In these times of near zero rates, it is not easy to find investments that allow an interesting annual coupon flow. But some Multi-year Treasury Bills listed on the market offer coupons significantly above the market average.
The experts of ProiezionidiBorsa have analyzed a government bond with a high coupon. Here’s how to receive a 5% yield on the current account for the next 5 years, guaranteed by the state
How to receive a 5% yield on the current account for the next 5 years, guaranteed by the state
Multiannual Treasury Bills listed on the AGAINST are many. Some are approaching maturity but were issued many years ago, in market conditions very different from the current ones. In historical situations where interest rates were significant, the BTPs issued necessarily had high coupons.
This is the case of the Multiannual Treasury Bill expiring in March 2025 (Isin IT0004513641). The security, which is then repaid in just under 5 years, has a 5% coupon. It means that every year its owner gets 5% of the nominal investment paid into the current account. Let’s take an example. Assuming we have 10 BTPs in the portfolio, with a nominal value of 10 thousand euros, 500 euros will be recognized each year as a coupon flow. Deposit directly into the bank account
Attention, the coupon is not the actual yield
Now, however, before you rush to buy the BTP some clarifications must be made. The first thing to know is that the coupon yield is not the actual yield. By purchasing it today and holding it until the time of repayment, you have an effective gross return of 0.6%. Because if you purchased the March 2025 Treasury Bill today, you would pay 119.5 cents. But on expiry you would get a refund of 100 cents. The sum of the coupon flow from today to maturity, added to the capital loss, will offer a positive gain of 0.6% gross per year
A strategy to earn
But isn’t it worth buying it then? It depends. First of all, it might be convenient for someone to have money invested which guarantees a gross annual coupon flow of 5%. In addition, the gain could be well above 0.6% if the stock was not held to maturity. In fact, the BTP in September 2019 was quoted 125 cents. If in the next 12/15 months the prices rose towards those values, it could be resold having a capital gain. And in the meantime he would enjoy the annual coupons of 5%. Why is there a unique opportunity for our government bonds? Read it who