BTP Italia, is it really worthwhile compared to other emissions?

Everyone is talking about BTP Italia under subscription from June 20-23, 2022 but no one compares it with other BTP versions in circulation. This article does the hard work and explains a practical answer: Is it really worth it?

In 2021, the Treasury returns to the stage of BTP Italia issuance. It is the 17th edition of BTP which is now 10 years old and has always registered the approval of Italian savers (the first release was in March 2021).

This article aims not only to examine the technical characteristics of BTP Italia, but also to compare it with other BTPs on the market, some of which cannot be compared, for example BTei, because they are linked to European inflation. However, the secondary market for BTPs presents issues that can allow for an informed decision. we asked Lorenzo RaffOr, bond expert, to summarize the characteristics of the new BTP Italia in an agile document accessible to all our readers, giving all the technical details of other similar BTP versions as well. In fact, the details of this case are generally described in the economic press but not an honest comparison between this case and others.

The characteristics of the new BTP Italia are as follows:

● Guaranteed minimum annual coupon rate: 1.6%
● Final price: at the opening of the fourth day of issuance, Thursday morning, June 23. May be confirmed or revised up
● Isin security code is set: IT0005496994
● Expiry 06/28/2030
● Indexing: by Italian inflation rate (Foi, no tobacco – CPI for blue-collar and white-collar households)
● Coupons: payable every 6 months with reassessment of the capital due to inflation in the same semester
● Double Loyalty Bonus: A temporary bonus after four years equal to 0.4% of the purchased non-revalued nominal capital. After the next four years, upon maturity of the bond (June 28, 2030), retail investors who continue to hold the security from issue to maturity will receive a second final installment equal to 0.6% of the nominal subscribed capital without revaluation.
● IPO: June 20-22, 2022. The second phase, intended for institutional investors, will take place on Thursday, June 23 from June 10-12.

According to columnist Lorenzo Raffo, the strong points of this issue are the following: A basic 1.6% coupon is the first step to satisfy. Moreover, the assumed yield of the first coupon will be high. Forecasts cannot be made for subsequent predictions but they may still be important. The bond also displays some protection against deflation. Therefore there is a guarantee that the coupons cannot be calculated on a capital lower than the commitment. Finally, it doesn’t hurt to have a subscription fee.

If you want to watch the video explaining the webinar on BTP Italia held by Raffo click here.

But let’s get to what, again, for BTP Italia, the weaknesses in the opinion of Lorenzo Raffo: it is clear that the price hike will negatively affect the prices and this is even more important given that the term of BTP Italia is rather long. If instead inflation goes down, and we’re careful not to think about the logic of other BTP Italia coupons because the overall picture has changed, it’s not the best tool.
From the inflationary protection of the patermionio. I prefer BTP € i, as indexing is done on capital. It must also be remembered that this is a guarantee subject to the terms of Cacs, which may result in a change in various characteristics, such as maturity, coupons, etc., contrary to the will of the subscriber.

Is double loyalty a bonus a strong point or a weakness? Today this cannot be said, as evidenced by the unfortunate experience of BTP Futura. But let’s make a comparison with other BTPs already listed and try to express a favorable opinion, continues Lorenzo Raffo:

Btp Italia comparison (data refer to closing date 17/6/2022)

● Btp Italia Ap23 (Isin IT0005105843): Base rate 0.50% – Yield 2.48% – Inclusion €103.8 – Duration 0.6
● Btp Italia Mg23 (Isin IT0005253676): Base Price 0.45% – Yield 3.48% – Listing 103.8 € – Duration 0.66
● Btp Italia Nv23 (Isin IT0005312142): Base price 0.25% – Yield 3.7% – Insert €103.5 – Duration 1.0
● Btp Italia Ap24 (Isin IT0005174906): Base price 0.40% – Yield 5.33% – Inclusion €102.9 – Duration 1.2
● Btp Italia Ot24 (Isin IT0005217770): Base price 0.35% – Yield 5.89% – Listing €102.3 – Duration 1.55
● Btp Italia Mg25 (Isin IT0005410912): Base Price 1.40% – Yield 7.13% – Listing 103.5 € – Duration 1.88
● Btp Italia Mg26 (Isin IT0005332835): Base price 0.55% – Yield 7.6% – Inclusion €99.75 – Duration 2.43
● Btp Italia Ot27 (Isin IT0005388175): Base price 0.65% – Yield 8.0% – Listing €98.35 – Duration 3.11

Who wins the bid for the best attraction compared to BTP Italia? Let’s take a small overview of the different situations that can happen:

● With the highest essential coupon: New 2030
● Highest Yield: October 2027
● Lowest price: October 2027
● Shortest Duration: April 2023

At this point, the 2030 loyalty double bonus still plays an important role but pay attention to its duration, which will be the largest of all. Once again, we paint a general picture by following the different scenarios that can be realized:

● Inflation Jumped Again: The New 2030
● Inflation drop to 2%: October 2027
● The return of deflation: the new 2030
● Prices have gone up a lot: not BTP Italy but the best CCT

Sure, Ravo jokingly concludes that a good dose of luck is always required even in these situations.

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