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

ITALY AUCTION PREVIEW: Italy sells E1.5-2.0bln of CCTeu Apr-25, E2.0-2.5bln BTP

0.95% 1-Mar-23 (2nd tranche), E2.5-3.0bln BTP 2% Feb-28 (3rd tranche). 

- BACKGROUND: Exactly the same bonds as offered last month; settlement extends

over the long weekend to April 3. 

- RV/HISTORY: BTPs have performed okay since the election, even though the

market-unfriendly result of Lega/M5S govt appears increasingly likely. The 10Y

Bund-BTP spread is 136bp compared to a multi-year low of 120bp. However, Spanish

debt has vastly outperformed BTPs. The 5Y 0.95% Mar-23 has narrowed the spread

to the previous bmk, the 0.90% Aug-22 but the roll/carry for the Mar-23 is

slightly inferior to the 2022 area. Normally, the 10Y bmk would have a heavy

foreign participation but the politics may inhibit the bid. The Feb-28 offers no

obvious value to the IKM8 and is at the expensive end of range to swaps. Recent,

BTP 5-10Y curve flattening will not assist. The CCTeu Apr-25 is ASW+67bp and

compares to ASW+68bp for BTP 1.45% May-25. It does not appear as cheap as normal

because a thin foreign bid for Italy has cheapened the BTP curve to CCTs.

- TIMING: Auction cut-off is 1000BST, results are around 1015BST.