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

ITALY AUCTION PREVIEW: Italy sells E1.5-2.0bln of the Mar-20 CTZ and

E0.75-1.25bln of the 1.30% May-28 BTPei on Thursday.

- BACKGROUND: Both auctions are for existing issues with the 1.30% May-28 BTPei

being the 10-year linker benchmark. Italy remains on target for issuance this

year with 60% of the 2018 target already met.

- RV/HISTORY: Although Italian yields have stabilised since the political

turmoil of May/June, a sizeable premium over core EGBs remains. The German over

Italian 2-year bond yield spread stands at 127bps, down from a high of 354bps on

May 29, but still above the 50-100bps range which prevailed for most of

2014-2017. The Mar-20 CTZ currently trades at a yield of 0.693%, up from a July

low of 0.5385% and 86.9bps outside of the comparable EUR swap. Market based

measures of inflation expectations have fallen since the beginning of the year

with the Italian 5-year breakeven rate falling to 0.962% from a YTD high of

1.335% on April 25. The 1.30% May-28 BPTei trades at 1.558%, up from a month low

of 1.352% and a YTD low of 0.429% on April 18.

- TIMING: Results are due shortly after the auction closes at 0920GMT.