Btp Valore 2024, issue from 26 February
The Btp Valore, the security dedicated to small savers, arrives at its third test. In fact, the third issue will start on Monday 26 February and will last until Friday 1 March, unless it closes early. The security will have a duration of six years marked by the step-up mechanism usual in this product: that is, the rate increases as time passes. Also for this issue, as had already happened for the previous ones, the calendar will be divided in two, with the rate becoming stronger starting from the fourth year. And with a final prize.
So let’s try to understand what BTPs are, how they work, what the special characteristics of Value BTPs are and in which economic scenario they are moving.
The effects of rates on all BTPs
A premise: the scenario for the next 6-12 months now seems clearly outlined. After 10 interest rate increases which from July 2022 to the summer of 2023 brought the cost of money in the eurozone from zero to 4.5%, the ECB is moving towards measures that will be something more than a pause in the increase in interest rates. And so, long-term markets have already begun to position themselves on the new scenario of falling rates.
As Marco Sabella writes, the yield of the German 10-year Bund, the leading security of the entire fixed income system of government bonds in the euro area, went from 2.9% at the beginning of last October to 2.0% in about three weeks. 24% on Tuesday 5 December. A drop of 70 cents in just over a month is an exceptional move. Similarly, the Italian 10-year BTP went from a yield close to 5% to 3.97% on Tuesday 6 December, due to the double effect of the decrease in euro area yields and the drop in the spread (to 173 points) . The yield is at its lowest since July and has fallen to this level from 4.11% on Monday 4 December. A scenario that has led all BTP issues – Italia, Valore, Futura and “traditional” – to gain from 5 to 8 percentage points in capital value compared to the lows of 5 weeks ago. End of the introduction.
What are BTPs? And what are BTP Valore?
Let’s start with the ABC. Every nation has to face expenses: from public employees to infrastructure, from social assistance to education. These expenses are partly financed with tax revenue, i.e. with taxes paid by taxpayers. The remaining part is financed with bonds, government bonds, which can be purchased by savers as a form of investment. In Italy we have three types of government bonds: BOTs (ordinary Treasury bills), Ctzs (Zero-coupon Treasury Certificates) and BTPs (multi-year Treasury bills).
BTPs have a duration that varies from 18 months to 3, 5, 7, 10, 15, 20, 30 and 50 years (this is why they are called multi-year bonds) and their yield is given by a coupon rate. BTPs are always issued at 100 and their price at maturity always returns to 100 (as for all bonds), the coupon that comes out is gross and is subject to a tax of 12.5% and is directly paid into the bank’s current account. investor every six months. At the moment there are BTPs with a maturity between 2025 and 2028 which can be purchased under 100 and with the coupons they allow an annual return of around 2.5-3% For the ten-year BTPs (maturity 2032) the return between price and coupons it is around 4% per year.
Within the BTP family, there are Valore BTPs, dedicated solely to small savers and investors, commonly called retail. As with the Btp Italia and Futura, the Btp Valore are instruments that the Treasury issues using not the traditional auction mechanism, but the Mot platform of the Italian Stock Exchange-Euronext Group, this is because the investors they are aimed at are not professionals of the sector. The BTP Valore is a simple investment to make thanks to the possibility of purchasing directly in the bank, at the post office or through your home banking, if enabled for the online trading function. There are no commissions or constraints for investors, who if they decide to keep the security or securities purchased until their natural maturity (in this case 5 years), are rewarded with an extra final premium.
The investment can start from a minimum of 1,000 euros, always having the certainty of having the requested amount subscribed. The government bond can be purchased at par (price equal to 100) and without commissions during the placement days.
What is the net yield of a BTP? And what about a BTP Value?
BTPs have three possible return modes. Coupon rate: it is the semi-annual interest rate that determines the amount of the coupons. For example, if you buy a BTP for 100 euros with a coupon rate of 1.20%, every 6 months you will receive 1.20 euros in the form of a coupon, from which the 12.50% taxation must be deducted.
