France taps 5.50% Apr-29.....>

FRANCE AUCTION PREVIEW: France taps 5.50% Apr-29 OAT, 1.50% May-31 OAT and 1.25%

May-36 OAT for between E5.5-E6.5bln on Thursday.

- BACKGROUND: The May-31 last sold on July 5 at 0.86% avg yield and 1.4x cover.

June 7 saw the most recent taps of Apr-29 at 0.86% avg yield and 2.0x cover, and

May-36 at 1.37% yield and 2.1x cover.

- RV/HISTORY: The auction comes at a time of rising volatility, with MT/LT bonds

under pressure globally from the Bank of Japan's July 31 decision to let the JGB

curve steepen. With Japanese investors large buyers of OATs, yields on the bonds

on offer Thursday have hit six-week highs. The 10-Yr segment is been the worst

hit, with yields up 5.8bps since the BOJ meeting, and 11-20-Yrs have likewise

sold off though slightly less at around 5.0bps. This has pushed OAT spreads

wider to JGBs (Apr-29 trading at 4-week wides to JGBs at 60.6bps), but still far

from 80-90bps spreads that have previously attracted Japanese inflows. Spreads

vs Bunds have remained steady (for the 2029 and 2031 at 30bps for example at the

midpoint of one-year 21-41bps range), so no clear mispricing due to volatility.

- TIMING: Auction results are due around 0955GMT.