Long-dated BTPs in the portfolio: features and scenarios that change price and yield

We analyzed the BTP 1 August 2039, 5% coupon, recently back in the spotlight because of its generous coupon and its strong price sensitivity to rates and the spread.

by Giuseppe Anfuso

As is well known, in fixed-rate securities the coupon makes the periodic cash flow immediately understandable, but not everyone understands that their market value can change quickly depending on monetary policy developments and, for government bonds (such as BTPs), also on how much confidence markets have in sovereign debt.

In a world where the range of savings products is increasingly channelled toward managed instruments (UCITS and ETFs, above all, but also unit-linked policies and asset management solutions), focusing on the “old” BTP may seem anachronistic. Yet using it in a diversified portfolio could still be a valid alternative to balanced bond funds, thanks to the complete absence of management fees – apart from the marginal cost of the securities account, including the stamp duty – and the visibility of the coupon flows. In any case, an analysis of a BTP such as the one we are dealing with today, namely the BTP 1 August 2039 5% (ISIN IT0004286966), must be approached through different scenarios, because on the same security different outcomes depend on the macro backdrop and on the time of sale.

Sure coupon, variable price: why the long maturity really matters – Let us begin by saying that coupons and capital gains on government bonds are taxed at 12.5%. On top of the securities account there is also the stamp duty (ordinarily 0.2% per year on the countervalue), plus any commissions. Therefore, when the investor is considering an exit before maturity, stamp duty and costs can reduce the margin. Moreover, because of its remaining life (about 14 years), the BTP 2039 is a “speculative” bond, since although it pays an annual coupon of 5% (2.5% semiannually), its price can fluctuate significantly from day to day. To give an example from recent history, from its peak on 5 January 2021 (166.3), the bond fell to its current 112.60, after touching a low of 97.90 on 18 October 2023; this means that, as of today (5 January 2026), the BTP 2039 is down 32.29% from its high, but on 18 October 2023 it was down by more than 41%. Buying today therefore at least rules out a catastrophic scenario such as the very high inflation and the sharp rise in interest rates carried out by the European Central Bank between 2022 and 2023.

Based on what we have just described, we can identify a first basic rule: if the bond’s yield to maturity (coupon annualised in relation to the purchase price) of the fixed-coupon bond rises, the price tends to fall; if its yield to maturity falls, the price tends to rise. On long maturities this effect is amplified. Returning to the previous example, those who bought the BTP 2039 at its peak price (166.3 on 05/01/2021) had a yield to maturity of 3% (5% divided by 166.3); those who bought it at the price of 18 October 2023 (97.90) had a yield to maturity of 5.11%, while those who buy it today will have a yield to maturity – always on the assumption that they hold it to maturity – of 4.45%. These yields are gross, since 12.5% withholding tax must in any case be deducted from them.

Another feature of almost all bonds (BTPs included) is that repayment always takes place “at par”, that is, at 100. It is a detail many forget when they buy a BTP at a price “above par”, meaning above 100. The Treasury also redeems our BTP at 100; therefore, when the bond is quoted above par, anyone who holds it until 2039 will collect the coupons but must factor in the fact that, at the finish line, redemption remains 100: the difference between 100 and today’s price (112.25, as of 22/12/25) will be reflected in its effective yield, reducing the annual coupon of 5% by about one fourteenth – the bond’s remaining life is 14 years – of the difference between 112.25 and 100 (12.5), namely 0.893 to be deducted over 14 years. This gives an effective yield of 4.107%.

To determine whether the BTP in question (BTP 2039 5%) is interesting and responds well to the criterion of portfolio diversification, it is worth describing the four possible scenarios a saver may face, from worst to best, so as to generate the highest possible level of awareness in one’s own investment choices, with concrete examples of what could happen in bond markets in general and in the government bond market (of which BTPs are part) in particular.

Disastrous scenario: inflation returns, rates rise, spread widens - If the market expects further monetary tightening (ECB interest rate hikes) or tension on public debt increases, yields and the spread (the yield difference between the 10-year BTP and the 10-year German BUND) can rise. In this case the price of the BTP 2039 may fall significantly: anyone forced to sell risks locking in losses, even while collecting the accrued coupons (which may not make up for the fall in price).
Negative scenario: rates on hold “for longer”, volatility and no clear direction - With a cautious policy and high uncertainty, the price may move in jerks without forming a real trend. The return on one’s investment then tends to depend mainly on coupons, while the capital gain (capital gain) remains tied to occasional and brief market windows.

Moderate scenario: gradual cuts, stable spread, limited recovery - With yields edging lower and the spread under control, the price may find solid support and begin to rise with a clear upward trend. The investor may see measured improvement, provided the investment goals and time horizon are set consistently.
Positive scenario: faster rate declines and narrowing spread - If yields and the spread fall, long-dated bonds react better: the price may rise more strongly and capital gain becomes a meaningful contribution in addition to the coupons. In any case, sudden negative price corrections can also occur in favourable phases, which is why you need your adviser alongside you to determine the best purchase time with a higher probability of success.

In short, the indicators to watch are few but decisive. For “long” BTPs (such as the 2039), the ECB decisions, inflation, the level of the BTP-Bund spread and the outcome of Treasury auctions matter most: these are the factors that, in practice, move the price one way or the other. The BTP 2039 5% coupon is a simple bond on the surface, but it requires a certain amount of risk management, namely defining your time horizon, the share of savings to invest in it and having adequate liquidity at all times, which avoids being forced to sell at the worst possible moment in an emergency. Your own discipline in investing, as well as rates, the spread and taxes, will determine the success of the investment.

DISCLAIMER: The information and opinions contained in this article do not constitute an offer or solicitation to invest and do not constitute a recommendation or advice, including of a fiscal nature, or an offer aimed at investment, and must under no circumstances be interpreted as such. Before making any investment, for a detailed description of the characteristics, risks and related charges, readers are advised to examine the documentation provided by official sources and/or by the supervisory bodies overseeing distribution in Italy, as well as the annual or half-yearly report and the By-laws, available from the placing agents. Indeed, investment in financial products or in equity interests is subject to fluctuations that may also be substantial, with consequent increases or decreases in prices and in the value of the investment, and it may not be possible to recover the amount originally invested.