1 unrepeatable opportunity to earn by betting on this government bond


On the Italian government securities market, the calm is slowly returning. While awaiting the European Commission’s proposal on the Recovery Fund, the spread has fallen to 200 basis points. And in this more relaxed atmosphere, purchases on our BTPs are returning. In particular, there is 1 unrepeatable opportunity to earn by focusing on this government bond

Here is what affects the trend of BTP prices

There is a more relaxed climate on the Italian government securities market. The drop in the differential between BTP and the Bund below 200 points favors the appreciation of our fixed rate government bonds. In fact, due to the characteristics of the BTPs, which offer a fixed rate coupon, the change in yield affects the price. If the yield falls, the price rises, and vice versa. The impact on the price of the change in the yield is greater the greater the residual duration of the government bond. A decrease in yield creates a higher price rally on a BTP with a maturity of 30 years than a BTP with a residual maturity of 5 years.

1 unrepeatable opportunity to earn by betting on this government bond

A stable return of the BTP-Bund spread below 200 points favors the appreciation of the prices of fixed rate government bonds. In this perspective, there are very greedy opportunities for capital gains on long-term BTPs such as 10-year or better 30-year BTPs. But if you want to ride a price hike to the max you should bet on the BTP maturity in 2067

The Multiannual Treasury Bill, which will be redeemed in March 2067 (Isin: IT0005217390) has a fixed coupon of 2.8%. It is currently bought on MOT, the Italian stock exchange market for government securities and bonds, at 105.90 cents. Since the minimum amount is 1000 nominal euros, at least 1059 euros are required to purchase a BTP expiring in 2067.

The bet for those who buy it is that it can return to pre-crisis prices by the end of the year, or 120 cents. If the hypothesis comes true, prices should rise by 14%. Whoever had it in his portfolio, reselling it to 120 would take home a gain of about 14%. To this would be added the coupon interest accrued during the period of holding the security.

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