AUCTION PREVIEW: Large OAT Sale; Dealer Bid Seen for Long Dates
(Bloomberg) -- France to sell 0.5% 05/2026, 1.50% 05/2031, 1.25% 05/2036, 4.50% 04/2041 for EU9b-EU10b at 10:50am CET.
- Analysts views in RV are mixed; long-dated bonds are tight in repo, expected to be supported by dealer demand
- Barclays (Huw Worthington)
- 05/2026 looks slightly rich on the roll in ASW terms; cross-market has pared some of recent outperformance versus core and semi-core bonds heading into supply, though not enough to leave OATs looking cheap
- 05/2031 has cheapened versus peers, now at cheapest levels since first issued; 05/2036 has cheapened by ~2bps versus peers, sits back at cheap levels on the curve
- 04/2041 expected to be supported specifically by dealer demand
- Mizuho (Antoine Bouvet)
- Auction is larger than usual; duration of the bonds on offer is large, making it harder for the market to absorb
- Recent performance in 05/2026, 05/2031 bonds suggests these issues continue to find support from investors
- More cautious on 05/2036, 05/2041 due to their underperformance versus the curve, although both trade special on repo, suggesting short-covering demand
- SocGen (Marc-Henri Thoumin)
- 10Y offers good pick-up versus 04/2026, but only modest value versus fitted curve; expect limited interest in this bond
- 05/2036 has seen some concession versus peers, other soft- core; 05/2031 has remained more stable in contrast; 10s15s OAT looks steep in comparison to Bunds
- 04/2041 looks rich at the long end, expect only modest demand for this bond
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Huw Worthington (Barclays PLC)
Antoine Bouvet (Mizuho Financial Group Inc)
Marc-Henri Thoumin (Societe Generale SA)
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