from Intesa to Lottomatica, here are the highest returns – Corriere.it

Spring flowering for corporate bonds both in Italy and in Europe. A few weeks after the decision to raise interest rates taken by the Fed and the ECB – which brought the reference rates respectively to 5.25% and 3.75% – the large Italian and European financial and industrial groups gave the start a real wave of new corporate issues. These are bonds with maturities of between 3 and 10 years (and beyond) which offer coupons up to two percentage points higher than those of government bonds of the same duration, often in the presence of an investment grade rating, and therefore with a high degree of safety.

The curve

The moment is favorable for the launch of this type of issue because companies are taking advantage of a period in which interest rates are close to their maximum ceiling. And above all they take advantage of the fact that the market rate curve – the long-term swap rates on which operators reason – is inverted: i.e. long-term debt costs less than short-term debt, explains Paolo Barbieri, head of income fixed in Valori Asset Management, an independent investment company with offices in Milan, Lugano and Luxembourg.

The savers

Low long-term rates for firms — the 30-year swap rate at just 2.65% and the 2-year swap rate at 3.50% — mean firms incur lower costs when borrowing. But the profit is also interesting for savers. In fact, a premium of 2 or 3 percentage points is added to these base rates which brings the coupons of corporate loans well above 4%, even for short-term issues. For example, the 3-year bond issued by Intesa Sanpaolo maturing in May 2026 has a coupon of 4%, a price slightly below par and yields 4.08% at maturity. The ten-year Ferrovie dello Stato bond, maturing in May 2022, has a coupon of 4.50% and a yield to maturity of 4.61%. It too is slightly below par. These, indicatively, are the yields for investment grade issues, with a rating below triple B.

The rating

But if you leave the enclosure of high-security bonds, bonds such as Lottomatica with a five-year maturity in May 2028 offer coupons above 7% (7.13%) with a respectable rating (BB-) for a company that generates large Cash Flows. The limit of corporate bonds, for private investors, given by the very high minimum denomination, which is rarely less than 100 thousand euros, and a 26% tax on interest, against the 12.5% ​​tax on government bonds , observes Barbieri. But if the tax effect tends to realign the yield of corporate bonds to that of public issues, the former continue to maintain an advantage. In the event of turbulence on the financial markets and tensions on Italian public debt securities, corporate issues are generally more stable and less exposed to market volatility, concludes Barbieri.