The war in Iran intensifies and the regime now in the hands of the Pasdaran aims to export it to the rest of the Middle East to inflict losses on the enemies in the area. The markets are reacting by seeking protection: gold up to above 5,400 dollars an ounce, the Swiss franc at historic highs against the euro, bond yields rising and stock markets falling. In this scenario, i BTp Italy they are gaining appeal. Government bonds indexed to Italian inflation have been designed since their inception with the aim of satisfying a request from families: the protection of capital from the loss of purchasing power.
BTp Italia regain appeal
BTp Italia were considered unattractive assets for about a decade, that is, until 2022. Inflation had been low and investors do not see much reason to include them in their portfolios. The situation began to change after the pandemic, when inflation in Italy and elsewhere exploded to its highest level since the 1980s. At that point, an asset that could offer constant real returns became a must within a differentiated bond portfolio.
Signals on Italian inflation
The latest issue dates back to June last year, when the Treasury issued the BTP Italia 4 June 2032 (ISIN: IT0005648255). This security was trading at 102.35 at the end of yesterday’s session on the Italian Stock Exchange bond market. For a minimum lot of 1,000 euros, therefore, the investor must spend around 1,023.50 euros. The real yield, i.e. net of the inflation component, is currently 1.45%. It compares with the 2.82% offered yesterday by the BTp March 2032 with fixed coupon.
Pay attention to this last data, since it serves as a reference for the BTp Value 2032 currently being issued. The yield offered by the Treasury to subscribers was about 0.20% higher last Friday. Now, that premium has halved. At this rate, it could revise the minimum guaranteed rates upwards.
But let’s go back to BTp Italia. The “breakeven” with the fixed coupon Treasury bond is between 1.35% and 1.40%. These are the inflation expectations between now and 2032 for Italy. Despite the war in Iran, we are not seeing an immediate repricing that signals these expectations are heating up. However, inflation hardly rings the bell to ask to be allowed in. It breaks in like a thief in the night, just as it happened in 2022. And even in that case the pretext was the expensive energy with the war between Russia and Ukraine.
Wallet protection against bad surprises
Oil today has already risen above 80 dollars a barrel, while European gas is at around 58 euros per Mega-watt hour, at a 3-year high. All this, if it lasted for months, would trigger a recovery in consumer prices. And here we should play in advance, inserting some BTp Italia into our portfolio. Maybe it doesn’t happen, but if it does, we won’t be caught unprepared this time too.
giuseppe.timpone@investireoggi.it
