HALISTER1: AUCTION PREVIEW: BTPs Favored Versus SPGBs Out of Supply

AUCTION PREVIEW: BTPs Favored Versus SPGBs Out of Supply

(Bloomberg) -- Italy to sell new 5Y 0.35% 11/2021 for EU3.5b-EU4b, 10Y 1.25% 12/2026 for EU2b-EU2.5b and CCTeu 07/2023 for EU1b-2.5b at 11am CET.
  • Analysts optimistic on sale, despite mixed views on new 5Y in RV; bias toward owning BTPs vs SPGBs after recent widening
  • Commerzbank (David Schnautz)
    • Yesterday’s BTP outperformance vs Spain despite the supply is a good omen
    • Focus should swiftly shift toward Spain, in terms of both supply and ratings, with news on both fronts due tomorrow
  • BBVA (Jaime Costero)
    • New 5Y trades cheap, yield pickup of the roll is 7.7bps; prefer owning new 5Y as part of 2s5s flattener boxed vs Spain as SPGB 2s5s is at flattest level since QE was implemented
    • 10Y bond has corrected previous richness on repo, also slightly cheapened on the curve
    • Cross-market basis continues to favor switches in 10Y BTP area vs SPGBs, either outright or as part of 5s10s flatteners
  • ING (Benjamin Schroeder)
    • New 5Y benchmark ~0.32% in gray market does not suggest much bond-specific concession vs BTP curve
    • BTPs have suffered vs bunds, SPGBs in recent weeks with general risk-off patterns triggering latest widening leg
    • BTPs outperformed SPGBs yesterday; expect this trend to continue as BTP spreads vs Spain have reached stretched levels at more than 20bps in 5Y and 30bps in 10Y
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Benjamin Schroeder (ING Groep NV)
David Schnautz (Commerzbank AG)
Jaime Costero (Banco Bilbao Vizcaya Argentaria SA)

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