Introduction section Treasury Bonds (BTPs)
Treasury Bonds (BTPs)
Treasury bonds are medium/long-term securities, with a fixed coupon paid every 6 months.
Auctions are reserved for institutional intermediaries authorized in accordance with legislative decree no. 58 of 24 February 1998 (see the “Authorized dealers” section).
|Maturities||From 18 months to 3, 5, 7, 10, 15, 20, 30 and 50 years.|
|Remuneration||Semi-annual coupons in arrears and possible discount at issuance.|
|Type of auction||Marginal auction with discretional determination of allocation price and quantity issued.|
|Auction frequency||Twice a month according to maturities.|
|Settlement dates||T+2 on the primary and secondary markets.|
|Market conventions||Actual/actual for yield and accrual calculation|
|Redemption||At par, single payment at maturity|
1. Investing in BTPs
BTPs are issued with maturities1from 18 months to 3, 5, 7, 10, 15, 20, 30 and 50 years. They are medium/long-term securities with fixed coupons that are particularly useful for those investors requiring constant payments2 every 6 months. The different maturities existing on the market allow investors to schedule regular cash flows during the whole year. Moreover, BTPs are particularly appreciated for their liquidity: before maturity, wholesale investors can buy or sell BTPs both on the regulated secondary markets (MTS) for trades of at least 2.5 million euros and on the over-the-counter market; while private citizens can perform these transactions on the regulated secondary market MOT (Government Bond and securities electronic market), where operations must be of at least 1,000 euros.
Among the dealers allowed to participate in the auctions, these securities are placed mainly with “Specialists in Italian Government Bonds” (that have a special section dedicated to them in the Public Debt website) who, on average, are awarded more than 90% of the total nominal amount issued at each auction
1To increase liquidity the Treasury issues 5½ year, 10½ year, 15½ year and 31 year BTPs, so that when the series of reopenings ends, residual maturity is near 5, 10, 15, 30 years.
2 To satisfy those investors who prefer securities offering a single payment at maturity (zero coupon bonds), in 1998 the Treasury initiated a program called Separated Trading of Registered Interest and Principal of Securities (STRIP), that allows them to split the capital and the coupons. The reconstitution of the “stripped” security by matching the coupons and the principal is possible at a later date. The Government Bonds that are subject to stripping are 10, 15 and 30 year BTPs.
2. Minimum denomination
BTPs can be subscribed for a minimum amount of 1,000 euros or multiples thereof.
3. Type of auction
BTPs are offered through a marginal auction with discretional determination of price and quantity issued. There is a mechanism of speculative bid exclusion which is described in detail in every issuance decree. The same decree sets supplementary placement terms, reserved to specialists in Government Bonds, technically treated as a subsequent tranche. The quota reserved to Specialist is equal to 30% of the amount allocated in the ordinary auction for the first tranche and 15% for further tranches. Only specialists who took part in the last auction, have access to this supplementary placement.
The amount of each of the five bids that every intermediary can place cannot be less than 500,000 euros.
Bidders can submit prices with a minimum tick of one euro cent or multiples thereof. For each security to be issued auction fees will be applied based on residual maturity, which will be set according to the number of days between the auction settlement date and the maturity date, according to the table below:
|Type of security||Residual maturity in days||Fees|
|Btp Short Term||1||940||0,075|
|3 years BTP||941||1460||0,10|
|5 years BTP||1461||2190||0,15|
|7 years BTP||2191||3102||0,15|
|10 years BTP||3103||4562||0,20|
|15 years BTP||4563||6390||0,25|
|20 years BTP||6391||8765||0,25|
|30 years BTP||8766||12775||0,35|
|50 years BTP||12776||99999||0,40|
Currently BTPs have maturities from 18 months to 3, 5, 7, 10, 15, 20, 30 and 50 years.3
3 In the past the Treasury issued BTPs with maturities of 2, 4, and 9 years but they are no longer issued.
5. Auction calendar
BTP auctions are usually held monthly, during the second half of the month for 3/7/15/30 year BTPs, according to market demand, and during the last week of the month for 5/10 year BTPs.
BTP Short Term auctions are usually held monthly, during the fourth week, together with the BTP€I auctions.
6. Auction announcements
The relevant information can be accessed at the pages “Medium/Long-term Securities issue Announcements” and “Latest BTP auction Results” of the Public Debt website (http://www.dt.tesoro.it/en/debito_pubblico/).