The introduction of BTP Valore, Italian sovereign bonds sold exclusively to retail investors, has thus helped to achieve the government’s goal of increasing the share of Italian government debt held by residents.
Strong demand for BTP Valore coincided with the upward swing in interest rates. In addition to higher interest rates, favourable tax treatment encouraged savers to shift some of their bank deposits into the bonds, particularly as Italian banks have been relatively slow to pass on the benefits of higher rates to depositors.
However, strong retail demand is unlikely to be enough to replace the gradual decline in the ECB’s holdings of Italian government bonds amid still rising government debt. Deposits held in Italian banks of EUR 2.03bn as of Q1 2024 are mainly overnight deposits, with around 24% having agreed maturities or being redeemable at notice. This is below previous highs of around 36% reached in 2012/13.
If depositors were to shift their…
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