BTp twins: ‘Even the super-coupon is attracting interest from retail investors’
Ciro Pietroluongo, Chief Executive of MTS, the government bond market, speaks
Ciro Pietroluongo is a veteran of the bond and government securities market. From his current position as managing director of MTS (the wholesale bond market that forms part of the Euronext group), he has a privileged vantage point over all the Italian government’s bond issues. Over the next few days, until Friday, the placement of five-year Treasury Bills, reserved for retail investors, is underway, in two versions: the BTp Valore, the classic bond with increasing quarterly coupons, and the BTp Valore Insieme, a new formula that provides for the payment of a single ‘lump-sum coupon’ at maturity. The classic version offers annual rates of 3.7 per cent for the first two years, 4.1 per cent in the third and fourth years, and 4.7 per cent in the fifth year, whilst the Insieme version does not pay interim coupons but pays 22.25 per cent in a single lump sum at maturity. The amount of the single coupon is slightly higher than the sum of the quarterly coupons because it implicitly incorporates the reinvestment of those coupons, but the financial yield at maturity is always 4.1 per cent.
How did the launch of the placement go, particularly with regard to the new format?
Initially, demand from savers was focused mainly on the traditional product, but I would say there are signs of interest in the new products as well. In any case, the subscription amounts are substantial.
Why has the Treasury decided to propose a new structure with a single final coupon?
When issues are aimed at intermediaries, the consistency of the standard structure is key; it is the rate and maturity that make the difference. In the case of issues reserved for retail investors, on the other hand, the aim is to find solutions that continually generate fresh interest.
