Introduction sectionBtp Italia: new issue to support Italy’s health system and economic recovery

Btp Italia: new issue to support Italy’s health system and economic recovery

The Btp Italia returned from Monday 18th May to Thursday 21st May 2020 - the Italian inflation-linked government bond designed for individual savers.

 

Btp Italia: new issue to support italy’s health system and economic recovery

 

Updates have been made to Public Debt management in order to tackle the Covid-19 emergency.

 

As announced in the new 2020 public debt management guidelines, several actions shall be taken to finance the measures implemented by the Government to tackle the health and economic emergency being caused by the ongoing epidemic.

 

There are many new features regarding auctions and placements reserved for specialist government security dealers, but an important role has also been reserved for the retail market, i.e. any Italian citizens who wish to contribute towards healthcare costs, supporting workers and relaunching the economy, also through the management of their investments.

 

According to Banca d’Italia data, only 3% of total government securities currently in circulation are subscribed directly by retail investors, a very low level even if compared with the recent past.

 

Btp Italia Covid-19 emergency issue - an investment to support us.

 

This Btp Italia issue, announced between 18th and 21st May 2020, is the sixteenth in the history of this security, entirely dedicated to financing the costs of the Covid-19 emergency.

 

What is the Btp Italia?

 

The Btp Italia is an Italian inflation-linked government bond, designed as an instrument to protect savings against rising prices.

 

Different issuances of this security have involved varying maturities, from 4 to 8 years, with coupon payments every six months and capital always being guaranteed upon expiry, even in the event of deflation. This issue has a maturity of 5 years.

 

What’s new about this sixteenth issue?

 

This new issue has a number of new features:

 

First of all, the new Btp Italia issue will be entirely used to finance the costs of the Covid-19 emergency and the measures to relaunch Italy's economy and support families and businesses.

 

In addition, a 5-year maturity has been introduced for the first time, which has never been set for previous issues.

 

The "loyalty premium" has also been doubled, to 0.8% of invested capital. As always, this premium is only for private savers who purchased the security on 18th, 19th or 20th May and keep it until it expires.

 

Finally, with the aim of encouraging as many subscriptions as possible and to facilitate the work of financial intermediaries at this unusual time, for the first time, there was no early closing option. This meant that three full days, 18th, 19th and 20th May, were dedicated to subscriptions by retail investors.

 

The other features of the security remain the same.

  • Annual real rate indexed to Italian inflation
  • A floor to protect invested capital in case of deflation
  • Semi-annual coupons
  • Capital always guaranteed at maturity
  • Reduced capital gains tax, as is the case for all government securities, at 12.5%
  • No commission for those who buy on the placement days

 

What are the expected returns for subscribers of this Btp Italia issue?

 

The yield varies for each issue. For the issue starting on Monday 18th May, the minimum guaranteed annual (real) coupon rate was set at 1.40%.

 

The final annual (real) coupon rate for the sixteenth issue of the Btp Italia, confirmed at the opening of the fourth placement day (on the morning of Thursday 21st May), is equal to 1.40%.

 

As always, coupons will be paid every six months.

 

The final yield of the Btp Italia for this sixteenth issue shall be equal to the rate set on 21st May revalued, i.e. with the addition of the Italian inflation rate recorded for each six-month period during the security’s 5-year duration. The inflation rate of reference is the ‘FOI’ index (the consumer price index for blue and white-collar worker households, net of tobacco, by Istat - the Italian National Institute of Statistics).

 

How to subscribe the Btp Italia

 

As well as being available at the bank or post office where you hold your securities account, it is also possible to subscribe this security directly online using home banking, if you are authorised to use the online trading function. This means that you do not have to go to the bank branch or post office in person. This has always been a feature of the BTP Italia and has proven to be particularly useful on this occasion, considering the ongoing emergency.

 

In fact, the BTP Italia is not placed through the usual auctions, but using Borsa Italiana's electronic bond and government securities market (“MOT”), with the support of four banks acting as dealers: Banca Imi Spa, Bnp Paribas, Monte dei Paschi di Siena Capital Services Banca per le imprese Spa and Unicredit Spa.

 

Placement is divided into two phases, dedicated to the two different types of potential subscribers.

 

The First Phase took place over three days, from Monday 18th May to Wednesday 20th May, and, as usual, was reserved for individual savers and other similar investors (the retail market), without any restrictions or ceilings on the issue. Securities could be subscribed for a minimum amount of € 1,000. The ISIN code for the security during the First Phase: IT0005410904.

 

The Second Phase, held on the morning of Thursday 21st May, was reserved for institutional investors. In this case, the placement may involve a proportional allocation mechanism, should the total orders received exceed the final supply decided by the MEF. The ISIN code for the Second Phase: IT0005410912.

 

The inflation index number calculated on the date of entitlement and settlement for the security is 102.58065.

 

All issuance details are published in the Term sheet for the security in question. It is also possible to consult the Btp Italia FAQ page.

 

All communications are available from the Ministry of Economy and Finance website.

 

Results: a record for the sixteenth Btp Italia issue

 

Over € 22 billion were raised by the Btp Italia issue dedicated to financing Covid-19 emergency measures, held over two phases between 18th and 21st May.

 

In particular, during the first phase reserved for retail investors, 383,966 contracts were concluded for an equivalent value of € 13,997.606 million.

 

During the second placement phase, dedicated to institutional investors, 746 subscription proposals were received and processed for an equivalent value of € 8,300.000 million, compared with total requests for € 19,546.876 million (proportional allocation mechanism ratio equal to approximately 42.5%).

 

Details on the composition of demand can be found in the press release issued by the Ministry of Economy and Finance.

 

For further information, please send an e-mail request to: dt.gruppo.info@tesoro.it

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