AUCTION PREVIEW: Analysts Optimistic on Italy Sale as Risks Ease
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Imogen Bachra (Royal Bank of Scotland Group PLC)
Rainer Guntermann (Commerzbank AG)
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UUID: 7947283
(Bloomberg) -- Italy to sell 1.2% 04/2022 for EU1.75b-2.25b, 2.20% 06/2027 for EU2b-2.5b, CCT-eu 2024 for EU2b-2.5b, 2.80% 03/2067 for EU500m-750m and 0.65% 11/2020 for EU500m-1b at 11am CET.
- Combined auction size is up to EU9b, which may equate to around EU5m/bp in risk terms
- NatWest Markets (Imogen Bachra)
- Supply to be well-digested, spread across the lines and should support current lengthening BTP risk trades via cash-for-cash extensions from 2020 into 2024
- Expect the 11/2020s to see decent demand, despite being expensive. Given it is off-the-run, the choice to reopen is justified by investor appetite
- Look for BTPs to tighten materially from their 2017 lows in the summer; 10y BTP/Bund spreads can tighten to 160bps if Le Pen doesn’t win
- Mizuho (Antoine Bouvet)
- See value in buying the 2022 sector as part of the short 2019/2021/2022 butterfly to fade the TLTRO-II bid; pick up convexity in BTPs
- New 10Y benchmark trades cheap on fitted curve compared to where previous benchmarks trade, though some of this difference may be explained by the higher coupon of the current issue
- Commerzbank (Rainer Guntermann)
- Initial ultra-long curve steepening following the announcement of the 50y tap was short-lived; 50y yields have fallen 10bps since then
- Yesterday’s underperformance has helped make room for the supply, while fading general political concerns and the macro backdrop should be supportive
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Imogen Bachra (Royal Bank of Scotland Group PLC)
Rainer Guntermann (Commerzbank AG)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283