Dear Porro, in response to the financial expert’s article which explains how i BTP are doing well and relatively better than similar French and German titles, we have an arithmetic exercise to show.
Currently, latest annual data, therefore December 2023 compared to December 2022 we have the following data:
In Italy inflation is 0.6%
in France 3.6%
in Germany 3.2%
BTPs yield 3.8%,
French OATs 2.8%
German Bunds 1.9%
Therefore BTPs yield +3.2% more than inflation
French OATs lose -1% compared to inflation
and German Bunds lose -1.3% compared to inflation
So in Italy anyone who has 100 thousand euros to put in ten-year BTPs has the prospect of earning a generous 3% more than inflation. Plus, given that it’s here inflation has collapsedthe probability that the prices of BTPs will drop is very low and therefore in a year he can also sell them and perhaps earn something in capital too.
- All the news on BTPs and bond funds
The math of returns versus inflation probably explains it all phenomenon. It’s an excellent thing for those who have money saved up and in fact we are finally starting to see the beginning of an exodus from current accounts and also managed savings products.
For the Italian State but it’s the opposite, it pays 3% or so more than inflation, when the French and German states finance themselves at a negative cost (net of inflation which then inflates the GDP). In short, there is always a downside.
Paolo Becchi and Giovanni Zibordi, 18 January 2024
The article BTPs are a godsend for investors (but not for the State) comes from Nicola Porro.