Bots, everything you need to know before the April 2023 auction

Inflation and interest rate increases lead to more expenses and outgoings, but also earning opportunities: savers are rediscovering Bots, short-term government bonds, which today yield much more than a year ago. And interest in “Repurchase agreements” is growing

Bot, the big comeback

The Return of the Bots. Which have gone from a sub-zero yield to over 3 per cent gross in one year (maturity October 2023). Considering that the 10-year BTP now offers 4.1%, it is not strange that a number of investors choose short-term investment solutions. The economic situation is complex, inflation is high: why take too much long-term risk without being able to cover the cost of living which travels just under 8%?

And here then is the return of the flame for the Bots, the ordinary Treasury bills that have been set aside for a long time, but also for securities with short maturities. Because if the curve is “flat”, that is, there is little distance between short-term and more distant returns, those who like to invest in bonds can set up new strategies before rates fall. And that the curve will become steeper again.

The options

What does the market offer? The banking system of our country offers a type of operation called “repurchase agreements”. Which, in essence, supports the purchase operations of bots, both for profitability and for the duration of the investment itself. The purchase of Bots is not limited to the phases in which the Treasury Department carries out the auctions, at the beginning of the month, with the placement of the annual bonds, or at the end of the month, when the bonds to be placed have six-monthly duration. Actually, it is possible to add this type to the portfolio every day

Between Btp and Bot: when the deadline is short

Borsa Italiana offers the opportunity to buy, but also want to sell, no less than sixteen types of BTPs that do this for this purpose, from the closest expiry, at the end of the current month, to the furthest, with repayment date in March 2024. At the same time , banks, the Italian post office or other authorized financial structures are also free to sell BOTs purchased at the auction or to buy similar securities from their customers which the latter choose to sell before their natural expiry, for the most disparate reasons. Generally, those who opt to invest part of their assets in bonds do so both to limit the overall risk of the assets allocated to bond instruments and to have a type of bond whose short maturity reduces the average duration of the bond portfolio. Alongside this strategy, or alternatively, some investors prefer to entrust part of their assets to counterparties, almost always of banking origin, which offer returns, in line with those obtained by investing in bots for periods ranging from six months to a few years , but the preferred deadline is the annual one.

The technique between new issues and old issues

In the past, it has been recalled, this form of activity was called «repurchase agreements» and consisted in the purchase of bond issues, to be held for a few months, immediately establishing the date on which the security purchased would be resold, fixing also the resale price. The two quotations were established so that the «temporary» depositor would benefit from a pre-established return. Activity, however, which did not meet with particular success. But it represented a sort of alternative to investing in instruments with short maturities, first and foremost BOTs, but also BTPs issued years earlier and now close to the repayment date. Strategy, the latter, which can still be a good opportunity today. While on the one hand there are BOTs and time deposits, on the other hand “old” securities not far from the repayment date offer a range of opportunities which, in a phase still uncertain about the future of market rates, can be a viaticum important for those who wish to invest part of their personal assets in the short term.