Italy will tap the market.....>

ITALY AUCTION PREVIEW: Italy will tap the market for E5.0-6.5bln today. On offer

are the 1.00% Jul-22 BTP, 2.10% Jul-26 BTP and the 3.35% Mar-35 BTP.

- BACKGROUND: At the last auction of the 1.00% Jul-22 BTP, E2.75bln was sold at

an average yield of 1.24% and bid-to-cover ratio of 1.58x. The 2.10% Jul-26 BTP

was last re-opened on May 14 with E2.5bln sold at an average yield of 2.33% and

bid-to-cover of 1.40x. The 3.35% Mar-35 BTP, which serves as the 15-year

benchmark, was last tapped on April 11 with E1.5bln sold at an average yield of

3.00% and bid-to-cover of 1.37x.

- RV/HISTORY: In line with the deterioration in the regional outlook for growth

and inflation, BTP yields have trended lower since the beginning of the year and

took a sharp leg lower in June. However, the budget drama has resurfaced with

members of Italy's fractious coalition vocally opposing the EUs fiscal rules,

which has kept BTP-Bund spreads elevated. Spreads relative to the comparable EUR

swap: 1.00% Jul-22 BTP (134.8bp), 2.10% Jul-26 BTP (197.4bp), 3.35% Mar-35 BTP

(230.4bp).

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