Italy on Wednesday sells......>

ITALY AUCTION PREVIEW: Italy on Wednesday sells new Jun-21 CTZ for up to

E3.5bln, and re-opens 1.25% Sep-32 BTPei for up to E1.0bln.

- BACKGROUND: The last sale of CTZ on March 26 saw the Nov-20 sold at average

yield of 0.288% and 1.81x bid-to-cover. The Sep-32 BTPei linker was last sold on

February 22, yielding 2.24% at a cover ratio of 1.97x.

- RV/HISTORY: The auction comes at a time of waning risk appetite for Italian

paper. Headlines over the Easter weekend suggested renewed tensions within the

ruling government coalition, and a looming S&P sovereign review (BBB-, negative)

on Friday April 26 is seen to be weighing. In the resumption of trading

following the long weekend, 10-Yr Italian spreads vs Bunds extended to widest

levels since late Feb.

- Liquidity may be slightly limited this week due to holidays, but large cash

flows of E35.3bln coming back to EGB markets this week in the form of coupons

and redemptions are seen supporting demand, particularly with such a small

amount of issuance (the only other seller this week is Germany).

- TIMING: Results are due shortly after the auction closes at 1000BST.