Analysis-Italy's small investor push to slacken when ECB rate cuts start
By Sara Rossi
MILAN (Reuters) — Elisabetta Trevisan, a 50-year-old teacher from Venice, plans to use interest payments from an Italian bond for small savers to help put her two sons through university.
The three bonds she bought for 40,000 euros ($43,100) carry an annual coupon of up to 4.5%, a healthy mark-up on other savings options, with payments every three or six months.
«With a 0.001% annual interest rate from my bank account, I would have earned four cents!», Trevisan told Reuters.
Trevisan is one of thousands of ordinary Italians who bought part of Rome's 2.4 trillion euro public debt in 2023, attracted by enticing returns and fearing sky-high inflation could erode the value of their cash.
The government — managing a debt-to-GDP ratio of around 140%, the second largest in the euro zone — rode that wave, aware that small savers are less likely to pull out their money in a potential crisis and their trust in Rome's debt encourages foreign investors.
The campaign was successful with the share of BTPs or Buoni del Tesoro Poliennali (Medium- to long-term Treasury bonds) held by domestic retail buyers jumping from 6% in mid-2022 to 13.5% by October, its highest level since 2014, Bank of Italy data showed.
However, analysts warn that the trend will lose some steam this year, possibly weakening a key pillar in the Treasury's strategy to find buyers for one of the world's largest public debt piles.
This, they say, is mainly because the prospect of European Central Bank interest rate cuts will probably make Italian government bond yields less attractive to small savers.
At the same time banks, which have struggled to compete with the state for their customers' cash, may reward deposits more generously through higher
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