In the last few hours, the MEF has published the “Public Debt Management Guidelines for 2023”, answering these to other questions relating to government bonds.
With the document many details emerge from which we have a useful framework not only for investors but for all citizens in relation to the financing of public debt.
One glaring fact emerges above all; in 2022 the average cost of issuing government bonds was more than 17 times the historic low of 0.1% reached last year. This is information that acts as a guide on what the program could be for the whole of 2023.
If this year ends with increased public debt, the burden looks set to increase in 2023. This situation is in line with expectations of a slowdown in growth which puts government bonds on the plate with yields adjusted to the greater risk.
In 2022, medium/long-term securities were issued for almost €285 billion; at the same time the spread of the same increased by 300 basis points compared to German Bunds. The increase in the cost of financing is evident, due to political uncertainties; it is not so much the current government but the context also in preparation for the effects of the increase in interest rates and the end of the ECB’s support for the purchase of sovereign bonds.
Coping with the recessionary effects of monetary policies against inflation
An overall average interest rate of 2.9% on the entire debt weighs on bonds today. In this regard, the document also underlines the intention to issue a new BTP which is exclusive for subscription by Italian citizens. The intention is handed over to fellow countrymen the fate and responsibility for the political effects of volatility on government bonds.
In its monthly publication, the Bank of Italy has announced that foreigners have reduced their exposure to Italian securities; specifically between September and October the reduction came to exceed 15 billion euro. The explanation is largely due to the inefficiency of bonds against inflation but not only.
An explanation is also due to the greater involvement of small investors through a debt management policy aimed at protecting savings from the erosion of purchasing power. Apart from this, the idea that is already being put into practice in a context of serious economic imbalances is to protect the stability of the debt stock. The purpose of new dedicated and exclusive Securities is to provide adequate support to the liquidity and efficiency of the internal market.
With reference to the BTP Italia and the future BTP, the Mef recalled that; “During the year issues were carried out which were the first to reach a total amount of over 21 billion”. Next year, Italy’s BTPs maturing will be worth a total of 25 billion euro. In this context, the Treasury will evaluate the opportunity to issue one or more BTP Italia issues during the year.
As for the BTP Futura, the security was introduced in 2020 to meet the financial needs due to the Pandemic. Contrary to what was previously announced, the Treasury did not deem it appropriate to make new issues during this year.
