A multi-year treasury bond (BTP) is a debt certificate, a bond, issued by the Italian State, with a maturity of more than one calendar year.

The issue of BTPs by the Italian Republic was authorised by Law No. 941 of 27 December 1953.

The first issue of multi-year Treasury Bonds of the Italian Republic took place in 1974, with Ministerial Decree 20/3/1974 (published in the Official Gazette no. 77 of 22/3/1974). This was an issue of 7% multi-year Treasury bonds maturing on 1 April 1978 and for a total amount of Lire 324 billion.

The highest nominal rate was reached in 1981 with the issuance by Ministerial Decree 16/6/1981 (published in the Official Gazette no. 166 of 18/6/1981) of 18% multi-year Treasury Bonds maturing on 1 July 1983 and for a total amount of ITL 2,000 billion. Other 18% issues followed during 1982.

They are traded on the General Government Bond Market for amounts exceeding 2.5 million and on the MOT for smaller lots.

The bond has a multi-year duration (usually with maturities of 3, 5, 10, 15, 30 or 50 years) and has annual coupons paid semi-annually (e.g. a 6% BTP pays two semi-annual coupons of 3% each). The yield is given by the fixed coupon rate and the difference between the issue price and the redemption price. It is a 'capital guaranteed' security, i.e. it provides for repayment of the full nominal value at maturity. The price of a BTP is given by the sum of the present value of a deferred annuity whose instalments correspond to the constant value of the coupon C plus the present value of the nominal value V that you will receive at maturity.

Having known the price, duration, nominal value and coupon, if one wants to know the IRR, it is possible to calculate it using computer programmes. For example, the IRR of a BTP with a nominal value of 100, an annual coupon of 10, a price of 98 and 5 years is 10.53%. In fact, using the to_poly_solve function of the wxMaxima programme, complex and real solutions are obtained, of which only the positive one, i.e. 10.53%, must be considered:

Since the BTP is an instrument with fixed-rate coupons, it is subject to price fluctuations during its 'financial life', which will be all the more pronounced the longer the duration of the security (duration). In particular, it can be shown that if the IRR increases, the price decreases and vice versa.

Issues take place twice a month with marginal auctions. As for all other Italian government bonds, the minimum denomination is €1,000. Placement operations are entrusted to the Bank of Italy. In return for this service, the Treasury pays the Central Bank a commission of 0.20% for three-year bonds, 0.30% for five-year bonds and 0.40% for longer maturities. This commission is, in whole or in part, transferred to the intermediaries participating in the auction, considering that they may not charge customers any commission for this service.