AUCTION PREVIEW: Analysts Positive on SPGBs Given Smaller Sizes
Source: BFW (Bloomberg First Word)
People
Pooja Kumra (Nomura Holdings Inc)
Antoine Bouvet (Mizuho Financial Group Inc)
Ioannis Sokos (BNP Paribas SA)
Marc-Henri Thoumin (Societe Generale SA)
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UUID: 7947283
(Bloomberg) -- Spain to sell 0.25% 01/2019, 1.95% 04/2026, 5.75% 07/2032 for EU2b-3b at 10:30am CET. Analysts have mixed views on curve value, though expect smaller size of auction to provide support.
Alert: HALISTER1- Nomura (Pooja Kumra)
- Size is relatively small; on micro fly, 3Y has cheapened 4bps-5bps in the past few sessions, mostly a result of 2s5s flattening move
- 10Y has richened on the curve since Jan. launch; on the roll, offers pick-up of 7.8bps over the SPGB 10/2025,which still looks rich relative to recent range
- Off-the-run SPGB 2032s has marginally cheapened on the curve since the supply announcement
- SocGen (Marc-Henri Thoumin)
- Despite new ECB measures, political gridlock, aftermath of possible general elections on June 23 may cause more volatility
- 3Y offers value vs other SPGBs, though has seen limited concession; short-dated bonds offer greater protection from worsening global risk sentiment, also acceptable carry
- Limited value in 10Y; bond has underperformed 10/2025s by ~1bp in ASW since the announcement, though from rich levels
- 2032 issue has seen limited concession, bond offers good pick-up vs 10Y sector, which may support the auction
- Mizuho (Antoine Bouvet)
- Limited size gave SPGBs a boost when announced; 3Y looks cheap vs surrounding high coupon bonds, though recommend waiting for better entry point
- 10Y trades around fair value on the curve; 8-9Y sector more attractive
- Optimistic on the 07/2032 bond given strong performance on the curve, trades rich in repo, expect good demand for the issue
- BNP (Ioannis Sokos)
- Spanish spreads vs Germany have compressed since March ECB, but by less than BTPs; think relatively wider SPGB/BTP spreads are justified, do not exclude further SPGB underperformance on the back of political uncertainty in the months ahead
- 2020-22 bonds outperformed on SPGB curve, driving the 5/10s slope steeper, may see some 5s10s over coming
- Overall expect good auction result, driven mostly by the low auction size vs usual EU4b-5b
Source: BFW (Bloomberg First Word)
People
Pooja Kumra (Nomura Holdings Inc)
Antoine Bouvet (Mizuho Financial Group Inc)
Ioannis Sokos (BNP Paribas SA)
Marc-Henri Thoumin (Societe Generale SA)
To de-activate this alert, click here
UUID: 7947283