HALISTER1: AUCTION PREVIEW: BTPs Offer Value vs Spain, 7Y Attractive in RV

AUCTION PREVIEW: BTPs Offer Value vs Spain, 7Y Attractive in RV

(Bloomberg) -- Italy to sell 0.1% 04/2019 for EU1.5b-EU2b, 0.95% 03/2023 for EU2.5b-EU3b, as well as 2.7% 03/2047 and 4.75% 09/2044 for a combined EU1.5b-2b at 11am CET.
  • Analysts see value in owning shorter issues versus Spain; preference for 7Y BTP given value in sector and in RV
  • JPMorgan (Gianluca Salford)
    • 2Y-4Y sector expensive on BTP curve, though 3Y benchmark trades with ~1bp discount, broadly fair value; cross market, Italy over Spain in 2Y-3Y sector as Spain trades through Italy
    • 7Y-9Y sector remains broadly cheap on BTP curve, 7Y benchmark has cheapened relative to surrounding bonds since first issued, offers benchmark discount of ~3bps, upper end of 12-mo. range
    • 09/2044 bonds looks around fair value, 03/2047 appears cheap
  • Mizuho (Antoine Bouvet)
    • Auction is more duration than market was expecting; peripheral spreads should come under pressure this week from supply
    • Most optimistic about 03/2023; bond looks attractive in RV, especially against high coupon 05/2023
  • UniCredit (Alessandro Giongo)
    • 3Y looks moderately cheap vs neighbors in Z-spread, trades ~4bps cheaper vs BTP 03/2019
    • 03/2034 looks cheap vs peers, trades 6.5bps cheaper than SPGBs
    • 03/2047 looks attractive in Z-spread vs BTP 09/2044
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Alessandro Giongo (UniCredit SpA)
Antoine Bouvet (Mizuho Financial Group Inc)
Gianluca Salford (JPMorgan Chase & Co)

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