HALISTER1: AUCTION PREVIEW: Mixed Views on Spain Supply; Levels Rich vs BTP

AUCTION PREVIEW: Mixed Views on Spain Supply; Levels Rich vs BTP

(Bloomberg) -- Spain to sell 0.75% 07/2021, 1.3% 10/2026, 1.95% 07/2030 bonds for EU2.5b-3.5b, and I/L 2024 for EU0.5-1.0b at 10:30am CET.
  • Some caution among analysts given gains in Spanish bonds, though reduced size and relative value seen as supportive
  • Mizuho (Antoine Bouvet)
    • Despite some underperformance vs BTPs yesterday, SPGBs have fared better than the pickup in risk aversion and questioning of ECB easing would have suggested
    • In yield terms, recent back-up is likely to be viewed as an investment opportunity by some outright investors, should help the sale
    • Optimistic on the 5y issue given its richening on the curve, history of being special on repo, but see small auction size as generally supportive for other lines too
    • Suspect there is a short base in the 10/2026 as the bond has not been tapped in a month
  • ING (Benjamin Schroeder)
    • The end to political deadlock has benefited SPGBs in recent weeks, but 10y spreads vs bunds has hit resistance at about 105bps
    • New government is supportive, though passing a budget with a minority government may prove difficult
    • On balance, see SPGBs as relatively rich, not only versus BTPs
  • Santander (Edgar da Silva)
    • 15y bond is most interesting in RV, trades about 3bps cheap to fair value; see auction as an opportunity to lengthen duration by switching out of the immediately shorter 01/2029, which trades about 4bps rich, into the 15y auction bond
    • See value in owning the 10y, vs 10/2028, which trades about 2bps rich; 5y issue offers little in RV terms
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Antoine Bouvet (Mizuho Financial Group Inc)
Benjamin Schroeder (ING Groep NV)
Edgar Da Silva Figueira (Banco Santander SA)

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