The Ministry of Economy and Finance announced that they will be auctioned on Wednesday 10 April 2024 One year BOT for a value of 8 billion euros. To participate and secure the Government Bonds, however, it is necessary to book by Tuesday 9 April. Let’s find out how the auction works and what are all the deadlines to keep in mind to avoid delays (time is running out).
When is the BOT auction in April 2024?
In detail, the12 month BOT auction, expiring on April 14, 2025. However, reservations are required and public reservations expire on April 9. The deadline for submitting applications for the auction, however, is set at 11.00 on Thursday 10 April.
Then, Friday 11 April ends additional placement of BOTs (deadline at 3.30pm), while April 12th is the date set for the publication of the regulation. The first deadline to be respected for those interested in investing in Treasury bills is therefore Tuesday 9 April. You can book the desired quantity of BOTs with an authorized intermediary.
How does the BOT auction work?
Unlike other government bonds, BOTs are placed through an auction in which operators enter their requests in terms of yield, rather than price (called competitive auction in terms of yield). Furthermore, the competitive auction requires that each request, if allocated, be awarded at the proposed rate. The competitive auction, therefore, ends with a multiplicity of allocation rates, against which the Bank of Italy calculates the weighted average return and the corresponding weighted average price.
Each authorized operator can submit a maximum of 5 requests with different yields of at least one thousandth of a percentage point. There minimum quantity that can be requested for each offer is 1.5 million euros, while the maximum amount that can be requested is equal to the quantity offered by the Treasury at auction; any offers of a higher amount are accepted limited to the same amount. The minimum amount that can be subscribed by customers is equal to one thousand euros.
The demands with the lowest yields are satisfied first and then the others in ascending order, until the quantity offered is completely exhausted. In the event that the offers at the last remaining winning bid cannot be fully accepted, a pro-quota distribution will be made, with the necessary rounding.
To prevent the weighted average award yield from being negatively influenced by any requests formulated at yields that are not in line with market ones, a minimum acceptable yield (or safeguard yield). Similarly, a is calculated maximum acceptable yield (or exclusion yield), to exclude any speculative requests from the auctions. The methods for calculating these returns are illustrated in the following example:
Purchase requests by operators can be formulated at both positive, negative or zero returns. As established by the decree of the Minister of Economy and Finance, the intermediary must guarantee to customers who subscribe to the securities at auction the application of the weighted average price resulting from the auction itself.
