The issuances of public debt securities are not limited this week to BTp Value May 2030, the placement of which began on Monday and will end on Friday 10 May, unless it closes early. Meanwhile, the Treasury is holding an auction for the new 12-month BOTs, set for tomorrow, and a second for medium-long term maturities the day after tomorrow. With the first it aims to raise 7.5 billion euros, with the second between a minimum of 7.5 and a maximum of 9.25 billion. And there will be five bonds offered this Friday, among which the new 7 year BTp expiring July 15, 2031.
Debut for BTp 2031
So, an important week for sovereign funding. At a rough estimate, between auctions and placement of the BTp Valore the Treasury should collect more than 25 billion and with the possibility of approaching the threshold of 30. Roughly speaking, something like over 5% of the total gross emissions expected for the entire year . We were saying, five bonds on offer. The lion’s share will be played by the novice: the first tranche of the BTp 2031 will be between 4 and 4.5 billion.
It will be benchmarked at 7 years
This new 7-year BTp offers a fixed annual gross coupon of 3.45%. Since the issue date is officially set for May 15th and the bond makes the first payment on July 15th, for that date the bondholder will receive a “mini-coupon” of 0.578159% of the nominal capital owned. It corresponds to a holding period of 61 days out of a theoretical semester of 182 days.
The current “benchmark” 7-year BTp expires on February 15, 2031 and offers a coupon of 3.50%. It currently trades just above par and offers a yield of 3.47%. Therefore, the new issue should also have a hammer price around par, probably a little below.
Two BTp at 3 years
There will not only be the BTp 2031. Investors will be able to book part of the ninth tranche of the BTp 15 February 2027 with coupon 2.95% (ISIN: IT0005580045) between 1.5 and 2 billion.
The price is below par on the secondary market, trading around 99.15 cents, corresponding to a gross yield to maturity of just under 3.30%.
There will also be the ninth tranche of BTp 1 April 2027 with coupon 1.10% (ISIN: IT0005484552) for 0.75-1 billion. The former five-year bond has a residual duration of less than three years and can be purchased on the secondary market at prices significantly lower than par (around 94.15 cents), as a result of the low coupon offered. Also in this case, the gross yield to maturity is around 3.30%.
Former thirty-year bond with maxi-coupon
So far the medium-short maturities. There will also be the possibility of bidding on long and ultra-long ones at the auction. The Treasury offers the twenty-fourth tranche of the BTp 1 September 2040, ex thirty-year, with 5% coupon (ISIN: IT0004532559) for an amount between 0.75 and 1 billion. Listing significantly above par, in the 111 area, for a gross yield of 4.11%. We are talking about a bond with a residual duration of approximately 16 years.
The BTp returns to 50 years
Finally, the Methuselah. Return the BTp March 1, 2072 with coupon 2.15% (ISIN: IT0005441883), our 50-year benchmark. In this case, the offer will be for a fifth tranche between 500 and 750 million. Clearance prices, as we know for this deadline: just 62 cents. In practice, a minimum lot of 1,000 euros can be purchased for just over 620 euros. The yield does not reach 3.95%. Be careful, because part of it is related to the capital gain realized at maturity due to the price factor. The flow of coupons alone each year, however, produces a gross yield of 3.45%.
BTp 2031 to the challenge of inflation
Returning to the BTp 2031, we have an expected net return above 3%, which in real terms would remain above 1.90% with aItalian inflation estimated in the medium-long term in the 1.10% area. Although the market may underestimate future inflation, barring unforeseen events such as in the past two years, families could be confident of a sufficiently profitable investment to use their savings.
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