It ended today, Friday 10 May, the fourth edition of the BTP Valore, the government bond aimed at retail investors launched by Mef-Tesoro last Monday 6 May.
The Ministry of Economy and Finance led by Giancarlo Giorgetti announced that the issue has closed with 11,226.556 million euros collected, therefore with more than 11 billion euros of orders, and 384,295 contracts registered.
The Treasury also made the highly anticipated announcement on the definitive annual rates today, confirming the minimum guaranteed rates that he communicated last May 3:
equal to 3.35% for the 1st, 2nd and 3rd year and 3.90% for the 4th, 5th and 6th year.
As the Mef note points out, released today, Friday 10 May 2024:
“The amount issued coincides with the overall value of the purchase contracts validly concluded at par on the MOT (the Telematic Market of Government Bonds and Securities of the Italian Stock Exchange) in the five days of placementthrough the two dealer banks Intesa Sanpaolo SpA and Unicredit SpA and the support of the two co-dealer banks Banca Akros SpA and Banca Sella Holding SpA”.
The Mef recalled the characteristics of this fourth BTP Value:
“The security has an entitlement date of May 14, 2024 and maturity on May 14, 2030. Subscribers who maintain the BTP Valore for the entire duration of the 6 years will also be guaranteed an extra final premium of 0.8%”.
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BTP Value: IV edition ends with orders for over 11 billion euros
It has therefore reached the end of the line the fourth edition of the Italian state title whose birth was conceived in line with the wishes of Prime Minister Giorgia Meloni to increase the participation of Italian savers in the country’s public debt:
a burden that has continued to weigh on state coffers for years and whose trajectory is predicted by the same Def recently launched by the Meloni government still on the rise, and for quite some time.
Regarding this BTP Valore, during this issue, the comments were decidedly less triumphalistic, in view the lukewarm reception that this time retail investors gave to Meloni’s new appeal.
In short, no record of subscriptions for what has been defined several times in Italy Patriotic BTP, or even sovereignist BTP.
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The value of orders However, it did not disappoint the expectations of the Treasury and analysts either, which were for a collection exceeding 10 billion euros.
Among other things, it involved thelast issue of this special bond before the arrival of the first ECB rate cut led by President Christine Lagarde which, after much hesitation, and in any case always ready to spring forth at the first sign of an inflation that does not remain in place, seems to finally be ready to make the big move, as they confirmed today the same minutes, just made known, relating to the latest meeting of the Governing Council of the European Central Bank.
At that last meeting on April 11, the Eurotower announced that it had left unchanged the rates on main refinancing operations, marginal refinancing operations and deposits at the central bank respectively al 4.50%, al 4.75% and al 4.00%, after the last monetary tightening which dates back to the September 2023 meeting.
That was also the day when Lagarde said she was ready to intervene on rates even regardless of Jerome Powell’s Fed.
BTP Valore, fourth act: richest loyalty reward
Returning to the BTP Valore, in the face of less attractive guaranteed minimum rates, the Mef this time issued a government bond characterized by a higher loyalty premium, equal to 0.8%.
In the previous issue at the end of February, the loyalty bonus was equal to 0.7%.
It is worth summarizing the identikit of this state title, maximum expression of Prime Minister Meloni’s objective of diverting Italians’ savings as much as possible towards debt:
the new BTP Valore, aimed exclusively at small savers or even retail investors, It has a duration of 6 years and pays coupons every three months with increasing returns over time based on the now well-known 3+3 year ste-up mechanism that has already characterized previous editions.
The extra final premium, equal to 0.8%, is recognized only to those who, when purchasing the BTP Valore during the placement days, holds it until maturity, therefore for the entire duration of six years.
The title benefits from preferential taxation at 12.5% and does not contribute to the ISEE calculation up to 50,000 euros.
The minimum denomination that can be purchased is 1000 euros.
Con codice ISIN IT0005594491this fourth BTP Valore has aroused since the first days of the issue more than one suspicion on the very sustainability of Meloni’s strategy, which can be summarized in the expression “nationalization of debt”.
Citi’s warning about Italian government bonds
In the last few days, commenting the rather depressing value of the orders subscribed, someone has launched a warning aimed at BTPs in general, which continue to enjoy a good moment on the market, thanks to the expectation of a rate cut signed by Lagarde.
