Italian soccer players brave enough to tackle the nation’s bond market have scored a 26 percent return since they were urged to prove their patriotism by buying government securities last year.
Since BTP Day on Nov. 28, 2011, when the Italian Banking Association got lenders to offer perks to buy government bonds known as BTPs, the yield on the nation’s 10-year debt fell more than 2.5 percentage points. Damiano Tommasi, head of the Italian Footballers Association, said there was a “very positive response” from players, including Udinese striker Antonio Di Natale, who led Serie A league in scoring during 2010 and 2011.
“We wanted to do our part and help Italy to stay afloat at a very difficult time, but it wasn’t just solidarity that prompted us to step in,” said Tommasi, a former Roma midfielder. “These bonds have turned out to be a great investment. Our association bought government bonds, and we sent a letter to the captains of all the professional teams inviting them to do the same. I bought myself.”
BTP Day was held two weeks after Mario Monti was appointed prime minister, bringing political stability and action on the economy that was lacking under his predecessor, Silvio Berlusconi. Italian bonds also got support from 1 trillion euros ($1.3 trillion) of extraordinary lending from the European Central Bank. The almost 30 percent gain in Italian bonds since BTP Day compares with 13 percent for Spanish debt and 6.7 percent for German bunds.
Spain Versus Italy
Italian 10-year bond yields were little changed at 4.75 percent at 9:19 a.m. London time, down from a euro-era record 7.48 percent reached Nov. 9, 2011. The decline reduced the yield premium investors demand to hold 10-year Italian bonds instead of German bunds to 3.31 percentage points from a euro-era high of 5.75 points. The Spanish 10-year yield was at 5.60 percent, compared with 5.82 percent on the day Italy’s yield reached a record.
BTP Day, was proposed by 51-year-old Tuscan financial consultant Giuliano Melani, and saw lenders waive fees for clients purchasing bonds and bills. Melani paid for a full-page advertisement in Italian newspaper Corriere della Sera, urging fellow citizens to acquire bonds to show that Italians “are one people, a great people.”
On BTP Day, UniCredit SpA (UCG), Italy’s biggest bank, saw its trading in Italian bonds surge to double the average of previous weeks. The size of the contracts “showed they were probably bought by Italian families and small investors,” said Monica Cellerino, head of UniCredit’s consumer unit in the Lombardy region.
Italians are among Europe’s biggest savers and have the third-lowest household debt in terms of gross domestic product in the 17-nation euro area, according to ECB data. Spain has the fourth highest.
Italy benefits from “higher private savings rates than Spain,” said Michael Riddell, a London-based fund manager at M&G Group Plc, which oversees about $324 billion. “The government has had some success in tapping into these savings.”
In a separate effort to attract Italian savers, the Treasury offered special bonds to retail investors. The Treasury sold 18 billion euros of the securities, inflation-linked four- year notes with a coupon premium when held to maturity, at the last sale in October, about twice the combined 9 billion euros placed in the first two auctions in March and June. The October sale also took in more than three times as much as the Treasury’s regular monthly bond auction on Oct. 11.
When Monti took over from Berlusconi 12 months ago, 10-year Italian bond rates exceeded 7 percent. Monti adopted additional austerity measures to contain the euro region’s second-biggest debt, overhauled the pension system and revamped labor laws. Monti’s efforts along with the ECB action helped boost confidence in Italian bonds and helped them decouple from Spain, where both the debt and deficit have surged.
Italy’s deficit will be less than the EU limit of 3 percent of GDP this year and below 2 percent in 2013, even though the economy contracted for a fifth quarter in the three months ended Sept. 30. The country also is running a surplus after interest payments. Debt will begin to decline beginning next year, the government forecasts. By contrast, Spain’s deficit will be more than twice the EU limit in 2012.
“Italy had been a victim of speculation,” said Mario Spreafico, who manages 1.5 billion euros as chief investment officer at Schroders Private Banking in Milan. “Markets are finally paying attention to the numbers now and we clearly are in a much better position than Spain. The BTP Day has proven to be an incredible opportunity, especially for those who bought long-term bonds.”
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