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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.