AUCTION PREVIEW: Analyst Views Mixed on Spain Relative Value
Source: BFW (Bloomberg First Word)
People
Aman Bansal (Citigroup Inc)
Antoine Bouvet (Mizuho Financial Group Inc)
Huw Worthington (Barclays PLC)
Marc-Henri Thoumin (Societe Generale SA)
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UUID: 7947283
(Bloomberg) -- Spain to sell 0.75% 07/2021, 4.65% 07/2025, 1.95% 07/2030 for EU4-5b, as well as 1.8% I/L 11/2024 for EU250-750m, at 10:30am CET.
Alert: HALISTER1- Mixed view on relative value from analysts; cross-market vs Italy has seen some concession, though this comes as strong post-election outperformance
- Barclays (Huw Worthington)
- 07/2021 has richened vs peers to most expensive levels since March; cross-market has outperformed bunds by ~38bps, Italy by ~19bps following recent elections
- 07/2025 has been a strong performer on SPGB curve, advancing by ~3bps in recent months to richest levels in the bond’s history; following post-election rally, has seen ~6.5bps of concession vs Italy
- 07/2030 has cheapened steadily on the curve, lagging peers by ~10bps, though this came from very rich levels
- Citi (Aman Bansal)
- Spreads vs Germany have been resilient in the face of event risk, supported by better than expected election result
- Cross-market, constructive on Bonos vs BTPs given banking concerns, upcoming referendum in Italy
- In RV, 07/2021 has actually richened on the microfly; better value in 07/2025 which has cheapened vs peers over past 10 months
- 15Y sector overall is rich vs fitted curve; however, auction bond is least rich in the sector, prefer switching from 10/2028s to 07/2028s
- Mizuho (Antoine Bouvet)
- 5Y Spain still trades with positive yield; bonds in this area trade special on repo (by 10-20bp), hence offering non-negligible carry
- Markets have been ignoring re-denomination risk and continue to focus on carry, which should bode well for this tap
- 07/2025 has offered some concession on the curve, which should make supply easier to absorb
- Optimistic about 07/2030 issue as the sector has been tapped 6 times this year and retained its value on the curve
- SocGen (Marc-Henri Thoumin)
- Both shorter maturities look rich against other SPGBs, expect limited interest in both these issue
- While 07/2030 has seen no particular concession, 15s30s Spain looks too flat; expect this to reverse after the auction
Source: BFW (Bloomberg First Word)
People
Aman Bansal (Citigroup Inc)
Antoine Bouvet (Mizuho Financial Group Inc)
Huw Worthington (Barclays PLC)
Marc-Henri Thoumin (Societe Generale SA)
To de-activate this alert, click here
UUID: 7947283