Impending Expiration of 3×4 Savings Bonds Issued in 2012 Offering Up to 5% Returns

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The Importance of Timing in Fixed Income Investments

In the realm of fixed income investing, timing can be crucial in determining financial success or failure.
A vivid example illustrates this point.
During 2020-21, only long bonds offered yields exceeding 1-1.5% gross annually.
However, in 2022-23, inflation surged, causing the prices of these bonds to plummet while new issues provided higher returns.
The outcome was disastrous for many investors.

A similar narrative plays out with postal savings bonds (BFP), where older bonds had more generous yields than those currently available.
For instance, BFPs maturing from 2012, which had yields as high as 5%, are now expiring, reflecting the market’s shifting landscape.

Details on 3×4 BFP Issues from 2012

Cassa Depositi e Prestiti, the issuer of BFP and postal savings products, adjusts their offerings in tandem with financial market conditions.
The 3×4 bonds issued in 2012 will mature in 2024, precisely in the month of their initial purchase.
Notably, multiple series were launched in 2012, typically on a monthly basis.
These series showcased varying yields, emphasizing the fluctuations in interest rates.

Here’s a recap of the 2012 BFP series yield:

• T04 – 4.50%
• T05 – 4.30%
• T06 – 4.30%
• T07 – 3.70%
• T08 – 3.70%
• T09 – 4.10%
• T10 – 4.50%
• T11 – 5.00%
• T12 – 4.50%
• T13 – 4.00%
• T14 – 5.00%
• T15 – 5.00%

Considering the current series, the BFP 3×4 (TF212A241011) currently offers a yield of 2.00% gross annually, a stark contrast to last year’s 3.25%.
Back in 2012, the backdrop was filled with uncertainty due to a sovereign debt crisis.

Calculating the Liquidated Amounts

Let’s explore some specific bonds to assess the amounts liquidated to respective investors based on hypothetical €10,000 investments, focusing on series T7, T11, and T13.

For the T07 series subscribed on April 14, 2012, the gross interest earned would amount to €5,464.83, minus a €683.10 withholding tax.
This results in a total liquidated amount of €14,781.73.

For the T11 series subscribed in August 2012, the earnings from a €10,000 investment yielded a total of €16,963.74 after a €994.82 tax deduction.

Lastly, for the T13 series with a subscription date of October 4, 2012, the gross interest would total €6,010.32, leading to a liquidated amount of €15,259.03 after considering the €751.29 tax.

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