HALISTER1: AUCTION PREVIEW: Reduced Sizes to Support SPGB Supply

AUCTION PREVIEW: Reduced Sizes to Support SPGB Supply

(Bloomberg) -- Spain to sell 1.95% 04/2026, 1.95% 07/2030, 4.9% 07/2040 for EU1.5b-2b, as well as new 5Y I/L 0.3% 11/2021 for EU1.5b-2b.
  • Analysts optimistic on the sale, despite lack of concession, given reduced sizes; new 5Y I/L expected to see good demand
  • Mizuho (Antoine Bouvet)
    • Good opportunity to buy 10Y sector in the 2023-2026-2029 butterfly, despite its directionality
    • Neutral on the two other bonds; concession seen in 07/2040, offers the widest spread to the fitted curve, expect this to attract demand in micro-RV
      • 25Y bond also trades spread in repo, suggesting auction could benefit from short-covering demand
  • BNP (Parisha Saimbi, Ioannis Sokos)
    • New 5Y linker to meet good demand, support of the ECB’s expanded PSPP buying, a lack of 5Y EUR linker supply this year, new issue discount, strong positive carry in Q2 2016
    • Issue trades at a real yield of SPGBei-19 + 45bps in grey market, with inflation floor value of 3bps, looks fair value
  • Commerzbank (David Schnautz)
    • New 5Y linker should see smooth reception, given lack of nominal SPGB supply in this tenor, modest size
    • Small size in the longer-dated nominals seen as positive; recent underperformance of Spain vs semi-core, favorable supply outlook should also provide support
  • SocGen (Marc-Henri Thoumin)
    • No real concession priced in ahead of the taps; size is admittedly small, though cautious given longer-term fiscal, budget uncertainties
    • Best non-core risk-reward lies in the 2-5y sector, much shorter than those being sold today
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Antoine Bouvet (Mizuho Financial Group Inc)
David Schnautz (Commerzbank AG)
Ioannis Sokos (BNP Paribas SA)
Marc-Henri Thoumin (Societe Generale SA)
Parisha Saimbi (BNP Paribas SA)

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