How Money Market Funds could revolutionise the management of Italy's public debt

billions. In practice, MMFs act as intermediaries between widespread savings and the US Treasury: they collect money from millions of savers and invest it in short-term government bonds.

The mechanism works like this: an American family opens an account with Fidelity, Vanguard or Schwab and deposits its savings. This money automatically flows into a Money Market Fund - for example the Fidelity Government Money Market Fund (SPAXX) - which invests it in T-Bills and other very short-term instruments. The saver receives a return of around 3.5-4% per annum (in line with the federal funds rate, currently between 3.50% and 3.75%), which is much higher than that of a traditional bank account (often below 1%). But here is the crucial point: that money is not 'locked in' as in a traditional investment.

American MMFs are not technically current accounts. They are investment funds, and to withdraw money one must formally 'redeem' one's shares. In theory, therefore, there is one more step than a simple bank withdrawal. In practice, however, the big brokers have made this step completely invisible. Here is how it works in practice:

Fidelity Cash Management Account. The saver receives a debit card and a chequebook linked directly to his MMF. When he pays at a restaurant with the card or uses a cheque for rent, Fidelity automatically redeems the exact number of shares needed to cover the transaction. The saver does not have to do anything: from his point of view, it is identical to using a bank debit card. In the meantime, all unspent money continues to earn a return on the fund. Vanguard. Its MMFs allow cheques, generally with a minimum of $250-500 per cheque. Schwab. Brokerage accounts support cheques and debit cards, with the possibility of cash flowing into MMFs.

In essence, the American saver enjoys a double benefit: he earns a significant return on his cash (3.5-4% per annum) and retains the ability to use that money for everyday payments virtually instantaneously. It is not exactly a current account - the fund shares aim to maintain a stable value of $1.00, but are technically not guaranteed by the FDIC like bank deposits - but in everyday practice the difference is almost imperceptible.

The result is a virtuous circle of extraordinary effectiveness. The US Treasury issues short-term T-Bills, which cost less in interest and are not subject to the futures speculation that plagues long-term securities. Money market funds collect widespread savings and invest them heavily in T-Bills, creating a stable and predictable demand. Savers obtain higher returns than banks while maintaining full flexibility in the use of money. Banks lose some of their sight deposits (which pay little or no interest) but the system as a whole is more efficient. The Treasury, in practice, finances itself cheaply because it can count on a huge, stable and constantly growing buyer base. The 7.6 trillion MMFs represent a pool of demand that makes T-Bills auctions predictable and efficient.

Now let us transfer this reasoning to the Italia context. Italia has a public debt of more than EUR 3,100 billion, financed to a large extent by BTPs - Buoni del Tesoro Poliennali - with maturities ranging from 3 to 30 years, which account for more than 90 per cent of the stock. BTPs are coupon instruments, traded on deep secondary markets and, above all, subject to speculation through futures contracts.

When the BTP-Bund spread widens, it is not necessarily because the fundamentals of Italy's economy have worsened: it is often the result of speculative movements on BTP futures, which amplify volatility and drive up the cost of debt for the Italian state. We saw this in 2011, in 2018 and on several other occasions.

BOTs - Buoni Ordinari del Tesoro - are the Italia equivalent of American T-Bills: short-term securities (3, 6 or 12 months) without coupons, issued below par. Today, they represent a modest share of Italy's public debt, about 135 billion euro out of over 3,100 total - just over 4%, compared to the almost 22% that T-Bills represent in the US.

The current direction of the Italia Treasury goes in the opposite direction to that proposed here: the MEF's Guidelines for 2026 explicitly envisage a 'gradual reduction in the weight of short-term segments on total issues'. In 2025, BOT issues were just under 170 billion, against 380 billion of medium- to long-term securities. In short, Italia is deliberately lengthening the average life of its debt. The thesis of this article is that this strategy, while understandable in terms of prudence, misses a significant opportunity.

What if Italia did what the US did? What if it shifted a significant share of its financing from BTPs to BOTs? The advantages would be manifold. BOTs cost less: short-term rates are generally lower than long-term rates, especially in steep yield curve phases. BOTs are not subject to futures speculation: there are no significant futures contracts on BOTs, which eliminates an important channel for crisis amplification. Frequent rollover, which is often cited as a risk, becomes manageable if demand is stable and institutionalised - just as it is in the US.

But why doesn't Italia do it? The problem is not technical, it is infrastructural. The key piece is missing: an ecosystem of Money Market Funds dedicated to short-term Italian government bonds. Italian households would not buy BOTs directly in sufficient quantities. They do not want to manage quarterly or six-monthly renewals, they do not want to tie up liquidity without being able to use it, and minimum denominations (even when reduced) remain an obstacle. But if there were Italian MMFs that invested predominantly in BOTs, and if these funds offered similar functionalities to those in the US, the picture would change completely.

Imagine a system structured as follows: an Italian family invests its savings in a money fund that buys BOTs and other short-term government bonds. The fund offers a return of, let us say, 2.5-3% per year - hugely higher than the 0.28% that Italian banks

pay on average on current accounts (ABI figure, March 2026). At the same time, the fund is linked to a debit card and payment system that allows the family to use that money for daily payments, bills, purchases, just as they would with a current account. The redemption of the shares would happen automatically, behind the scenes, without the saver having to worry about manually selling his BOT. From the user's point of view, it would be like having a current account paying 2.5-3% instead of 0.28%.

