Italy will tap the market.....>

ITALY AUCTION PREVIEW: Italy will tap the market for E5.25-6.75bln on Tuesday.

On offer are the 1.00% Jul-22 BTP, 2.10% Jul-26 BTP and the 3.85% Sep-49 BTP.

- BACKGROUND: The 1.00% Jul-22 BTP was last tapped on April 11 with E2.5bln sold

at an average yield of 1.08% and bid-to-cover ratio of 1.62x. The 2.10% Jul-26

BTP was also re-opened on April 11 with E3.75bln sold at an average yield of

2.05% and bid-to-cover ratio of 1.36x. The 3.85% Sep-49 BTP was last sold for

E8.0bln on February 6 at an average yield of 3.91% and bid-to-cover ratio of

5.1x.

- RV/HISTORY: Italian BTP yields have inched higher since the beginning of April

as concerns over next year's budget have resurfaced and the global trade

backdrop deteriorates. The 10-year BTP-Bund spread has widened ~20bp over this

period, while the 5-year Italian breakeven has fallen 13bp since the beginning

of May. Current yields/EUR swap spread: 1.00% Jul-22 BTP (1.240% / 135.4bp),

2.10% Jul-26 BTP (2.230%/ 198.2bp), 3.85% Sep-49 BTP (3.6665% / 261.6bp).

- TIMING: Results are due shortly after the auction closes at 1000BST.