The forms of investment in Italian state bonds

Government Bonds are financial instruments issued by national governments in order to face their respective nations needs and to deal with different institutional activities. To invest in Government Bonds is an opportunity that many savers do indeed enjoy, thanks to the risk-factor being perceived as low/mild on these kinds of investments. Moreover, it results as particularly efficient for investors interested in low-risk investments, even though with low returns (as for Italian Government Bonds, in 2017 the average interest rate was 0.68%).

Italian Government Bonds are divided into seven types and are available both for private investors and institutional investors. Basically, they differ in length, indexing and the method by which interests are paid. Let’s see together the main differences between the seven types of Italian Bonds:

  1. Treasury Bills (BOT)

These are short-term titles sold via open auction, with a term of 3, 6, 12 months or any other duration included in the current year (also known as Flexible BOTs). These titles do not contemplate periodic coupon payments. The remuneration is given by the difference between the nominal value to be redeemed and the issue price.


  1. Zero Coupon Bonds (CTZ)

These are titles with a term of 24 months, issued by monthly marginal auctions, along with 6 month term BOTs. These bonds too do not contemplate the periodic coupon payment. The remuneration is given by the difference between the nominal value to be redeemed and the issue price.


  1. Government Certificates (CCT)

These are titles with a term of 7 years, issued by marginal auctions. Their coupons are given by the 6 month Treasury Bills annual yield registered in the previous auction.


  1. Treasury Credit Certificate (CCTeu)

These are titles that usually have a term of 7 years, but never less than 5 years. They are issued by marginal auctions, which pay semi-annual coupons corresponding to the 6 month Euribor rate increased with a spread and multiplied for the ACT/360 compute basis (which foresees that the interests are calculated on the credit real number of calendar days length in the 360 business days  in a year).


  1. Multiannual Treasury Bills indexed by European Inflation (BTP€i)

These are mid-long term titles, with terms at 5, 10, 15 or 30 years, issued monthly at the end of the month auction. These titles ensure cover from the rising prices in Europe. Both the nominal value to be redeemed and the semiannual coupons of these titles are indeed recomputed based on the European Inflation trend, measured by the Harmonized Index of Consumer Prices in the euro area (HICP), not including tobacco.


  1. BTP Italia

These are titles with a term of 4 years which ensure cover from rising prices in Italy. Both the capital and the coupons are indeed recomputed based on the Italian Inflation, measured by the ISTAT index for consumer prices for blue- and white-collar households (FOI), every semester.


  1. Multiannual Treasury Bills (BTP)

These are mid-long term titles, with terms at 3, 5, 10, or 15 years, issued by auction with fixed flat-rate semiannual coupons. The 3 year term titles are issued two times per month, 5 year and 10 year titles are issued monthly in the mid-month auction, finally, 15 year and 30 year titles are issued quarterly.

The participation to any of the above-mentioned auctions can be done only by an intermediary, namely a Bank or an investment firm which shall be registered at the Bank of Italy and authorized for the performance of investment services regulated by the Consolidated law on financial inter-mediation (Legislative degree no. 58/1998). Foreign individual investors can join the titles placement, with exception in cases where it is expressly provided in the “restrictions on sales” enforced by the Government (i.e. United State of America), to which individual investors must adhere. Identification and certification are the responsibility of the intermediary who receives the order from the buyer and will also take responsibility for its transmission to the intermediary to whom he sends the purchase order received by the foreign customer.

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