers who wanted to sell the BTP Valore purchased before maturity could in fact find unfavorable conditions on the market due to the growth of public debt, as certified by the Economic and Financial Document released by the Meloni government: “Therefore, it is essential to understand whether the BTP Valore is an instrument in line with your risk profile, objectives and time horizon, without neglecting the external variables that can influence the investment”.

European bonds better than US ones: large investors are betting on public debt

Translated into money, here is the simulation of the BTP Valore issued in May 2024. Assuming you have invested 10,000 euros and taking into account the 12.5 percent tax rate, every three months a net coupon of 73.28 euros will arrive in your account, i.e. just over 293 euros a year. From the fourth year, the coupons increase and rise to 85.31 euros every three months, i.e. 341 euros per year. At the end of the six years the prize brings another 70 euros net. With the BTP Valore, at the end of the six years the 10,000 euros initially invested will have yielded 1,972 euros net.

The alterations to the BTP Value on government bonds

“For those with a time horizon in line with the BTP Valore, it is important to remember that there are alternative investments capable of generating higher returns. As always, the key word remains ”diversify”, that is, not concentrating the risk on just one tool, but build multi-asset portfolios, in which exposure to BTPs is considered within broader financial planning”, advises the Moneyfarm expert.

As shown by the Users and Consumers Association (Aduc) in the table below, to facilitate the choice of where and how to invest, comparisons on the returns of securities with a maturity similar to the BTP Valore are listed, with the relevant ISIN code.