In a week, on June 20, the BTP Italia returns, having reached its seventeenth issue and arriving at a very special moment characterized by galloping inflation. The BTP Italia is indexed to the Italian inflation rate and therefore makes it possible to mitigate the loss of purchasing power due to the increase in prices. The issue will be from Monday 20 to Thursday 23 June 2022.
Let’s see what the characteristics of the BTP Italia are, also looking at the advantages and potential unknowns of the subscription of this type of government bond designed specifically for retail investors.
The novelty of the double loyalty bonus
The new BTP Italia will have a duration of 8 years and as usual, it will be placed on the market two stages: the First Phase will take place from Monday 20 to Wednesday 22 June, unless early closure, and will be reserved exclusively for individual and similar savers (the so-called retail market); the Second Phase will take place on 23 June and will be reserved for institutional investors only. The guaranteed minimum rates will be announced on Friday 17 June, while the final real annual rate will be communicated in the morning of 23 June.
The new BTP Italia will maintain almost the same characteristics as the previous issues: semi-annual coupons indexed to the FOI (Consumer price index for blue-collar and white-collar families, net of tobacco), to which is added the payment of recovery of the inflation accrued in the half year (with the provision of a floor in the event of deflation to guarantee that the coupons actually paid are in any case not lower than the final guaranteed real rate), and single repayment at maturity.
The big news concerns the fact that for the first time a double loyalty bonus: one that will be paid halfway through the term of the issue and one at the final maturity for those who have held it continuously.
In detail, investors who buy the security during the ‘First Phase’ of the placement period and hold it until the end of the first four years (June 28, 2026), will be paid an intermediate loyalty bonus equal to 0.4% of the nominal capital purchased. not re-evaluated. After the next four years, upon maturity of the security (28 June 2030), retail investors who have continued to hold the security from issue to maturity will be paid a final premium equal to 0.6% of the nominal subscribed capital not revalued. . Therefore, the saver who buys the BTP Italia upon issue and holds it until maturity will receive an overall premium equal to 1%.
pros and cons
The coupons are therefore paid every six months, starting from a guaranteed fixed rate for the entire duration of the issue, to which is added the national inflation recorded in the previous six-month period. This second variable component, linked to the trend of inflation, will tip the balance in determining the attractiveness of the issue as the real rate should not be very large. If inflation remains high also in the next few years, the investor will find in the BTP Italia a valid shield against the expensive life. Conversely, a sharp slowdown in inflation compared to current levels would make issuance less attractive.
The risk associated with the current context must then be considered. On 9 June the Bce announced a first rate hike in July, followed by another in September. This restrictive phase of the central bank could lead to a decrease in the value of the issue and for the investor who wants to sell the BTP Italia before maturity, he will have to bear a loss equal to the difference between the purchase price and the sale price.
It should be remembered that BTPs held to maturity guarantee the yield at which they were placed. Securities on the secondary market have a variable return based on the market price at the time of purchase and sale.
How to subscribe
Retail savers will be able to subscribe BTP Italia in banks, at post offices or using online purchase channels, through their home banking if enabled for trading functions.. The minimum denomination that can be purchased is one thousand euros.
The placement will take place on the electronic platform AGAINST (the electronic market for bonds and government securities of the Italian Stock Exchange) through the following bank dealers: Intesa Sanpaolo SpA and Unicredit SpA
It should be remembered that for subscribing the BTP Italia, as in the past, no placement commissions will be applied while the usual subsidized taxation on government bonds of 12.5% will continue to be applied to the yield of the bond.
Le negotiations on the secondary market will start on 28 June.