HALISTER1: AUCTION PREVIEW: Rich Repo Levels Supportive for OAT Sale

AUCTION PREVIEW: Rich Repo Levels Supportive for OAT Sale

(Bloomberg) -- France to sell 0.25% 11/2026, 1.50% 05/2031, 1.75% 05/2066 for EU6.5b-EU7.5b at 10:50am CET.
  • Lack of concession seen in RV, though richness on repo, expected to support, according to analysts
  • Mizuho (Antoine Bouvet)
    • Optimistic about 10y bond given specialness on repo, despite mixed performance going into the sale
    • Back-up in yields likely to drive some demand away from semi-core into core bonds, though expect this dynamic to be more prevalent on a larger selloff
    • 15y issue has cheapened on French fitted curve going into the supply announcement, but has since performed well making the bond less attractive in RV
    • Expect 50Y tap will go well, despite the competing 50Y BTP sale earlier this week; repo markets suggest there remain a substantial short base among dealers in this bond
  • SocGen (Marc-Henri Thoumin)
    • 10y has seen no particular cheapening against surrounding issues
    • 05/2031 has seen limited concession overall, but the bond offers some pick-up against the 10y sector
    • 50y issue has seen some cheapening at the long end in recent session; concession has been amplified by the introduction of the 50y BTP, makes the case for a post- auction rebound more compelling
  • Commerzbank (David Schnautz)
    • Expect France to allocate low size in 50y benchmark as overall range when France tapped old 04/2060 issue, suggested under EU1b size
      • Suggests EU6.5bn split between the 10y, 15y benchmarks at EU4.5bn, EU2b, respectively
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Antoine Bouvet (Mizuho Financial Group Inc)
David Schnautz (Commerzbank AG)
Marc-Henri Thoumin (Societe Generale SA)

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