Italy sells a new CTZ 0%......>

ITALY AUCTION PREVIEW: Italy sells a new CTZ 0% Oct-19 for between E2.5-3.0bln

ITALY AUCTION PREVIEW: Italy sells a new CTZ 0% Oct-19 for between E2.5-3.0bln

on Wednesday alongside a E0.75-1.25bln tap of the BTPei 1.3% May-28.

- BACKGROUND: The ECB meeting is on Thursday. There is a 6Y BTP Italia issue in

3 weeks. - RV/HISTORY: This is a brand new CTZ and traditionally these

instruments head to the domestic investors. They also tend to trade on a cheaper

curve that the BTPs. In the grey market, the Oct-19 trades with a 9.1bp spread

to the CTZ May- 19. This 9.1bp roll is equivalent to a 4.5bp more generous

spread to 6m euribor. What is really interesting is that the BTP 0.05% 15-Oct-19

bond swaps 5.8bp more expensive than the CTZ zero coupon 30-Oct-19. Note the 5bp

coupon difference, which makes a subtle difference at ECB operations. The CTZ

curve is cheap. Regarding the linker, we hear that Italian linkers make sense as

a carry trade into year end and if you think the ECB does a dovish taper, this

is the trade. Linkers usually see good demand but the BTPei28's saw only a 1.39x

cover at their last outing on Jul 26.

- TIMING: Auction cut-off is 0900GMT/1000BST, results are around 0920GMT.