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ITALY AUCTION PREVIEW: Italy finance ministry sells E1.5-2.0bln tap of a CTZ 0%
Mar-20 alongside E1.25-E1.75bln of BTPei 1.30% May-28 and 1.25% Sep-32 BTPei.
- BACKGROUND. BTPs in general have performed well compared to German Bunds last
week and there appears a positive feeling for BTPs despite the continued impasse
of forming a new government which should help this relatively small auction
- RV. CTZ usually trade on a cheaper curve than BTPs and this is no exception.
The BTP 4.25% Mar-20 to CTZ Mar-20 spread is an ample 6.3bp however there is a
large difference in cash flows. The Mar-20 trades with a steep 8.2bp spread to
the CTZ Oct-19, close to its high seen since it launch on Mar 26. The 6 auction
average bid-cover ratio is 1.79x. For the linkers, the real yield of BTPei
May-28 is 0.494%, still very low on an historical basis but the breakeven of
1.345% also offers little protection. While the 1.25% Sep-32 BTPei trades at
real yield of 0.774% and a breakeven of 1.36%. 6 auction average cover ratio for
linkers has been 1.75x.
- RESULTS. Auction cut-off is at 1000BST with results around 20 minutes later