Co-founder of Affari Miei Independent Financial Advisory Company
4 October 2023
The collection continues at full speed BTp Value that, in the first two days of placement, it allowed the MEF to bring home around 9 billion euros. The data is positive, although slightly lower than in June: it is, however, a partial result and, to be fair, it will be appropriate to do the calculations at the end.
Meanwhile, the bond market seems to be back on the map with the ten-year government bonds of the main countries which are now at their highest levels for years and are literally conquering the scene.
But at what price? With what risks and unknowns for the future?
Let’s try to find out in this analysis.
This article talks about:
Ten-year yields are soaring across Europe
Yesterday, 3 October 2023, the yields of ten-year bonds in Europe reached very significant peaks (see the first column of the image).
Italy stands out as it is currently considered one of the riskiest countries on the Old Continent and is forced to give investors a ten-year rate close to 10 years, even more so than Greece which, to be honest, has returned to the market for a very short time and comes from a decade of unconditional support from the ECB which is still being felt in terms of perceived risk.
The FED and the European Central Bank have clearly said that rates could remain high for longer than expected and the news was not taken particularly well by the stock market which, starting this year, has a new rival: bonds.
In fact, even the most risk-loving investor, with such high returns on ten-year government bonds, is starting to ask himself some questions and the requests of savers burned by 2022 are now, rightly or wrongly, going towards what appears to be “safe”. .
But is it really?
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The Italian case
Italy is a special observation and this time it is not the spread that dominates but the actual yield of government bonds.
Let’s explain it briefly for those who don’t know much: the spread is a differential between BTPs and German Bunds. At the moment all government bond yields are growing everywhere: the differential between BTP and Bund measures the perception of country risk but, on its own, is not enough to explain the context.
Few governments, in fact, can afford to pay such high interest on their debt and the most indebted ones, such as Italy and Greece, could suffer more than others.
For this reason it becomes important to analyze the performance of the ten-year anniversary which today, for Rome, is close to 5%: in the era of the Monti government it reached around 7% and it didn’t end very well given that blood and tears were necessary.
How are we doing now?
Not much better. The Italian economy, in fact, has grown very little in the last decade and the ratio between public debt and GDP it came close to touching the 150%: an enormity.
We are not saying that we are on the eve of our country’s default, far be it from us to alarm those who read us, but we are not even in the best possible context ever.
In short, here we are simply recommending prudence and attention.
The increase in interest rates wanted by the central banks, in fact, is already causing the economy to slow down and lower growth will inevitably lead to lower tax revenues for a state increasingly “in need” of public resources to pay for pensions and healthcare, expenses that are growing every year due to the aging of the population.
For this reason it will be necessary to monitor the near future extremely carefully in order to understand how the Central Banks will move which, at a certain point, will be pulled by the jacket by governments to lower rates.
The rope is tight and could break if not handled carefully.
So the BTp Valore is not safe?
The concept of security is such a complicated business that we at Affari Miei have just dedicated a book on the topic.
In general, investing in BTp Valore today is not safe to the extent that we do it “Italian style”, that is, allocating a large part of our assets to Italian government bonds, perhaps with a few properties we own in our country and income that depends on state salaries or pensions.
Such a scenario is unsafe and dangerous in any context because, basically, there is a lack of serious diversification and the 9-year experience of Affari Miei tells me that what I have just written is not my fantasy but the reality of hundreds of thousands of people .
In all other cases the BTp Value – here are the characteristics – it is one of the many investments currently available on the bond market: I also talked about it in the video that I report here for completeness.
That’s it for today. If you are reading this article and are new to the world of wealth management, I recommend you start here.
Here, then, you will find some articles that may interest you:
If, however, you are trying to start your investment journey in a conscious manner as an independent investor, then I recommend you find out more here:
Happy continuation!
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