HALISTER1: AUCTION PREVIEW: German Taps 5Y, Covered Auction Expected

AUCTION PREVIEW: German Taps 5Y, Covered Auction Expected

(Bloomberg) -- Germany will re-open the OBL April 2021 for the 2nd time, again by EU4b at 11:30am CET.
  • UniCredit (Luca Cazzulani)
    • Last week, Germany sold EU1b of Aug. 2046 where demand was weak and the auction was technically uncovered
    • However, so far, interest for the 5y has been solid where Germany sold the 5y in early March at a yield of -0.36%
    • OBL April 2021 currently trades at -0.30%, slightly less expensive than at the last auction
  • Commerzbank (David Schnautz)
    • Expect covered German auction that stands a small chance of scoring a fresh record low yield for a nominal OBL auction, with -0.36% from the first tap the level to beat
  • UBS (Nishay Patel)
    • 5y German yields remain close to the record lows, have risen only slightly since the last auction
    • 2s5s Germany is close to the flatter end of 1-yr range of values
    • 5y Germany has cheapened on the 3s5s7s fly over the last 2-wks from the richer end of 9-mo. range and trades close to the mid-range
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
3413Z GR (Federal Republic of Germany)

People
Luca Cazzulani (UniCredit SpA)
David Schnautz (Commerzbank AG)
Nishay Patel (UBS Global Asset Management Japan Ltd)

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UUID: 7947283

HALISTER1: AUCTION PREVIEW: Italy to Sell New 5Y BTP, 10Y More Favourable

AUCTION PREVIEW: Italy to Sell New 5Y BTP, 10Y More Favourable

(Bloomberg) -- Italy will launch 5y BTP 0.45% June 2021 for EU3-3.5b, re-open the benchmark 10y BTP 1.6% June 2026 for EU2.5-3b and CCTeu Dec. 2022 for EU1.0-1.5b at 11am CET.
  • Unicredit (Luca Cazzulani)
    • New 5Y BTP should come at a yield of around 0.4% (z- spread +37.5bp)
    • Interpolating the yield of BTP May 2021 and Aug. 2021 obtains roll of 12bp; fair value is likely a bit lower, considering both BTPs trade well above par
    • BTP June 2026 trades at yield of 1.35% (z-spread +79bp); with a yield pickup of around 5.5bp
    • With upcoming supply, and ahead of the quarter end, a quick tightening of 10Y BTP/Bund spread is not very likely
    • Some support for the auction may come from the expiration of the BTPi March 2016 (EU7.3b)
    • CCTeu Dec. 2022 is trading at attractive levels vs BTP curve
** At the long end, prefer CCTeu June 2022
  • UBS (Nishay Patel)
    • Italy 3s5s has flattened more than 5s7s in the last 6- mo. and is at the flatter end of 1-yr range
    • 10y Italy has cheapened on 5s10s30s over the last week
    • Italy 5s10s has flattened in March, after being at the steeper end of range since Aug. 2015
    • 5y Italy is at the richer end of 9-mo. range vs Ireland
    • Italy 5s10s has flattened less than France 5s10s YTD, driving the box spread to 1-yr wides
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2103Z IM (Republic of Italy)

People
Luca Cazzulani (UniCredit SpA)
Nishay Patel (UBS Global Asset Management Japan Ltd)

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UUID: 7947283

HALISTER1: India FII Debt Quota Increase Is Medium-Term Positive: StanChart

India FII Debt Quota Increase Is Medium-Term Positive: StanChart

(Bloomberg) -- India’s announcement to raise FII debt quota should “definitely” spur foreign flows into local bonds in medium term, says Gopikrishnan MS, head of FX, rates and credit for South Asia at Standard Chartered, in an interview.
  • Given there are still unutilized FII debt quota, however, the planned increase is unlikely to prompt buying from foreign institutional investors in near term: Mumbai-based Gopikrishnan; NOTE: RBI to raise FPI investment limit in govt securities by 205b rupees; NSDL data show 14.47b rupees ($218m) in govt debt quota currently available for all foreign investors as of March 29
  • Govt sticking to fiscal deficit target, held-to-maturity status for special state bonds under power sector restructuring and passage of some bills have supported bond- market sentiment in past month: Gopikrishnan; says all of these factors led to “renewed interest from offshore investors as can be seen from inflows into equities and debt”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Gopikrishnan Ms (Standard Chartered PLC)

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UUID: 7947283