Italy sells E1.5-2.0bln CTZ...>

ITALY AUCTION PREVIEW: Italy sells E1.5-2.0bln CTZ 0% Oct-19 for between on

Monday. 

- BACKGROUND: Normally, there is a linker that gets sold alongside the CTZ but,

this is missing. Furthermore, at the M/L term auction on Wednesday, the Italian

Treasury is selling a surprisingly small amount having cancelled the 5Y bmk.

Italy is the only scheduled issuer in Europe this week. There are E3.3bln of EGB

coupon payments this week and around half comes from Italy.

- RV/HISTORY: CTZ and traditionally these instruments head to the domestic

investors. They also tend to trade on a cheaper curve that the BTPs. In the the

Oct-19 trades with a 5.8bp spread to the CTZ May-19. This 5.8bp roll has

tightened aggressively in the past month; initially the Oct-19 CTZ was gifted to

markets at a 9bp spread, when introduced in October. What is really interesting

is that the BTP 0.05% 15-Oct-19 bond swaps 5.3bp 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. 

- TIMING: Auction cut-off is 1000GMT/1100BST, results are around 1020GMT.