Btp and other government bonds, how to earn with coupons (up to 5% for ten-year bonds) or by reselling them – Corriere.it

Ten-year strategies. With the Btp and other long securities of the euro and beyond. On several occasions, in the crucial months of last year, starting in June in particular, several voices recommended investing in bond issues with ten-year maturities. The simplest way, as often happens in the sector, is to turn to Italian government bonds. Both because they are recipients of a defined degree of reliability investment gradeand because they are easily available on the Italian Stock Exchange, and because, in the face of falling market prices, they could have offered, over the next 18-24 months, an important capital gain, to be added to the coupon flow. Coupon which, compared to those of the BTPs currently being placed, however, is non-competitive. In any case, this situation is compensated for by a fairly interesting capital gain prospect.

The trading

Not all investors opt to keep medium and long-term bond issues in their portfolio until maturity. Not a few, in fact, prefer to carry out a trading activity, that is, to buy and sell, in a short space of time. In this case, in the face of increases in the price of the instrument in which you invest, even for a not particularly high percentage value, you choose to sell the bond purchased even a few days ago to the market.

The two roads

The recent stock market sessions, beyond the complex events that have disturbed the markets, also show discrete increases in market values, for example, of ten-year BTPs. The graph shows the succession of market prices of the 2.45% Btp with repayment date set for 1 September 2033. In retrospect, it would be natural to hypothesize that those who choose to forfeit capital gains, when they become apparent, would have materialized a discrete capital gain, selling the aforementioned Btp in the time frame that goes from the beginning of the year to the most recent operating sessions. Just as it would be almost automatic to reinvest the proceeds even in the same instrument if, during the next trading sessions, its market value were to drop by even just two or three points. The aforementioned 18-24 month perspective, now reduced to six months, remains a point of arrival that could probably be achieved. At the same time, those who had chosen to sell on the market, in the belief that greater price increases will hardly occur, would have nothing to reproach themselves for, if the strategy they opt for is short-term.

Prices and returns

At the same time, the turbulence that affected share trading indirectly increased investments in bond instruments and, also thanks to this situation that arose on the financial markets, the prices of BTPs and fixed-coupon corporate issues benefited market value level. The table shows a group photo of government issues at the moment: prices vary between 87 and just over 100. While yields fluctuate between 2.26% of the Bund and 5.29% of the BTP issued in dollars.

The prospects

It will therefore be interesting to follow future stock market sessions, in order to evaluate, for those who like to trade tradingwhat could be the most appropriate moment to invest again in the same Btp and/or in others with similar duration characteristics. Nothing taken for granted, of course. Nor is there the possibility that the market values ​​of this type of security will go back down and then go up again, nor that, conversely, the quotation will rise further. And this could happen if the restrictive monetary policy of the central banks were to stop decisively. A hypothesis that does not seem imminent, but which could manifest itself, should the propensity to consume decrease globally, with close effects also on the inflation dynamics. There are many variables involved and this is the reason that makes the current situation of the financial markets complex.