Btp Italia, orders at 7 billion. Five questions to ask yourself before buying

Orders for the new Btp Italia, currently being placed, reached 7 billion euros in the morning. Today is the third and last day dedicated to the clientele of small investors.

Tomorrow it will be the turn of banks and large institutional investors. According to Borsa Italiana data, around 10.00 am the stock received requests for 430 million, which add up to the 6.57 billion of the first two days of the offer.

The level reached in the last edition, in November 2022, can now be considered exceeded. At the time, the Treasury had raised 11.99 billion (7.27 billion of which assigned to retail investors) by placing the bond in November 2028, coupon 1.6%.

The final final coupon will be communicated tomorrow morning and may be confirmed or revised upwards with respect to the minimum guaranteed coupon which has been set at 2% gross per annum. The loyalty bonus of 8 per thousand on invested capital (not revalued) must be added. Provided, however, that the investor who buys on the issue days holds the security until maturity.

What to know

There is great interest in the new Btp Italia being placed. It is a tool dedicated to customers of small savers. The attraction is the 2% coupon, after years of rates close to zero.

But the six-monthly revaluation of the subscribed capital is also convincing. Furthermore, the coupons, which are also paid semi-annually, guarantee a constant minimum return in real terms: the amount of each coupon is calculated by multiplying half the fixed annual coupon real interest rate, established at issue, by the revalued subscribed capital based on inflation occurring on a half-yearly basis.

This means that the coupon structure is characterized by a minimum fixed-rate component of 2% and by one linked to the trend of inflation (specifically the Foi ex Tobacco index). It is a protection mechanism against rising prices.

Questions before buying

For those who are looking at the new Btp Italia, it is crucial to understand how long you intend to immobilize your investment and therefore the savings that could become necessary for other projects or needs. In practice, it is necessary to be clear in mind that the price of this security could fall (this is what is happening to previous issues, for example that of November 2022 which today is around 96.5 euros). At maturity, the security is refunded on the purchase price. This means that, in the event of declining prices, it will be necessary to wait for the maturity of the security (2028) to get back the capital employed. Of course, there is the coupon paid periodically which will act as a parachute. However, the calculations need to be done correctly. “Whether or not it is appropriate to buy any security depends on the investor’s investment objectives, risk appetite and time horizon,” recalls Vito Ferito of Gamma Capital Markets.

The purchase and sale commissions are also to be evaluated. It is true that they are reset during the subscription phase. However, those wishing to sell before expiry will have to consider any commissions, which vary according to the bank, to be applied at the time of the operation and which will weigh on the net final return.

The question to be asked also concerns possible more interesting alternatives on the market. «The BTP Italia being issued has higher yield expectations than a classic fixed-rate BTP with a similar maturity (currently around 4% gross of taxes)» explains the expert who then continues: «The so-called break even point, identified as the average of inflation over the next five years, it is located at 2%: the higher the expectation for inflation above 2%, the more convenient it will be to opt for the BTP Italia. In the event of inflation expectations below 2%, it is better to opt for the fixed-rate BTP».

What will happen if inflation goes down? “In the event that inflation slows down, investors could find themselves in their portfolio an instrument that under-performs a normal BTP on the same maturities” says Edoardo Fusco Femiano, founder of DLD Capital SCF. It means that other instruments will be more attractive and will attract investor purchases.

What else does the secondary market offer? «The new Btp Italia, in this historic moment, presents valid alternatives starting with the Btp curve which presents yields from 4% to 4.5% on maturities 2027-2033 – says Paolo Barbieri, Fixed Income Manager of Valori Asset Management -. The European Corporate Investment grade market (which with a similar duration has yields between 4.5%-5%) also offers alternative solutions». For the expert, it is precisely in the latter sector that the most interesting offers can be found such as the Pirelli 2028 (XS2577396430) with a 4.65% yield to maturity or, alternatively with a retail cut, the Newlat 2027 (XS2289795465) and the Alerion 2028 (XS2455938212) at 5.15%. However, it is necessary to move with caution and always evaluate the liquidity of this type of bond. The BTP has on its side the fact that it is a highly traded and very liquid instrument and consequently it is possible to part with it at any time.