The Italian Treasury has chosen the banks for the placement of a new one 20-year BTP benchmark. The Ministry of Economy and Finance has entrusted Barclays Bank Ireland Plc, Bnp Paribas, Citibank Europe Plc, Goldman Sachs Bank Europe Se and Intesa Sanpaolo with the mandate to the syndicated placement of a new 20-year BTP benchmark, maturing on 1 September 2043. This was reported by a note from Mef himself. The transaction will be carried out shortly, in relation to market conditions. To take account of this operation, no securities with a term exceeding ten years will be offered at the auctions of medium/long-term securities scheduled for Thursday 12 January. The spread, as of 9 January when the news was released, closed at 195 basis points, down compared to the 200 basis points at the end of Friday 6 January. The yield on the 10-year benchmark BTP also dropped significantly, closing trading at 4.16% compared to the 4.21% recorded at the closing on Friday 6 January.
The losses of 2022
2022 was not a year of great opportunities on the bond front: inflation and continuous increases in interest rates pushed up the yield on government bonds. The BTPs at all maturities recorded huge losses, for an average against capital of around 14.4%. The greatest damages have emerged in longer-term issues, in fact those at 50 years (maturity March 2072 with a 2.15% coupon) – an instrument used mostly by institutional investors and not by private savers – are now traded at a loss 40% of the subscription price. An extreme example that gives an idea of what happens even in the case of shorter deadlines. The BTP maturing in August 2031 with a coupon of 0.60%, for those who choose it today it has a value of approximately 7,500 euros which, on the repayment date, would rise to 10 thousand euros with a yield of 4.21%. A value equal to less than half of inflation, which stood at +11.6% in December (down compared to the November figure but still very high). The real interest rate net of inflation would therefore be heavily negative: around -5%.
The “luckiest” BTPs
Italy’s BTPs were saved, with the yield and capital value linked to the Italian inflation rate, the BTPEIs, with yield and capital indexed to the increase in the cost of living in the euro area and the issues linked to the Eurostat inflation rate. The coupons are revalued on the basis of the inflation rate, hence their yield in 2022 it was particularly high and, in some cases, exceeded 8%. No capital account loss was recorded, therefore the real return net of the inflation rate remained above zero. The Btp Futura, linked to the Italian GDP, have not given great results. The collapse in GDP that occurred in 2020 with Covid was not made up for with the recovery of 2021 and 2022. The loss of these emissions, perhaps also damaged by the complex method of calculating the coupon and yield premiums, between 20 and 25% .
The forecast for 2023
According to experts, 2023 could be the right year to invest in bonds. The question is when inflation will stabilize and whether the recession is still highly plausible or can be avoided. According to Treasury data, in the new year, financing needs will be determined by the maturities of outstanding securities which, net of BOTs, they will amount to just under 260 billion euros and by the new state sector borrowing requirement for the year which, based on preliminary estimates from last November, should amount to around 90 billion euro. Taking into account the loans of the Next Generation Eu package and the management of cash availability, with the information currently available, overall gross issues of medium-long term securities are expected to range between 310 and 320 billion euros.CopyAMP code.
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