BTP Futura too stingy and complex to be loved by Italians eager for returns. The reasons for the failure of the anti-MES bond boom

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The Italians did not queue to grab the new Futura BTP, intended for retail savers only and that it will be entirely intended to finance measures such as the strengthening of the health system and the revitalization of the post-Covid national economy. The final numbers say that funding among retailers has not even come close to the record two months ago for BTP Italia (22.3 billion in total, of which almost 14 billion in retail), also aimed at financing the expenses for Covid. Two months ago the conditions were much more advantageous for investors with higher rates and also a less binding duration (5 years compared to 10 of the BTP Futura).
The issue of the new BTP raised 6.13 billion euros, against one initial demand estimated at around 10 billion.

The coldest reception is not dictated by mistrust towards Italy considering that today the Bot auction went very well and savers continue to be aware that the policy shield of the Recovery Fund and of the unconventional ultra-expansive measures by the ECB such as PEPP they will support the government bonds of the peripheral countries and in particular the Italian ones, where the premium for political risk is higher.

What led to the lukewarm response of savers

“Other elements weighed on the lukewarm response of savers, primarily the minimum coupon rates without a significant excess of yield compared to the nominal ten-year BTPs”, he underlines Massimiliano Schena, CIO of Symphonia SGR, who adds: “While the coupon for the first 4 years is relatively better than expected, the overall” step “from 1.15% to 1.45% is relatively low, reducing the duration risk protection for a ten issue years. The average yield of the new security of 1.28% (1.38% also incorporating the minimum loyalty bonus) is only moderately higher than that of the BTP in August 2030 (1.25%). The upside potential on the secondary market is therefore limited, even if there is one good probability of obtaining the maximum loyalty bonus due to the depressed level of the starting GDP, which would bring the overall yield of 1.58% “.
Furthermore, the structure with half-yearly nominal coupons calculated on the basis of pre-established and increasing rates over time, the so-called step-up mechanism, is probably more difficult to understand than a BTP with a fixed coupon. To these elements must be added the longer maturity – ten years compared to the five years of the BTP Italia in May – and the low liquidity that the BTP Futura will have on the secondary market, since it is an issue reserved for the retail public only.
Finally, Schena asserts, the uncertainties related to the growth of Italy’s GDP for the next few years, on which the loyalty bonus of the new BTP depends, after the publication of the summer economic forecasts by the European Commission, which should not be underestimated three days ago he placed our country as the tail light in Europe for 2020.

The numbers of the first issue of the Futura BTP

The issue of the Futura BTP, according to the numbers reported by the Treasury, saw the conclusion of 174,318 contracts for a value of € 6,132.260 million and the amount issued coincides with the total value of the purchase contracts validly concluded at par on the MOT (the Mercato Telematico dei Bonds and Government Bonds of Borsa Italiana). Of the contracts concluded on the MOT approx 64% was less than 20,000 euros, while if you consider contracts up to 50,000 euros, you will get to about 89% of the total. The average cut in contracts was € 35,179.
From the information collected by the Dealers, Co-Dealers and other intermediaries, it is clear that the participation of retail investors was prevalent compared to that of private banking (with a share of 62 percent and 38 percent respectively). Within the portion subscribed by retail investors, it is estimated that about 69 percent have placed the order through the branches of the banking networks (both physically going to the branch and forwarding the order remotely), while about 31 percent through home banking. About 60% of the subscribers of BTP Futura had not participated in the last issue of BTP Italia, thus marking an important increase in the direct involvement of Italian savers. As regards the geographical distribution of the orders received, almost all the orders are from domestic investors (around 98%).





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