HALISTER1: AUCTION PREVIEW: BTP Volatility a Concern, Offers Value vs Spain

AUCTION PREVIEW: BTP Volatility a Concern, Offers Value vs Spain

(Bloomberg) -- Italy to sell 0.05% 10/2019, 0.65% 10/2023, 2.70% 03/2047, 5.0% 09/2040 for a combined EU5.25-7.25b at 11am CET.
  • Some apprehension given rising volatility, S&P ratings review; supportive is a lack of supply into year-end, carry in shorter bonds and valuations vs Spain
  • Commerzbank (David Schnautz)
    • Auction takes place ahead of important S&P review, may make them more difficult in an already challenging market environment
    • Positive that these bonds should not face more supply in 2016 as Italy is expected to cancel Dec. 13 auction
  • BBVA (Jaime Costero)
    • 3Y benchmark has become “very rich” in repo market since initially issued in mid-October; in terms of yield it has traded mostly in line with peers; attractive pick-up vs 3y Spain at ~23bps
    • 10y issue has cheapened on the 05/2023-10/2023-03/2024 fly, by ~7bps; also offers good pick up vs SPGBs
    • 2047 issue is rich on repo, however investor appetite for duration has decreased over the last few weeks
  • Mizuho (Antoine Bouvet)
    • 3Y yields have risen to levels that would normally attract carry demand, but rising volatility and prospect of the referendum has prevented aggressive investor buying
    • Steepening of the 03/2023-10/2023 roll offers a good concession ahead of the sale, also like the sector on the wider curve
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Antoine Bouvet (Mizuho Financial Group Inc)
David Schnautz (Commerzbank AG)
Jaime Costero (Banco Bilbao Vizcaya Argentaria SA)

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