AUCTION PREVIEW: SPGBs to Benefit From Improving Sentiment, ECB
Source: BFW (Bloomberg First Word)
Tickers
2539Z GR (European Central Bank)
People
Marc-Henri Thoumin (Societe Generale SA)
Antoine Bouvet (Mizuho Financial Group Inc)
Benjamin Schroeder (Commerzbank AG)
Henry Skeoch (Barclays PLC)
Ioannis Sokos (BNP Paribas SA)
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UUID: 7947283
(Bloomberg) -- Spain to sell 0.25% 01/2019, 1.15% 07/2020, 1.95% 04/2026 for EU3b-4b at 10:30am CET. Analysts note lack of curve concession, political risks but see support from improving risk sentiment, ECB policy outlook and attractive carry.
Alert: HALISTER1- SocGen (Marc-Henri Thoumin)
- SPGB 2019, 2020 have seen limited concession ahead of the auction; longs in front-end provide good carry and roll; also protection if risk sentiment proves unstable, should help demand
- 10Y issue looks rich in the sector, offers good pick-up vs the 2022 sector, though flattening looks uncertain given the unstable risk sentiment, political risks
- BNP (Ioannis Sokos)
- Size of auction is relatively small; SPGBs have underperformed vs BTPs lately, spreads vs Germany remain volatile; more clarity around next ECB meeting may benefit peripherals
- Don’t recommend BTP/SPGB compression trades, concerns over political situation in Spain, expect BTPs to outperform in ECB-related risk-on rally
- Commerzbank (Benjamin Schroeder)
- Political risks remain, valuations vs BTPs don’t look particularly attractive with the SPGB/BTP spread closer to middle of recent range
- General risk environment is starting to brighten again; spreads vs core, semi-core look stretched
- Barclays (Henry Skeoch)
- Spain has posted slight underperformance vs Germany, Italy recently; 3Y bond has cheapened slightly in relative value ahead of the supply
- Improvements in broad risk sentiment, expectations for ECB, should support the auction
- Mizuho (Antoine Bouvet)
- 3Y Spain looks cheap vs peers, would look to buy on further cheapening; 5Y issue is one of the cheapest in the sector, specialness on repo suggests auction to benefit from short covering demand
Source: BFW (Bloomberg First Word)
Tickers
2539Z GR (European Central Bank)
People
Marc-Henri Thoumin (Societe Generale SA)
Antoine Bouvet (Mizuho Financial Group Inc)
Benjamin Schroeder (Commerzbank AG)
Henry Skeoch (Barclays PLC)
Ioannis Sokos (BNP Paribas SA)
To de-activate this alert, click here
UUID: 7947283