Government bonds exceed 4%: here’s how to invest

Eurozone increasingly in crisis and struggling not only with the instability of governments (just think of what is happening in Italy), but above all with the repercussions of the sanctions imposed on Russia. The European Central Bank is in trouble. In September, at the next meeting, the Frankfurt institute is expected to decide on a new one rate hikeeven if at the moment we are dealing with the attacks inflicted both by rising inflation and by the increase in the public debt of many EU countries, including ours.

The uncertainties of investors are strong, looking for the most solid or in any case less risky returns. Making the necessary considerations relating to the historical moment in progress, to be preferred are the issues of the Italian treasury. And this not only for their performance proposal, but also and above all for their degree of reliability. Despite the government’s announced demise, the rating is still classified as “investment grade”, meaning reliable. Clearly, the judgment assigned to the German public debt is not reached, but it remains an acceptable condition. So off to the Italian BTPs, also thanks to the various opportunities provided by the financial market.

There is the possibility, for example, of combining the issues of the Italian treasury with others, so as to have higher yields and hold instruments with lower returns but with a higher level of reliability in the portfolio.

There European Central Bankmeanwhile, it has decided to increase the reference rate by half a point, following the trend of the United States Fed, which will soon raise rates once again (we are talking about a further 0.75 points). This would lead to the creation of a portfolio of securities in which fixed coupon issues with different maturities coexist on the one hand (for example BTPs) and on the other instruments without a pre-established coupon flow (such as CCTs), but strictly connected to changes in the Euribor with a six-monthly duration.

What changes between BTP and CCT

The current situation inexorably changes the strategies to be implemented in the presence of BTPs and CCTs indexed toinflation. In the group of BTPs linked to inflation, those specifically linked to the increase in the cost of living in our country, or the BTPs in Italy, provide for the reimbursement of part of the dear life accrued every six months. Bonds of the same type, namely those linked to changes in the cost of living in the Eurozone, tend to redeem it at their natural maturity.

Within a “medium risk” securities portfolio, for example, three distinct types of instruments could coexist to reach the share destined for the bond sector: it would be possible to focus on BTP Futura and BTP 2032 for 40%, and on CCT and issues indexed to the inflation rate for 30% each. As regards the latter, if you really decide to be more daring by investing in US securities, it would be advisable to stay within a value between 5% and 7.5%, also due to the fact that the value of the dollar is currently high compared to to the euro. In doing so, the gross yield of the portfolio would be between 3.05% and 3.25%, to which a further 1.5 percentage points would be added, deriving from the value of the coupons relating to inflation-linked securities.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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