a resounding success. But why does EVERYONE want it?

I have to be honest: I didn’t expect it. Let me be clear, I didn’t expect things to go quietly because Italians have a visceral passion for BTPs that is comparable only to bricks, however I honestly didn’t believe that this issue of BTp Valore (ISIN: IT0005547390) did so well in terms of collection.

While I’m writing we are already at 13.5 billion raiseddefinitely better than BTP Italy which we talked about a few months ago.

But are Valore BTPs really that special?

To enter into the merits of the reasoning, it is good to briefly summarize the functioning of the BTp Valore which has a four-year maturity: precisely it will expire on June 13, 2027. It offers a gross annual coupon of 3.25% for the first two years, which rises to 4% for the third and fourth years. At the end of the investment, a loyalty bonus of 0.50% is recognized to subscribers who keep the security in their portfolio until maturity.

The yield offered by the BTp Valore is objectively attractive when compared with other similar securities: on average, in fact, it stands at 3.625% and can reach 3.75% gross with the loyalty bonus.

Currently, the ordinary 4-year BTP offers less than 3.50%: Do you remember the concept of relative convenience that we’ve been talking about here on Affari Miei for a few days now?

But how can this success be explained?

Broadening the perspective, however, we can make a further reasoning: this bond has nothing specialnothing extraordinary for which one would have to jump off the chair.

In fact, the Treasury regularly issues government bonds that are very similar on all maturities.

So why aren’t households interested in other issues in the same way? The answer is very simple: there is a lack of general knowledge about auctions.

They are poorly publicized although they are held practically every week and, therefore, it is possible to buy many similar titles on the secondary market.

All thanks to advertising? Apparently yes, because one of the reasons for the low propensity to invest in similar instruments outside of these “events” is attributable precisely to the lack of knowledge of investment opportunities.

But there’s more: unlike the Italian BTPs, which offer protection against inflation, in this case there is no bet or protection to evaluate, therefore it’s also easier to understand.

Furthermore, some more prudent investors may have considered the BTp Valore better than an instrument indexed to inflation because they believe little in the continuation of the inflationary phenomenon.

If, as an investor, I consider an average net return of around 3.17% to be appreciable, it means that I attach less importance to a rise in consumer prices or that, simply, I believe that this phenomenon is destined to decrease.

In short, basically this BTP has nothing special but it is making a splash in terms of subscriptions going well beyond the expectations of the Treasury (and, as I said at the beginning, surprising me too).

My opinions

In my opinion, this BTP is in line with what is found on the market of equal size: it has objectively more attractive characteristics than other similar products to encourage subscription, but nothing that plays the life of an investor.

It can enter a portfolio directly – purchase and holding of the security – or indirectly through diversified instruments (funds, ETFs, even policies) but, if I have to express an opinion, I see no missed opportunity for those who remain outside.

The duration, which many will like very much, is in my opinion one half trap: four years is a little more than the duration of a deposit account (although now there are also constraints to five years) and a little less than an acceptable period for investing in a riskier market such as the stock market, for example.

I speak of a trap because the idea feared by many – “Purchase now and then we’ll see” – it could be a boomerang if interest rates were to rise: in this case the value would drop and it would not be easy to get rid of the security without losses.

Those who want to bring the bond to maturity are different: it can fit, as can many other things, with all the risks, pros and cons typical of the purchase of Italian government bonds that I have often talked about here on Affari Miei .

To know more

If you are looking for resources on the subject, here are some articles that may interest you: