Better to bet on these issues or the BTP Valore? At the moment, one key element is missing to articulate an answer: the coupons that the Btp Valore will offer investors
For one of the 10-year bonds being issued on May 30, the coupon offered by the Treasury is 4.4 percent
There is time until May 29 to book the purchase of BTP and CctEu with medium- to long-term maturities, scheduled for issuance on Tuesday, May 30. In this case, these are traditional cuts for government bonds, coming about a week before the new BTP Valore, which the Mef has begun promoting well in advance. The BTP Valore, we recall, is a four-year bond characterized by a significant fidelity premium (0.5 percent) and increasing coupons divided into two stages – the size of which will be known on June 1.
Coming to market next Tuesday are three BTP bonds, including two 10-year and one 5-year, plus a new tranche of 7-year CctEu. v
As for the five-year BTP, due August 1, 2028 (Isin yet to be assigned), the Treasury will offer a maximum of 5 billion euros with an annual coupon of 3.8 percent. An additional 1.5 billion will be auctioned on May 31.
The first of the two 10-year BTPs is the third tranche of the issue on Isin IT0005544082, maturing on November 1, 2033: up to 2.5 billion euros will be offered (plus 500 million in an additional auction) with a coupon rate of 4.35 percent.
The second 10-year, now in its eleventh issue on Isin IT0005518128, matures on May 1, 2033, and offers a slightly higher coupon of 4.4 percent. For this second 10-year, the maximum bid will be 2 billion, while another 400 million will come in a different auction.
Closing the group is the CctEu maturing on October 15, 2028, Isin IT0005534984, for which the Treasury will issue a maximum of 1.5 billion euros (plus 225 million in an additional auction). The operating mechanism of the CctEu consists of a yield paid on a semi-annual basis, pegged to the 6-month Euribor rate, and increased, in this specific case, by 0.8 percent. The Euribor is the reference rate for interbank lending and is correlated with the trend in reference rates set by the ECB. In other words, if rates fall, somewhat as they do in an adjustable-rate mortgage, the yield on the CttEu will decline and vice versa. The Euribor rate published at 11 a.m. two days before the coupon accrual date, in this case, the first being October 15, 2023, will be used as the reference for calculating the six-month coupon. The last gross rate this issue paid on April 16 was 4.29 percent. The expectation is that, over the next seven years, the ECB’s benchmark rates will go down from their current levels.
A (partial) comparison with the BTP Valore
Better to bet on these issues or the Btp Valore? One key element must be added to articulate an answer: the coupons the BTP Valore will offer investors. Based on the characteristics known so far, it is likely that the BTP Valore will offer a higher yield than the traditional four-year, fixed-coupon Btp: this is because the substantial size of the loyalty premium, at 0.5 percent, provides additional value for those who will keep the Btp in their portfolio from issuance to maturity. Those who would prefer to keep open the possibility of liquidating the government bond early while minimizing the chances of doing so at a loss might choose the traditional BTP since those who buy the Btp Valore on the secondary market would not be able to benefit from the loyalty premium (discounting this price penalty). However, the choice should be postponed until June 1, when the coupons of the BTP Valore will be announced, and a true comparison can be made.
