Issuers, maturities and interest: the bond glossary!

Rating, BTp, currency, coupon-these are just some of the terms that have become commonplace in the financial sphere that one needs to know in order to invest in bonds with knowledge.

Knowing the bond glossary is essential, especially if you are an investor or someone interested in better understanding how financial markets work.

The choice between buying a BOT (Treasury Bond) and a BTp (Multi-Year Treasury Bond) depends on your investment goals, your time horizon, and your risk tolerance.

Capital gain, or capital gain, is a term for the gain generated by the sale of an asset when its selling price exceeds the purchase price. This is a key concept for investors and taxpayers, as capital gains are subject to taxation. The tax charged varies depending on the security in which you invest.

Investing in bonds is often perceived as a relatively safe option compared to others, such as investing in stocks. However, bonds also carry a number of risks that investors need to consider carefully. Understanding these risks is essential for making informed investment decisions and better managing one’s portfolio.

The risks can be related to a variety of aspects of the investment: from the currency with which it was made, the value assumed by the bond, the rates affecting the market, and the degree of reliability of the issuer.

Buying bonds actually presents four types of risk.

In financial circles, the concepts of “hard landing,” “soft landing,” and “no landing” describe various perspectives on future economic conditions and the implications these may have on financial markets.

Soaring inflation and the need for central banks to raise interest rates to curb it have long led analysts to imagine recession scenarios in both Western and emerging markets. However, the demonstrated economic resilience has brought a recent flurry of optimism.

Those who imagined a “hard landing” in the markets first envisioned a “softer” scenario, and today even the possibility of a healthy, steadily growing market.

Investing in bonds is a way to diversify one’s portfolio while offering the potential to generate a regular and secure income stream, and protect against stock market volatility. This type of investment offers a number of advantages and is a key component of many investment strategies.

Bonds, in fact, are debt securities issued by governments, supranational entities, or corporations, and represent a loan made by the investor to the issuer in exchange for periodic interest payments and repayment of principal at maturity.

However, investment can be made “directly,” through the purchase of a single bond or a selection of bonds, or through passively managed funds (ETFs) or actively managed funds (bond funds).

In Italy, Buoni del Tesoro Poliennali(BTp) and Buoni Ordinari del Tesoro(BOT) represent two of the main types of government bonds issued by the Italian government to finance public debt. These financial instruments are critical to the management of state finances and offer investors different investment opportunities and returns, depending on their liquidity needs and time horizons.

Let’s analyze the topic together by taking an overview of these investment instruments!

The European Central Bank (ECB) and the Federal Reserve (FED) of the United States are two of the most influential financial institutions in the world, responsible for formulating and implementing monetary policies in their respective territories.

Their decisions have a significant impact on the global economy, investment and financial conditions. Let us therefore examine together the strategies and perspectives of these two central banks.

Often regarded as the “more prudent sisters” of stocks, bonds are one of the most well-known and recurring financial instruments in investment portfolios, even of the less experienced. In this article we will delve into several aspects of this instrument, and specifically clarify what bonds are and what their main characteristics are.

Let’s start with a simple definition: abond (in English “bond”) represents a debt security issued by private companies, states, or public entities for the purpose of raising finance from savers.

In other words, bonds are loans taken out by corpor ations (corporate bonds), governments (government bond) or supranational entities (supranational bonds) aimed at raising capital. These are true statements of credit whereby issuers promise to repay the amount borrowed on a set date and, at the same time, to pay a fixed interest rate over the term of the loan.

Here are some useful considerations about possible benefits and risk profiles.