“12-Month BOT Auction Today: May 10, 2023 – Specifications, Yields, and Analysis”

The month of May begins with a BOT auction: today 10 May 2023 the first Treasury bills of the month will be placed. The emission is consistent since there are bens on the plate 7 billion euros confirming the Treasury’s urgent need to speed up the satisfaction of the State’s borrowing requirement in a context characterized by high public debt (the new all-time high was reached in February).

As usual, the first auction of Treasury bills of the month is dedicated to the annual zero coupon security and therefore 12-month BOTs will be the protagonists of tomorrow’s appointment, 10 May.

The event only apparently runs the risk of being overshadowed by the recent announcement of the issue of the new BTP Valore. In reality, 12-month BOTs are aimed at a completely different target and therefore there are no doubts that the demand expected for tomorrow will be high also because it could really be one of the last chances to snatch high yields among other things unimaginable until a year ago for simple Treasury bills. Last chance because the last board of the ECB decided to raise the reference rates by only 25 basis points which could be the clear signal of greater moderation in European monetary policy.

12-month BOT auction today 10 May 2023: the specifications

As always, before talking about yield hypotheses, we present the new 12-month BOT to be issued today. The security has a duration of 368 days and the expiry date is therefore 14 May 2024. The ISIN code has not yet been assigned as is always the case when it comes to a new placement.

The BOTs in issue are assigned through the competitive auction system with the requests of the operators which are expressed in terms of yield.

To find out all the specifics of the bond being issued, you can refer to the always updated page Next BOT auction.

BOT auction today 10 May 2023: why could yields drop?

Some generalist blogs claim that tomorrow’s BOT auction yields could even be insane. In reality, the era of mind-boggling returns seems to be winding down.

This does not mean that today’s auction should lead to yields to be thrown away, but only that the curve seems to be increasingly declining. After all, one could not think that the trend held until a few months ago could be eternal.

That said, in the BOT auction of April 26, 2023, the Treasury placed annual bonds that elicited a gross allotment yield of 3.43%, obviously placing all the bonds on offer. In that case, however, it was a reopening (residual life) even if the impact of this peculiarity can be considered secondary.

Previously, the annual BOT auction of April 12, the yield had been 3.39%, slightly below that of the end of the month.

As can be seen from these numbers, we only deviate by a few cents after the decimal point, otherwise we will be there.

Read also >>> BOT yield calculation: example of simple/compound capitalization method

for theBOT auction today 10 May one could assume a yield around the same level, perhaps something slightly lower. This is because, even in a context characterized by high yield forecasts for the whole of 2023, signals are starting to arrive from the ECB on a possible monetary turnaround. In the last board rates only climbed by 25 basis points with expectations of a hike up to 50 basis points having been neutralized. Surely inflation will continue to remain high (and the data confirm this) but now the most probable scenario is that of limited increases in the next boards with a break which should then start in September.