BTP Auction to be Held on June 27th
The Ministry of Economy and Finance has announced that a new BTP auction will be held on Tuesday, June 27th. The auction will focus on medium to long-term bonds, with the aim of raising between 3.25 and 4.25 billion euros. Two government bonds will be offered during the auction.
The first bond on offer is the BTp short term, which is set to mature on March 28, 2025. This bond has a gross annual coupon of 3.40% and is expected to raise between 2 and 2.5 billion euros. This will be the ninth tranche for this bond, which currently has a residual term of 21 months.
The short term BTp has a duration of between 18 and 30 months. It made its debut on the sovereign market last February with a duration of 25 months. On the secondary market, it closed yesterday at a price of 99.40 cents, slightly below par. This corresponds to an annual gross return of 3.79%, or 3.32% net of interest tax.
However, there is uncertainty regarding whether the short term BTp will be able to cover the high Italian inflation in the coming months. It is expected that inflation will only drop dramatically next year, which may not give the bond enough time to reach the average 3.32% yield offered by the stock at the moment.
In addition to the short term BTp, there will also be an indexed bond called the BTp€i 15 May 2029. This bond has a real coupon of 1.50% and was priced below par at the close of yesterday’s market, in the 99 cents area. The real yield offered by this bond is 1.67%, compared to the approximately 3.80% offered by Treasury bonds of similar duration and fixed coupon.
The BTp€i is a bond indexed to inflation in the Eurozone, excluding tobacco. Its functioning is partially different from the BTp Italia, as the capital appreciation will take place on expiry in a single solution. This means that the price the buyer will be called upon to pay may be significantly higher than the quotation, as the cumulative inflation from the issue to the date of purchase must be added.
Investing in the BTp€i is equivalent to betting on inflation. If inflation turns out to be lower than market forecasts, the investor would obtain a lower average return to maturity compared to buying the BTP with a fixed coupon. Conversely, if inflation is higher than expected, the investor may benefit.
The BTP auction on June 27th will provide an opportunity for investors to participate in the bond market and potentially benefit from the different yields and inflation expectations offered by the short term BTp and the indexed BTp€i.
Source: Joseph Timpone, [email protected]
What are the key factors that have contributed to significant investor interest in the BTP Italia bond?
Years, and it has been met with significant interest from investors. The auction for this bond will take place from 10:30 a.m. to 11:00 a.m.
The second bond on offer is the BTP Italia, which is set to mature on March 15, 2022. This bond has a gross annual coupon of 1.65% and is expected to raise between 1.25 and 1.75 billion euros. This will be the tenth tranche for this bond, which currently has a residual term of 9 months.
The BTP Italia is aimed at retail investors and offers a semi-annual coupon payment. It has been a popular choice among individual investors due to its inflation adjustment and tax benefits. The auction for this bond will take place from 11:30 a.m. to 12:00 p.m.
These auctions are important in managing the country’s public debt and financing its budget deficit. They allow the government to borrow money from investors, who in turn receive interest payments on their investments.
The announcement of this upcoming BTP auction comes as the government seeks to take advantage of favorable market conditions. The yields on Italy’s sovereign bonds have been declining in recent months, reflecting increased confidence in the country’s economic prospects.
Investors will be closely watching the auction to gauge market sentiment and demand for Italian bonds. The success of these auctions will also impact the government’s borrowing costs in the future, as it looks to raise additional funds to support its spending plans.
Overall, the BTP auction on June 27th will be an important event for both the government and investors. It will provide valuable insight into market conditions and help determine the country’s borrowing costs moving forward.
“Exciting news! Looking forward to seeing the positive impact of these new BTp bonds offered by the Ministry of Economy and Finance. It’s great to see proactive steps being taken to support economic growth and stability.”
This new offering from the Ministry of Economy and Finance is a promising opportunity for investors looking to diversify their portfolio with government bonds. The BTp auction is worth keeping an eye on, as it can provide attractive returns while contributing to the growth of the national economy.