HALISTER1: AUCTION PREVIEW: 30Y Gilt Seen Cheap on Curve, Rich Cross-Market

AUCTION PREVIEW: 30Y Gilt Seen Cheap on Curve, Rich Cross-Market

(Bloomberg) -- U.K. plans to sell GBP2.5b in 1.5% 07/2047 gilts at 11:30am CET at fourth opening of series, equivalent to about GBP5.4m-GBP5.5m/bp in risk.
  • RBC (Vatsala Datta)
    • 30Y sector has underperformed on the curve amid recent rally in gilts that erased all cheapening since start of year
    • Note looks rich on cross-market basis, particularly against Germany, where the spread is approaching historically low levels; high supply to also weigh
  • Santander (Adam Dent)
    • 10s30s steepening “cannot simply be attributed to supply pressures, so is unlikely to snap back sharply after this sale, but rather, presents a genuine opportunity”
    • Recommendation buying 2047 note vs 2049, betting on spread tightening “as 47s become established”
  • Societe Generale (Ciaran O’Hagan)
    • Depth of demand may be questionable as pension funds could wait for 2065 linker syndication; series to be reopened in March reducing urgency to buy now
    • 10s30s steepening “hints” at market positioning for auction, with Wednesday’s 8bps decline in 30s gilt likely driven by short covering
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Vatsala Datta (RBC Europe Ltd)
Adam Dent (Abbey Natl Treasury Services)
Ciaran Ohagan (Societe Generale SA)

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