Issuance gap: a BTP is bought at a certain amount (the issue value), when it expires it is not certain that it will be reimbursed at the same amount with which it was purchased. The redemption value, in fact, can be above par if it is lower than the issue value, causing a loss, at par, or below par, generating a profit.
Sale before maturity: a BTP can be sold before maturity. Again, the sales value, as in the case of the redemption value, can generate a profit, a loss or neither.
As regards BTP Valore, the series of minimum annual coupon rates guaranteed in the first three years and in the following three years, together with the ISIN code that identifies the security, will be communicated on Friday 23 February 2024. At the end of the placement, the definitive rates will be announced which may be confirmed or revised, but only upwards. As mentioned in the previous sheet, the minimum denomination is one thousand euros and there is no maximum limit.
How are BTPs purchased? And the value of BTPs?
BTPs are purchased directly when they are issued by the Treasury, i.e. at an issue auction (when they are sold to savers for the first time) or on the secondary market after their issuance, like any financial instrument. All holders of a securities deposit with a banking institution (i.e. a platform that allows you to operate on the financial markets) can independently buy and sell BTPs from their online account if authorized for online trading. Or, alternatively, go directly to the bank. BTPs are purchased on the Mot (Electronic Bond Market), the segment of the Italian Stock Exchange on which bonds can be bought and sold. Each BTP has an alphanumeric code (Isin) that identifies it.
The BTP Valore is an easy security to subscribe to: the procedure requires the retail saver to purchase the security with a minimum investment of one thousand euros, without commissions, through his contact person, at the bank or at the post office, but also through home banking, if authorized for online trading operations, or by contacting the bank or post office where you have a current account and a securities deposit account. While there is a minimum investment limit (one thousand euros), there is no maximum limit. The usual preferential taxation for government bonds of 12.5% and the exemption from inheritance taxes apply to the BTP Valore. Subscribers, as always, will be able to sell all or part of the security before its maturity, without constraints and at market conditions. The subscribed capital is guaranteed upon maturity. The placement will take place on the Mot platform (the electronic market for bonds and government securities of the Italian Stock Exchange) through two dealer banks: Intesa Sanpaolo SpA and UniCredit SpA
Are there any special commissions or taxes for the purchase upon issue of BTPs and Valore BTPs?
For medium-long term government bonds, there is no bank commission to be paid by investors for the purchase upon issue. The commissions for advance sales or purchases after issuance are those agreed with your bank. As for all other government bonds, the taxation of capital and other income is 12.5%.
How often are the coupons of BTPs and BTPs paid?
BTPs have annual coupons paid every six months and, upon maturity, return the entire capital invested. As regards BTP Valore, as explained in the previous sheets, the third issue provides nominal coupons paid quarterly and calculated on the basis of the pre-established rate for the first 3 years, which increases for the following 2 years of life of the security: this is the which is called a step-up mechanism.
What is the extra loyalty bonus?
Limited to Valore BTPs, there is an extra final loyalty bonus: a bonus paid exclusively to those who purchase Valore BTPs during the placement period and hold them until maturity. For example: if you purchased BTPs for a thousand euros (which is the minimum denomination) the final premium – of 0.5% – is 5 euros.
Is it possible to sell BTPs and BTPs Valore before maturity?
The answer is yes. Both for BTPs and BTPs Value.
Selling BTPs in advance of the maturity and liquidation of the security is always possible, even if the sale takes place on the secondary market, i.e. a market in which previously issued and not newly issued securities are placed. Once the issue is completed, unless there is an additional auction or a new issue tranche, no new securities will be placed on the market, while the issued securities can be kept by the subscriber until maturity or resold on the market. secondary.
As regards value BTPs, from the day of first trading on the Mot the security can be freely sold or purchased at market conditions. At maturity, however, the security will be reimbursed at par (i.e. 100). The BTP Valore, due to its coupon characteristics that increase over time, tends to be less sensitive to any future movements in market rates, thus offering, in the event of sale before maturity, greater capital protection compared to traditional BTPs. equal duration.
2024-01-27 08:16:20
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