By definition, government bonds are considered safe investments. But what does it mean to invest in BOT? Let’s find out the meaning, operation and yield.
Buoni Ordinari del Tesoro (BOT) are one of the simplest solutions for investing savings without taking too many risks. These government bonds, issued by the Italian state, allow you to park your liquidity for a few months and receive a guaranteed sum back. And today, with inflation expected at 2.3% in 2025, 2.1% for 2026 and 2027 and markets full of uncertainty, many savers are re-evaluating them.
Their operation is simple, but really understanding how and when it is best to use them is not always a given. But be careful, if it is true that they are considered one of the safest options around, this does not mean they should be chosen lightly.
In this guide we explain what BOTs are exactly, how they work, how to buy them, what their advantages are and what limits to keep in mind before investing in them.
What are BOTs, Ordinary Treasury Bonds
Ordinary Treasury Bonds (BOTs) are bonds issued by the Italian State to finance the needs of the public sector. Being debt securities, they work on the loan principle: whoever buys a BOT lends money to the State in exchange for a guaranteed repayment at maturity.
Unlike other bonds, such as BTPs, BOTs have a short-term maturity, generally between 3 and 12 months, and do not pay periodic interest: they are zero coupon securities. The yield of BOTs is determined by the difference between the purchase price and the nominal value at the time of repayment. This feature makes them an interesting option for investors looking for safe and highly liquid investments.
The risk associated with BOTs is generally lower than securities with longer maturities, since the investment is concluded within a short time frame. Furthermore, since they are traded on regulated markets, BOTs offer greater transparency and liquidity to investors. With a minimum subscription amount of 1,000 euros, BOTs are an accessible choice. Thanks to their nature as short-term bond instruments, they are particularly suitable for those who aim to protect their capital and reduce exposure to market risks.
| Minimum nominal value | 1,000 euros and multiples |
| Currency | Euro |
| Maturity | 3, 6, 12 months or any other duration within the year |
| Auction frequency | Once a month for six-monthly and annual BOTs; variable, based on liquidity management needs, for quarterly and flexible BOTs |
| Auction mechanism | Competitive auction on yield |
| Remuneration | Issue discount |
| Repayment method | At par, in a single solution at maturity |
How BOTs work
Buoni Ordinari del Tesoro (BOTs) are short-term government bonds. They are also called “zero coupon” because, unlike other instruments such as BTPs, they do not pay periodic interest. The profit for those who buy them comes all at once, at maturity.
The yield of BOTs is determined by the issue discount, calculated as the difference between the nominal value of the bond (i.e. how much will be reimbursed at maturity) and the price paid by the investor to purchase it.
Let’s see how it works, in practice:
- discounted price at purchase: BOTs are issued at a lower price than their nominal value. This means that the investor pays less than what is indicated on the security. Generally, the longer the duration of the security, the higher the yield;
- refund at nominal value: at maturity, the State returns the nominal value of the security.
Let’s take a practical example:
An investor buys a BOT with a nominal value of 1,000 euros, but pays 990 euros for it. At maturity, he receives 1,000 euros, obtaining a profit of 10 euros. This is the gross yield resulting from the issue discount. After applying the substitute tax and commissions, the net amount will be slightly lower.
The gross yield of the BOT is subject to the substitute tax on government bonds, equal to 12.5%. Furthermore, to calculate the net yield, you must also take into account commissions and expenses related to the purchase and management of securities.
How to invest in BOT?
You don’t need to be a financial expert to invest in BOT. They can be purchased in two ways: by participating in periodic auctions organized by the Ministry of Economy and Finance (primary market) or by purchasing them on the secondary market (MOT), where securities already issued but still in progress are available.
The minimum investment is 1,000 euros and multiples of this amount. All you need is a securities account at a bank or an authorized intermediary. Generally, the process is easy and quite intuitive.
BOTs do not promise high returns, but they have three fundamental qualities on their side: liquidity, clarity and stability. And in a historical moment in which uncertainty dominates, these are not insignificant advantages.
Primary market: competitive auction
To participate in the auctions, individual savers must rely on banks or authorized financial intermediaries. The desired quantity must be reserved by the working day before the auction.
However, purchasing through an intermediary involves the application of commissions that increase based on the residual duration of the security. These commissions are defined by the "Decree for transparency in the placement of government bonds" of 2015:
- 0.03% for maturities equal to or less than 80 days;
- 0.05% for maturities between 81 and 140 days;
- 0.10% for maturities between 141 and 270 days;
- 0.15% for maturities greater than 270 days.
The complete calendar of BOT auctions, easy to consult, is published on the website of the Ministry of Economy and Finance. BOT auctions are held in the middle of the month for 12-month maturities and at the end of the month for 6-month maturities. For 3-month BOTs, the Treasury’s cash requirements are followed.
Secondary market: MOT
To buy BOTs already in circulation, you need to go to the MOT, the secondary market managed by Borsa Italiana where government bonds are traded. To access this market, you need an active securities account with a bank, a financial intermediary or an online trading platform.
Once you have opened the account, you can operate directly through home banking (if enabled) or rely on your bank or post office.
The operation is quite simple, but it is important to pay attention to some details before purchasing: the expiry date, the price and the expected return. These elements help you understand if the investment is really in line with your needs and the financial strategy you want to follow.
After the purchase, the securities are kept in the securities account. They do not pay interest during the holding period, but at maturity they return the nominal value, allowing you to earn on the difference between the purchase price and the repayment price.
Rates, interest and risks of BOTs
The return on BOTs does not come from periodic coupons, but from the difference between the purchase price and the nominal value at maturity. This is what is called the "issue spread".
There are several economic factors that influence this yield: first and foremost the decisions of the European Central Bank on rates, but also the trend of inflation and other macroeconomic factors.
Being short-term securities, BOTs usually pay lower rates than long-term instruments such as BTPs. However, in exchange, they offer greater flexibility and less exposure to market risks.
From a risk perspective, BOTs are considered a safe investment thanks to the reliability of the issuer, i.e. the Italian State. However, market risk exists, especially in periods of economic or political instability.
Since BOTs are “zero coupon” securities, the interest rate risk is generally low, given that there are no periodic coupons, and the yield is determined at the time of purchase.
One aspect that should not be underestimated is the liquidity risk. Even though BOTs are traded on the secondary market (MOT), it is not a given that they can be sold at the desired conditions. If sold before maturity, the price could be lower than the nominal value, especially in times of low demand or high volatility. This could lead to a potential loss of value.
It is also important to consider the taxes and commissions associated with BOTs. The substitute tax on government bonds is currently 12.5%, and commissions for the purchase and management of BOTs can reduce the net return.
Original article published on Money.it Italy. Original title: Cosa sono i BOT, come funzionano e come investire
