Introduction sectionBTP Futura, the 100% retail step-up government bond
BTP Futura, the 100% retail step-up government bond
BTP Futura is the name of the new security reserved exclusively for individual and similar investors (retail), with a 10-year maturity, issued for the first time from Monday 6th July to Friday 10th July 2020 (until 1 pm).
This first issue, conceived for "the future of the country", as anticipated in the review of the 2020 public debt guidelines and as already occurred for the BTP Italia last May, is dedicated entirely to financing the expenses foreseen by the latest measures implemented by the Government to tackle the Covid-19 emergency and support the recovery of the country.
A SECURITY THAT REWARDS CONFIDENCE IN THE RECOVERY OF ITALY
The security foresees a final bonus that is added to the last coupon and is equal to the average annual variation of the Italian nominal GDP during the life of the security based on the last updated series published on the Istat website before the bond’s maturity, with a guaranteed minimum of 1% and up to a maximum of 3% of the subscribed capital, for those who purchased it at issue and hold it until maturity.
SIMPLE AND INNOVATIVE STRUCTURE WITH FIXED RATES INCREASING OVER TIME
A further distinctive element of the new security are the half-yearly nominal coupons calculated on the basis of pre-established rates that increase over time (step-up mechanism), which will be calculated on the basis of a given fixed coupon rate for the first 4 years, increasing a first time for the following 3 years and a second time for the last 3 years of the security’s life before maturity.
The fixed and increasing coupon rates over time were communicated on 3th July and confirmed on 10th July:
- 1.15% (from year 1 to year 4)
- 1.30% (from year 5 to year 7)
- 1.45% (from year 8 to year 10)
While the coupon rate for the first 4 years will remain unchanged, based on market conditions, only rates subsequent to the first can be revised upwards.
COMMISSION-FREE PURCHASE AT A BANK, POST OFFICE AND VIA HOME BANKING
The placement took place on the MOT platform (the Borsa Italiana electronic Market for Bonds and government securities) through two Dealer banks, Banca Imi S.p.a., and Unicredit S.p.a., and two Co-Dealers, Banca Akros S.p.a. and Banca Sella Holding S.p.a.
There was not any cap or allotment, hence guaranteeing the entirely satisfaction of the demand, starting from a minimum lot of €1,000.
Furthermore, there were no fees to be borne by investors at issuance, while the taxation treatment is equal to 12.5 % and the Inheritance Tax shall not apply, as for all government securities.
The securities, which could be subscribed at par (100) and without any additional commission, were purchased at a bank or at the post office.
In consideration of the current circumstances and to encourage maximum participation by investors, securites could also be purchased online, via home banking, where enabled for trading functions, and four and a half days of placement were guaranteed.
The “special” ISIN code of the BTP Futura issue was IT0005415283 and identified the security during the placement period on the MOT (6-10 July), simplifying the recognition of entitlement to the loyalty bonus for the BTP Futura for those who hold it until maturity.
RESULTS OF THE FIRST ISSUE OF BTP FUTURA
174,318 contracts were concluded during the first issue of BTP Futura, dedicated to financing interventions relating to the Covid-19 emergency and held from 6 to 10 July 2020, for a value of €6,132.260 million.
During the placement period, approximately 64 per cent of the contracts concluded were for less than €20,000, while contracts up to €50,000 counted for approximately 89 per cent of the total. The average value of contracts was €35,179.
Details on the composition of the demand can be found in the press release by the Ministry of Economy and Finance.
NEGOTIABILITY ON THE SECONDARY MARKET
From the first accrual and settlement day, (14 July), the bond will be tradable on the MOT and liquidity will be guaranteed through the commitment of the Dealers and Co-Dealers selected by the MEF.
In order to simplify the entitlement to receive the Bonus Payment, at the time of any sale of the bond in the secondary market starting from the settlement date, the “special” ISIN code will be replaced by the “standard” ISIN code.