BTP Futura leaves on Monday. How coupons and loyalty bonuses work


The appointment is for next Monday, July 6, the day on which the BTP Futura operation will start.

The countdown has therefore already started for the placement of the new government bond exclusively dedicated to the retail public, whose collection will be used to finance the economic emergency triggered by the pandemic.

BTP Futura: focus on coupons. Two criteria have been adopted

During the Due di Denari transmission, yesterday morning at Radio 24, the Head of the Public Debt Department of the MEF, Davide Iacovoni, explained the special mechanism for recognizing the coupon flow of the BTP Futura.

The aforementioned mechanism is technically defined as “step up”, as it increases over time, that is, in the ten years of the title’s life.

During the transmission yesterday, Iacovoni said: “On Friday 3 July we will communicate the sequence of the minimum coupons, then at the end of the placement the definitive coupon rates will be set.

BTP Futura: the criteria for coupon rates will be two. Here are which

The criteria that we are going to adopt will be substantially two: on the one hand we will have to take into account the yield at maturity of a normal Btp, that is with fixed coupons that we ordinarily place on the market on a very close maturity compared to that of July 2030, and that will be the first reference we’re going to take.

Obviously it will not be a point of reference: we will analyze the trend of the 10-year BTP in these days “.

The second reference, explained Iacovoni, will consist in “spreading this fixed rate of return on a coupon sequence that will be increasing.

We will see on Friday what will be the optimal sequence to allow on the one hand to give an important interest already for the first coupon period, that is, the first 4 years.

But of course we will have to take into account the aspect of attracting the investor to maturity: those who keep to maturity will have this premium which should be significant.

In fact, it will have a minimum value of 1% of the nominal capital subscribed but which could be higher depending on the performance of the GDP “.

BTP Futura: how long can the loyalty bonus go?

Iacovoni said yesterday: “It will be an important reward that we cannot predetermine today and therefore will not be included in the calculation of the coupon sequence that we will communicate on Friday.

The investor must know that those coupons which he will benefit from today will be connected with the trend of the normal BTP rate, but he must also know that at maturity he will have a premium that we are not able to predict today and that is not included in the calculation of these coupons, it is completely additional to the normal BTP.

Future BTP has a defensive character: what does it mean?

“Having this structure with increasing coupons over time, this is a title that has a character that we call defensive technical jargon”.

This is what Iaconi explained, who added: “It may happen that once we have closed the placement, market interest rates may rise for various reasons.

And we know that when interest rates rise, the prices of already existing securities tend to fall.
This can be a problem for anyone who needs to sell the stock before the deadline.

However, this security, with its growing coupon sequence, has the ability to see its market price decrease less against a possible increase in interest rates.

The comparison should be made with respect to a normal fixed coupon BTP whose price reduction would be higher. So with the future BTP one is somewhat more immunized than the fluctuations in market interest rates “.

BTP Futura: what if the rates go down?

“Of course,” concluded the Head of the Public Debt Department, “if interest rates go down, which we obviously hope as an issuer, it is clear that the price goes up but tends to go up more than normal fixed coupon BTPs.

An important aspect that tends to protect those who today invest in this instrument and perhaps in 4,5,6 years’ time may need to sell the title.

He will clearly renounce the prize, but knowing that he can count on a more stable and less volatile underlying price dynamics “.

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