“A collection lower than the range of 17-18 billion euros (roughly the collection collected by the Treasury in each of the three previous issues) is a short-term risk for BTPs, due to the implications that a higher offer (of new debt) could entail”, commented Aman Bansal, strategist in Citigroup’s rates divisionspeaking from London, during an interview with Bloomberg.
The same Bloomberg news agency, in the article”Demand for Italian Retail Bonds Sags in Sign of Buyer Fatigue”, he highlighted “the sense of fatigue” of Italian investors in responding to yet another call to arms from Meloni.
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Fourth BTP Valore: Giorgetti’s words on the “special issue”
At the same time, it must be said that a spokesperson for the Ministry of Economy and Finance interviewed by Bloomberg he was keen to point out in recent days that the possibility that this fourth edition of the BTP Valore would not trigger the fever of retail investors had already been taken into account by the Meloni government itself.
The reason?
The nature of “special issue” which had been immediately illustrated by Mef-Ministry of Economy and Finance: special because, according to Minister Giorgetti’s own declarations, this edition was designed to meet the requests of those potential buyers of Italian government bonds, renamed BTP People for a while, who had not had the opportunity to participate in the third edition, launched at the end of February:
exactly what he did the history of BTPs offered to small investors.
It is therefore very probable that the Meloni government will continue to highlight the success of the BTP Valore, even in the face of decidedly weaker demand compared to the previous three.
Both Prime Minister Meloni and Minister Giorgetti have repeatedly reiterated their utmost confidence in this Italian state bond, which officially saw the light in June 2023 with its first edition.
The success of the BTP Valore was such that it was also interpreted as one of the factors that allowed the BTP-Bund spread to continue to fall.
Last May 3rd, Minister Giorgetti had returned to sponsor the titlepresenting the fourth edition – which then kicked off the following Monday, May 6, as one “extraordinary edition, in the sense that it was not foreseen”.
“But given the great demand we decided to replicate”he had pointed out, specifying:
“We offer a security that I believe offers attractive yields and interest payments every three months. We conceived it as a tool especially for pensioners and those who want to have an addition to their income, perhaps modest but constant over time”.
In addition to the BTP Valore, the minister, as well as Prime Minister Meloni, he had also proudly flaunted the decline in the BTP-Bund spread several times and, although not yet received, the tax on extra profits.
In this regard, it should be remembered what the minister said in relation to this levy, announced with great fanfare by the Meloni government in August 2023 which, after a wave of controversy, practically dissolved into thin air.
According to what Reuters reports, the owner of the Treasury, responding to a question from the M5S in the Chamber, stated that “at the moment no payments of the tax on bank extra profits appear to have been received”.
Giorgetti added that all banks they therefore decided to take advantage of the loophole provided by the State itselfto be precise by the Meloni government, which allowed the institutions themselves to strengthen their capitalization.
That tax on extra profits, it must be remembered, it had been immediately rejected by the ECB. Not only that: it was the Senate technicians themselves who raised the levy constitutional doubts.
The state mess had finally been scuttled by one lighter version of the withdrawal.
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In the meantime, pay attention to the statements that were released yesterday by number one of Banca Mediolanum, Massimo Doris, in relation to the placement of the BTP Valore:
“Our managed collection continues to do well and so I am absolutely not worried about a possible strong drain on collections from managed to BTP Valore”said Doris, according to what was reported by the Askanews and Radiocor agencies.
The CEO added that, “as I have always said, the BTP is a good investment that a prudent saver is wise to make. But it’s not smart to put everything there. The most advanced investor knows that there are instruments such as bond funds that can yield more than BTPs. Furthermore, I believe that the bond sector still has a lot to give.”
“Yesterday (the day before yesterday for those reading this) our customers subscribed to BTP Valore for 108 million euros, which is equal to 1.2% of all issued. Below the 3% market share we have.”
Rather, several experts have pointed out in recent weeks, the opposite is perhaps true: that is, it is the BTP Valore that the banks most likely have to fear, as they prepare to remunerate their customers with increasingly attractive rates on deposit accounts.