France taps 3 nominal OATs...>

FRANCE AUCTION PREVIEW: France taps 3 nominal OATs Thursday for a fairly decent

E8.0-E9.0bln indicative size. On offer are OAT 0.75% May-28, OAT 1.25% May-34

and OAT 1.75% May-66, so potentially a lot of duration.

- BACKGROUND: Currently, there is a very strong bid in the 15Y+ section of the

core and peripheral yield curves. France sells at the top of the target range.

- RV: The May-28 has seen a fairly static spread to Germany and has cheapened to

swaps. The 15Y May-34 is in the hands of French life insurers. BNP believes that

the "15y OAT area has dramatically cheapened in Q4 2017 within the 10s15s or

8s15s ASW box. The resumption of the rise in OAT yields close to last February's

attractive levels should attract renewed demand from life insurers and richen

that area." 50Y bonds have a lot of convexity, a strong advantage in uncertain

times and should respond positively to rising bond volatility but, this is not

happening. The French OAT principal strip Apr-41 to Apr-55 curve is still a very

wide 38.5bp, well above the 23bp from last Feb. The 50Y is rarely issued and

does not appear expensive. 

- RESULTS: Nominal bidding closes at 0950GMT. Results are due around 1000GMT