AUCTION PREVIEW: Repo Specialness, Cheapening May Support SPGBs
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Jens Sorensen (Danske Bank A/S)
Jose Fernandez (Banco Santander SA)
Jose Fernandez Sepulveda (Banco Santander SA)
Marc-Henri Thoumin (Societe Generale SA)
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UUID: 7947283
(Bloomberg) -- Spain to auction 0.25% 01/2019, 0.75% 07/2021, 1.95% 04/2026 and 4.9% 07/2040 government bonds for EU4.5b-5.5b at 10:30am CET.
Alert: HALISTER1- Analysts hold mixed views on the SPGB supply, though suggest sale may be supported by recent cheapening and short- covering demand as a result of repo specialness.
- Mizuho (Antoine Bouvet)
- Recent selloff in short-end Spanish debt make 3Y, 5Y attractive outright; however, volatility may have damped carry demand, expect investors to proceed after EU referendum
- 3Y, 5Y, 25Y all currently trading special on repo; expect short-covering demand for those lines
- 10Y point is cheap; extending from 10/2023 to 04/2026 allows 50bp pick-up; this spread was only 16.5bps when 10Y was issued
- SocGen (Marc-Henri Thoumin)
- 3Y has seen marginal concession; lower volatility at front end may help attract some interest as risk sentiment turns more unstable in EGBs
- 5Y looks rich relative to curve, expect only modest demand; 10Y offers decent RV vs wings, but given risks of further flight to quality, don’t expect a rebound just now
- 25Y has seen some cheapening vs shorter neighbors and vs 15Y sector, expect some convergence at the long end after the auction
- Danske (Jens Peter Sorensen)
- Expect decent demand for 3Y given positive yield, recent selloff
- 5Y, 10Y has stuck in a narrow range vs Italy; 10Y offers very attractive roll-down and carry
- Given recent demand for ultra-long bonds, there’s reason to expect decent demand for 30Y
- Santander (José María Fernández)
- Selling top-end of target range will see Spain complete equivalent of 56% of bond issuance target for 2016
- In RV, 10Y is most appealing, though 5Y offers good opportunity to switch out of longer tenors; 3Y and 25Y bonds trade ~1bp cheap to fair value
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Jens Sorensen (Danske Bank A/S)
Jose Fernandez (Banco Santander SA)
Jose Fernandez Sepulveda (Banco Santander SA)
Marc-Henri Thoumin (Societe Generale SA)
To de-activate this alert, click here
UUID: 7947283