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FRANCE AUCTION PREVIEW: LT OAT Supply Should Be Digested Smoothly

FRANCE AUCTION PREVIEW
CEEMEAEurozoneFranceBulletGlobalFixed Income BulletsRegionMarkets

Today’s OAT auction will be the first since PM Barnier announced his cabinet. On offer will be a combined E10-12bln of LT OATs (bidding deadline at 0950BST). OAT auctions have generally seen decent results over the past few months, despite ongoing political and fiscal risks. As such, we expect today’s supply to be digested smoothly.

  • The last LT OAT auction on Sep 5 saw the top of the target range sold (E12.0bln) and all four LT OATs sold saw their stop price exceed the pre-auction mid-price.
  • Today’s offering includes the on-the-run 10-year 3.00% Nov-34 OAT.
  • Curve RV should facilitate demand for the 10-year line, which has cheapened on the 5/10/15-year fly since the snap legislative election announcement in early July, last at ~21bps.
  • The on-the-run 30-year 3.25% May-55 OAT will also be offer, alongside the 1.25% May-34 OAT and the 3.00% Jun-49 Green OAT.

Figure 1: 5/10/15-year OAT Fly

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Today’s OAT auction will be the first since PM Barnier announced his cabinet. On offer will be a combined E10-12bln of LT OATs (bidding deadline at 0950BST). OAT auctions have generally seen decent results over the past few months, despite ongoing political and fiscal risks. As such, we expect today’s supply to be digested smoothly.

  • The last LT OAT auction on Sep 5 saw the top of the target range sold (E12.0bln) and all four LT OATs sold saw their stop price exceed the pre-auction mid-price.
  • Today’s offering includes the on-the-run 10-year 3.00% Nov-34 OAT.
  • Curve RV should facilitate demand for the 10-year line, which has cheapened on the 5/10/15-year fly since the snap legislative election announcement in early July, last at ~21bps.
  • The on-the-run 30-year 3.25% May-55 OAT will also be offer, alongside the 1.25% May-34 OAT and the 3.00% Jun-49 Green OAT.

Figure 1: 5/10/15-year OAT Fly