Let's do an exercise. The total liquidity held by households, companies and others in Italian bank accounts reached EUR 2,084 billion as of February 2026, of which EUR 1,410 billion was held in current accounts alone, earning an average interest rate of 0.28 per cent. For households alone, bank deposits amount to approximately 1,150 billion. If even just 20-25% of total liquidity - around 400-500 billion - were to flow into MMFs dedicated to BOTs, Italia could finance a very significant share of its annual needs through short-term instruments, at lower cost and with less exposure to speculation. For savers, it would mean going from 0.28% remuneration on current accounts to 2.5-3% on MMFs. For the Treasury, it would mean a stable, domestic demand base, less sensitive to international market turbulence.

Possible objections and answers. "The rollover risk is too high." It is true that financing short-term debt exposes one to the risk of having to renew frequently. But if demand is institutionalised through MMFs, rollover becomes automatic: the funds continuously reinvest the incoming liquidity. In the US, T-Bills are renewed without difficulty auction after auction because the demand for MMFs is structural, not speculative. "T-Bills do not protect against rising rates." On the contrary: BOTs adjust quickly to new market rates because they mature and are renewed every 3-12 months. It is the long-term BTPs that expose the state to the risk of having locked in high rates for decades. "The banks would object." Certainly the banks would see a reduction in sight deposits, which today represent an almost free source of funding. But banks could in turn offer MMFs through their own networks, offsetting the loss of deposits with management fees. Moreover, a more efficient financial system benefits everyone in the long run. Not to mention that they now have record profits of 41-43 billion a year and are the least troubled sector of the Italian economy.

The regulatory objection is obviously the one that counts, but it is also the one that has the most solutions at hand. There is no need to wait for a reform of the European Money Market Fund Regulation (MMFR). Italia can move now, exploiting two levers already available.

First lever: a 'Sovereign MMF' through Cassa Depositi e Prestiti. Italia already has a unique infrastructure in Europe for channelling household savings into public instruments: Cassa Depositi e Prestiti, which collects postal savings through Poste Italiane

- savings accounts and savings bonds - for over 160 years. CDP could set up a dedicated fund, invested exclusively or predominantly in BOTs, which would not technically be a 'money fund' within the meaning of the European MMFR regulation, but a public savings instrument in its own right, built on the same legal architecture that already regulates postal savings. In other words: not a financial product subject to the regulation of mutual funds, but a sovereign collection vehicle, guaranteed by the State, placed through the network of post offices and the BancoPosta app, and invested in BOTs. The advantage is twofold. On the saver's side, it would be a familiar product - an evolution of the postal passbook - offering higher yields (the yield on 12-month BOTs averaged 2.13% in 2025) than bank deposits (0.28%) and postal passbooks themselves. On the Treasury side, it would create a structural and domestic demand for BOTs, removed from the speculative dynamics of international markets.

Second lever: SEPA instant credit transfers, now mandatory. The real practical obstacle that always held back similar instruments in Europe was the settlement time: selling a security and getting the cash took at least one business day (T+1), making the 'current account-like' experience that US brokers offer with their MMFs impossible. This obstacle no longer exists. As of 9 October 2025, the European Instant Payments Regulation (IPR) has made it mandatory for all banks in the Eurozone to offer SEPA Instant Credit Transfers - euro transfers credited within 10 seconds, 24 hours a day, 365 days a year, at no extra cost compared to ordinary credit transfers. The technical infrastructure to settle the redemption of a BOT or money fund share in near real time is thus already in place on a European scale.

In concrete terms, the mechanism would work like this: the saver keeps his funds in CDP's 'Sovereign MMF', invested in BOTs. When he or she needs liquidity - to pay a bill, make a purchase, transfer money - he or she places an order (via app, debit card or direct debit) that automatically redeems the necessary shares. The countervalue is transferred to his bank account (or directly to the beneficiary) via an instant SEPA transfer, which arrives in less than 10 seconds. This is exactly the American scheme, but built on the European payment infrastructure, which is now technically superior to that of the US on this point (where instant payments are not yet mandatory for all banks).

A private operator - a fintech, or Poste Italiane itself - could today create an interface that automates the entire process: automatic investment of the cash in BOTs, on-demand redemption, and sending the cash to the beneficiary via instant transfer. None of the technologies required are experimental: they are all already operational market standards.

The most significant aspect of this proposal is that it does not require new European laws. The collection vehicle already exists (the CDP/postal savings model). The securities to be purchased already exist (BOTs). The instant payment infrastructure already exists (SEPA Instant, mandatory). All that is needed is the political will to put the pieces together.

The US has shown that it is possible to finance trillions of deficits through short-term securities, provided the right infrastructure is built. Money Market Funds are this infrastructure: they transform widespread savings into stable demand for government bonds, offering savers higher yields and almost total liquidity. Italia has all the tools to replicate this model - and it does not even have to start from scratch. It has BOTs, it has enormous private savings (more than 2 trillion parked in current accounts with almost zero yields), it has Cassa Depositi e Prestiti with its capillary collection network, and it has an infrastructure of instant payments that from 2025 is mandatory and operational. There is no lack of technology, no lack of legal instruments, no lack of savings to mobilise. What is lacking is the political will to put the pieces together. It would be a way to reduce the cost of debt, limit exposure to speculation, return returns to savers, and strengthen the country's financial sovereignty. This is not utopia. It is what the Americans already do with $7.6 trillion - and Italia, today, has everything it needs to do it better.