Btp, the double strategy (between 5 and 10 years) to bring home returns of 4% –

Btp, the double strategy (between 5 and 10 years) to bring home returns of 4% -


Not just drawers. Buying and selling five- and ten-year government bonds — which today yield between 3.75% and 4.28% — to earn on capital gains can be a strategy to take into consideration. Investment in debt securities, including government issues, is not a financial asset. Not that the inclusion of a security in the portfolio corresponds to the commitment to keep it until its natural maturity. It will be the personal strategy, on the basis of both the propensity to take risks and the future conditions that the financial markets will offer to investors, to establish whether the aforementioned investment will be maintained until its natural maturity. As always, the market conditions guide the choices that the investor decides to make. In essence, the value that the market will attribute to the securities purchased. BTPs are certainly not exempt from market valuations, nor are the government issues of other Treasury ministries. The economic, financial and political events of recent years are significant and have been reflected in the quotations, in particular of fixed coupon instruments, which have shown almost continuous increases and decreases.

The effect of the rate hike on government bonds

The current situation is hostage to the inflation dynamics. The objective of the central banks is to reduce its impact, until returning to an increase in the cost of living equal to 2% per annum. While waiting to reach the aforementioned objective, investors decide their strategy on the basis of the indications they receive and personal forecasts, or implementing a conservative policy, keeping the securities placed in the portfolio until their natural maturity, or initiating a policy more aggressive, buying and selling the same instrument multiple times. In this case, implementing a strategy of trading. In this regard, it is useful to underline that the decisions that the European Central Bank implements regarding the reference rate, as happened last Thursday 15 June 2023, do not correspond to particular variations in the market prices of government bonds. On the one hand, because on average the change in the reference rate is 0.25 points. On the other hand, because the analysts’ forecasts, already a couple of weeks before the press release, had a moderate impact on market values. To a fairly limited extent at the moment.

The strategies

Two BTP maturities lend themselves well to the latter strategy. The closest is the five-year, the furthest the ten-year. The graph refers to the quotations of two securities with the indicated maturities. The particularly marked price fluctuations that characterized their exchanges in the second half of last year were followed by a much less aggressive phase. In the days immediately preceding the decisions that the central banks will take regarding interest rates, the quotations of government securities are affected to a less marked extent than that which occurs for the securities of companies listed on the Stock Exchange. Not a fixed rule, but the curve of the eloquent graph for the market prices recorded in the first five months of this year. The continuity of the market price, for the two Btp maturities, leads us to believe that, now investing part of the availability in the shorter term and the other part in the ten-year term should generate a medium-high yield to maturity, thanks to the repayment upon maturity. It is foreseeable that, over the next few years, starting from mid-2024, once the rising phase of interest rates has ended, a phase of the opposite sign should slowly begin.

The probable drop in market yields is matched, on the other hand, by an increase in the prices of fixed-coupon securities, Btp in primis. The further the repayment date of the issue in the portfolio is, the greater will be the rise in the market value of the security itself. Splitting the portion of the portfolio dedicated to bond issues in half between the two maturities mentioned could be a strategy to implement. Overall, in any case, the percentage of the two securities could represent 15-20% of the entire managed assets. A curiosity, at the same time an indication that has a non-secondary economic value. The repayment of government bonds is expected at the nominal value, 100. At the same time, the tax on capital gains is also applied to this credit, if the price of the first placement of the bond was lower than the aforementioned nominal value. Both securities shown in the graph are subject to the aforementioned tax, because they are placed in a phase of high yields and issue prices below 100. The security maturing in 2028 will be repaid at approximately 99.84, while the maturing 2033 at approximately 98.38.


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