AUCTION PREVIEW: Rich Repo Levels to Support SPGB Supply
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Benjamin Schroeder (ING Groep NV)
Jaime Costero (Banco Bilbao Vizcaya Argentaria SA)
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UUID: 7947283
(Bloomberg) -- Spain to sell 0.75% 07/2021, 1.30% 10/2026, 4.20% 01/2037 for EU3.5b-4.5b, 0.30% I/L 11/2021 for EU0.5b-1b at 10:30am CET.
Alert: HALISTER1- Analysts optimistic on the sale given recent sell-off, rich levels on repo; Spain seen as rich vs Italy, after recent outperformance
- BBVA (Jaime Costero)
- 5Y has traded consistently rich in repo market, specialness has appeared once again over past few trading days
- 10Y benchmark has remained rich on repo, since it was syndicated, despite been tapped twice in Sept.; cross- market, think outperformance of SPGB 10Y area seems overdone, remain cautious
- 20y sector has suffered in recent bear steepening in EGB market, following recent QE taper story; bond trades around fair value on fitted curve, though also trades special on repo, which should add appetite in the auction
- ING (Benjamin Schroeder)
- All bonds trade special in repo, particularly 20y and 5y issues; given QE extension still likely in Dec., 5s10s looks steep again, sitting at top-end of range since beginning of Aug.
- Cross-market, SPGBs have shown remarkable performance vs BTPs, driven mainly by political divergence, ultra-long supply weighing on Italy
- Further spread performance potential from current levels is limited
- Mizuho (Antoine Bouvet)
- Optimistic auction will find support with 10Y yields back around 1% level, now markets have had a chance to put recent reports of QE tapering discussions into perspective
- Most optimistic for 5Y bond given its expensiveness on repo
- Expect 20y issue to benefit from short covering demand, though note back-end of the curve has been pressure following 50Y BTP syndication earlier this week
Source: BFW (Bloomberg First Word)
People
Antoine Bouvet (Mizuho Financial Group Inc)
Benjamin Schroeder (ING Groep NV)
Jaime Costero (Banco Bilbao Vizcaya Argentaria SA)
To de-activate this alert, click here
UUID: 7947283