Which BTPs and government bonds delivered the highest profits and yields in the decade from 2010 to 2020?


In this article, the Stock Projection Experts will consider the bonds of the last decade. In particular, we will verify whether one of the laws of the bond markets was also valid for this time frame taken as reference.


But above all, if so, we will try to understand what lesson it is possible to draw. But let's proceed in order and see which BTPs and government bonds have delivered the highest profits and returns in the decade from 2010 to 2020.

First point: when to buy the bond markets


The first point from which to start is to understand when it is more convenient to buy BTPs and government bonds. We have already answered this in this article. Here we mention only briefly that the cases are the following:


a) when interest rates are high (compared to their average) and expected to fall;


b) when it is inflation high (again compared to its historical average) and is estimated to be falling.


Now, how have the two macroeconomic variables fared in the last decade? We will consider one of the two, because it is more closely linked to national macroeconomic dynamics.


The graph below (source: Rivaluta) provides us with the inflation trend from January 2010 to November 2020. From it it can be inferred that the average for the decade was 1.1%, with a minimum peak of –0.6 % and the maximum + 3.4%.


inflation chart

Second point: a look at bond yields


Now, the second step is to check whether the Italian Treasury bond issues have broadly followed this inflation trend.


In other words, we should expect the highest yields to be those in conjunction with the issues at the beginning of the decade. When inflation was high and, particularly not indifferent, the spread was also skyrocketing. The sovereign debt crisis had in fact erupted in those years and Italy, together with other states, the so-called “peripheral”, had ended up in the crosshairs of international markets.


Therefore, the emissions between 2011 and 2012 should have been the most generous. Now we ask ourselves: did it turn out just like that?


Let's proceed by considering only some of the many emissions that have occurred over the decade. In particular, we have chosen the following ten-year BTPs:


a) the BTP ISIN code IT0004634132, starting trading on 31/08/2010 and expiring on 1 March 2021, has a coupon of 3.75%;


b) the BTP ISIN code IT0004801541, starting trading on 29/02/2012 and expiring on 1 September 2022, has a coupon of 5.50%;


c) another ten-year, the BTP ISIN code IT0005210650, with trading start date on 07/29/2016 and expiring December 2026, has a coupon equal to 1.25%;


d) finally, let's take the ten-year issued last June, in full Phase 2. Now, that BTP (ISIN IT0005413171, maturing December 2030) was issued with a coupon of 1.65%, when the spread was around 190-170 .


Third point: the law still proves valid


As was more or less predictable, that simple good practice of the bond markets of the beginning, has been confirmed valid. That is, the highest returns are obtained when rates and / or inflation and / or spreads are at their maximums and their decline is expected.


Of course, it should also be emphasized that when the spread is high it means that the market questions itself more about the repayment capacity of the issuer. In other words, the spread is also an important index to consider before investing. In fact, it helps to weigh the concept of risk / return, and also to reiterate that higher earnings also correspond to greater risks.


Therefore, those who, in the decade now closing, had bought at the time of the skyrocketing spread, in the last months of the Berlusconi government, guaranteed high returns.


Today, ECB interest rates are practically nil; inflation this autumn is even negative. Finally, the spread, after the surge at the beginning of the year, is now in the 116-117 area. Moral: under current market conditions (which however may no longer be valid in the near future) it is difficult to do the deal as it happened at the beginning of the decade.


Here is therefore a summary of which BTPs and government bonds have provided the highest profits and yields in the decade from 2010 to 2020.


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