Those who, in the distant autumn of 1993, decided to invest their savings in the BTP that we are presenting today, are guaranteed 30 years of lavish coupons. Two a year to be exact, one on May 1st and one on November 1st, each of 4.50% gross.
Not bad, indeed we should congratulate those who were shrewd and far-sighted to focus on such a long-term product at the time. Moreover, to guarantee the State and from full-bodied coupons.
But moving on to the point, today is the day of the coupon of this 9% BTP: but is this government bond suitable for the small saver?
Data sheet
The reference is to the BTP-1nov23 9%, ISIN code: IT0000366655, issued by the MEF back in 1993 (it is a thirty-year bond). In fact, its first enjoyment date is November 1, 1993 and detaches coupons twice a year as previously mentioned.
However, keep in mind that today and tomorrow are public holidays so the relevant credit should be visible next Monday. As always, it will already take place net of the 12.50% withholding tax. Obviously, the credit specification applies only to those who hold the bond in the portfolio.
Finally, we recall the maturity date of this bond, November 1, 2023. Practically it has another 30 months of life, which is equivalent to another 5 coupons before the full repayment of the initially subscribed capital.
So, today is the day of the coupon of this 9% BTP: but this government bond is suitable for the small saver
Therefore, if we consider the coupon and the short term duration of the bond, it is easy to understand why it is so tempting. In fact, on the market today such fixed-rate yields are not even found on monstrous maturities.
Let’s cite an example for everyone: the recent 50 BTP just issued (maturity March 2072) has a gross coupon of 2.15%. That is even less than a quarter of 9% of our bond, which however lasts “only” 30 and not 50 years.
The small saver therefore wonders if in the face of such great grace it is not the case to immediately go to the purchase.
But it is here that the distinctions and reflections of the case promptly start.
Indeed, yesterday this government bond closed trading at around 123 cents. So if we start from the current price, we immediately understand that the yield is negative. To be precise, the actual net annual yield fluctuates around –0.15%.
An example would help us understand the concept better.
Assuming a purchase of the stock (dry price) next Monday we would have an output of 12,300 euros, while at maturity we will collect only the nominal ten thousand. Of course, in the meantime we will also have collected 5 coupons of around € 391-397 each (depending on the days of the semesters), but the final balance is still negative. That is, future coupons would not cover us from the capital loss.
In summary: today is the day of the coupon of this 9% BTP: but this government bond is suitable for the small saver
So, what to do with this bond?
There are two possible ways, mutually exclusive. The first is reserved for only a very small number of savers and refers to the classic trading operation on government bonds. In other words, identifying a right entry price on the instrument and managing it in the strict time necessary to speculate on the price differential.
In short, an operation reserved for experts and professionals, also because the time remaining until its expiry is very skimpy.
The most affordable alternative could then be to look around and look for equally peaceful and profitable solutions.
For example, you might consider the deposit accounts solution. In this article we have already illustrated which is the best CD for the small saver. On the 2-3 year maturities, in fact, today the best restricted products offer up to 1.30% gross interest.
Ultimately, today is the day of the coupon of this 9% BTP: but this government bond is suitable for the small saver. Finally, in the article mentioned here the link we illustrate in which particular cases it is possible to get up to 3% interest on the CD.
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