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Italy sells E1.5-2.5bln CTZ...>

ITALY AUCTION PREVIEW
ITALY AUCTION PREVIEW: Italy sells E1.5-2.5bln CTZ 0% Oct-19 and E1.5-2.0bln of
BTPei 0.1% May-22 and BTPei 1.3% May-28 on Friday. 
- BACKGROUND: The Italian election is approaching but there is no panic in the
Italian debt market yet. There are no peripheral redemptions to help.
- RV/HISTORY: CTZ and traditionally these instruments head to the domestic
investors; the different client base might produce some swings in BTP-CTZ
spreads over the election. They also tend to trade on a cheaper curve that the
BTPs: the BTP 0.05% Oct-19 to CTZ Oct-19 spread is an ample 4.5bp in yield
despite very little difference in cash flows (5bp coupon difference makes a
subtle difference at ECB operations). The Oct-19 trades with a steep 14bp spread
to the CTZ May-19, its steepest ever. The 6 auction average bid-cover ratio is
1.82x. For the linkers, the real yield of BTPei May-22 is -0.353%, still very
low on an historical basis but the breakeven of 1.02% also offers little
protection from any inflation acceleration from the current 1.3%Y/Y. 6 auction
average cover ratio for linkers has been 1.75x. 
- TIMING: Auction cut-off is 1000GMT, results are around 1020GMT.

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