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Government bond are usually considered “not risky”. In fact, this is not totally true: surely risk that a Government will not pay the debt due is quite low, but remain some risk such as a yield lower than inflation, or foreign-exchange risk (if you are investing in foreign country bonds)

In Italy there are several types of government bonds: BOT, CTZ, CCT, BTP, and BTP€i.

  • BOT – Buoni Ordinari del Tesoro
  • CTZ – Certificati del Tesoro Zero Coupon
  • CCT – Certificati di Credito del Tesoro
  • BTP – Buoni del Tesoro Poliennali
  • BTP€iBuoni del Tesoro Poliennali indicizzati all’inflazione Europea

BOT, CTZ, CCT, BTP, BTP€i have different charactheristics

  • duration
  • investor remunerating
  • indexing to inflation

BOT (Buoni Ordinari del Tesoro), are government bonds with short maturity (3, 6 or 12 months), they are the simplest ones since there are no coupons. Investor yield comes from the difference from the nominal value (that is what the investor will recieve at maturiy) and what the bond is paid by the investor. For example, if we buy at €98 a €100 BOT, we have a €2 yield at maturity.

Very similar to BOT are CTZ (Certificati del Tesoro Zero Coupon): they work in the same way, the main difference is that they have a longer, 24-months, maturity.

CCT (Certificati di Credito del Tesoro) have 7 years matutity, and they provide a semi-annual coupon income, indexed to 6-months BOTs. Yield periodically marked to market makes quite easy to sell the bond before maturity, with low risk.

I BTP (Buoni del Tesoro Poliennali) are medium-long term bonds (3, 5, 10, 15 or 30 years maturity), and they provide a fixed semi-annual coupon. Since it is a medium-long term fixed-rate investment, in case of sale prior to maturity there can be a capital loss or a capital gain.

Very similar to BTP are BTP€i (Buoni del Tesoro Poliennali indexed to European Inflation): they have a 5, 10, or 30 anni duration, and they differ from BTP because both capital and coupons are appreciated multiplying their value by a index based on Eurostat index (that measures inflation in the euro-area).

Summarizing all we said in a table:

Bond

Maturity

Remuneration

BOT

3, 6, 12 months

  • Difference between nominal value and issue price

CTZ

24 mesi

  • Difference between nominal value and issue price

CCT

7 anni

  • Floating semi-annual coupon
  • Difference between nominal value and issue price

BTP

3, 5, 10, 15 e 30 anni

  • Fixed semi-annual coupon
  • Difference between nominal value and issue price

BTP€i

5, 10 e 30 anni

  • Difference between nominal value and issue price
  • semi-annual coupon indexed to inflation
  • capital revaluation indexed to inflation

Italian translation of this post: I Titoli di Stato: BOT, CTZ, CCT, BTP, BTP€i

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