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Last days to buy this (convenient) BTP

These are the last useful days to buy this BTP.
Everyone is crazy about Italian government bonds.
But there is a BTP in particular which, due to the context that currently characterizes the bond market and its characteristics – from the yield to maturity, from the timing of the payment of the coupon to the degree of security offered – emerges as a possible opportunity for investment for the investor inclined towards medium-low risk and a medium time horizon.
We are talking about the BTP 1FB37 4%.
The characteristics of this particular BTP, whose convenience appears to be maximum these days due to the dynamics explained below, are the following: ISIN: IT0003934657 Residual duration: 13.06 years Gross coupon: 4% Expiry date: 02/01/2037 Date next coupon: 02/01/2024 Estimated annual net yield: 3.42% Last price: 100.58 read also How to buy BTP (and why) Btp 1FB37 4%: why is it better to buy now? At the moment the price of the BTP expiring in February 2024, 4% gross coupon, is trading at 100.58, just above its nominal value.
The next macroeconomic framework should aim for a cooling of the Eurozone and Italian economy.
And, during 2023, the European Central Bank is expected to start cutting interest rates.
This will have a bearish impact on yields and a bullish impact on prices.
In short, BTPs will soon start to yield less and cost more, which is why at the recent MEF auction the new 7-year BTP and a tranche of the 30-year BTP already in the process of being issued sold like hot cakes.
And which is why, for example, a bond like the Btp 1FB37 4% appears very appetizing now, but not for long.
Assuming the case of an average investor with 10,000 euros to invest, this BTP offers a good compromise between risk, duration and – above all – return.
On the risk front, we are still talking about a BTP.
There is the issuer risk, i.e.
that the Italian State does not repay its investors.
Present, but at the same time remote.
As regards duration, the remaining 13 years fall within an average horizon, which helps to mitigate any large fluctuations.
Finally, the Btp 1FB37 4% appears very interesting in terms of yield today.
The now imminent coupon (the next one will be detached on February 1st, when those who buy today will be entitled to an installment of this) partially mitigates the costs linked to commissions and fixed expenses.
And with the price set to increase soon, it will be convenient to sell even before the expiration, earning on the difference between the sale price and the purchase price.
Finally, the higher cost paid today compared to the nominal value – in our example, we pay 10,058 euros, to which we add approximately 160 euros to compensate for the upcoming coupon accrual, to have a nominal value of 10,000 – is amply compensated by the yield, which after taxes it travels at 3.44%.
344 euros of return per year which, brought to maturity, leads the 1FB37 BTP to generate a total return of approximately 4,490 euros.
When the price starts to rise, as expected, in the coming months, the purchase will no longer be so convenient.
DISCLAIMER The information and considerations contained in this article should not be used as the sole or primary support on which to make investment decisions.
The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings.

Author: A.W.M.

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