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Two undervalued investment-grade government bonds

Today we review two investment grade government bonds in USD. They are available with a minimum denomination of USD 1,000 and yield 2.8% and 3.6% respectively.

Over the last few months the expectations of a monetary easing by the FED have given further impetus to the prices of USD bonds, reducing their yields.

Investment grade government bonds in USD are among the most demanded, as, differently from their EUR counterparts, they still guarantee positive returns. US Government bonds have yields of: 1.4% for a 5 years, 1.6% for 10 years, and 1.8% for 20 years. Most investment grade USD bonds of other countries have slightly higher returns.

Two undervalued bonds

These two Italian governement bonds issued in USD are very interesting. Despite being investment grade, they discount political uncertainty in Italy and therefore have a higher return. Rating agencies evaluate Italy: BBB ⬇︎ (S&P), Baa3 (Moody's), BBB ⬇︎ (Fitch), BBB (high) (DBRS).

The first bond expires in September 2023, a 4 year term. Pay an annual coupon of 6.875% on a half-yearly basis. Exchange at a price of around 115, or with a gross yield to maturity close to 2.8%. Being an issue of 3.5 B USD it is quite liquid. It is listed in Italy and other countries in the world. All data in the form (US465410AH18, 465410AH1).

The second expires in June 2033, then a 14-year term. It has a slightly lower coupon of 5.375% per annum on a half-yearly basis. Share at a price of around 116, therefore with a yield to maturity of 3.6% gross approx. The issued value is 2B USD and exchanges large volumes. Available in Italy, Luxembourg and other countries in the world. All data in the form (US465410BG26, 465410BG2).

Both bonds have a minimum lot of 1,000 USD, therefore potentially accessible to a large public. They are SEC Registered and also available in the United States on the TRACE OTC.

Currency risk

When investing in instruments issued in a currency other than your own, you are exposed to an exchange risk at the time of sale or repayment and on coupon payments.



Bonds, Governmental, Governments, States, Europe developed, Italy, USD, Fixed Rate, Income, Ideas


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