Italy will tap the market.....>

ITALY AUCTION PREVIEW: Italy will tap the market for E3.25-4.50bln on Friday. On

offer are the Jun-21 CTZ, 0.10% May-23 BTPEi and the 1.25% Sep-32 BTPEi.

- BACKGROUND: The Jun-21 CTZ was last tapped on June 25 with E2.25bln sold at an

average yield of 0.430% and a bid-to-cover ratio of 1.58x. The 0.10% May-23

BTPEi was last re-opened on May 28 with E0.63bln sold at an average yield of

1.10% and bid-to-cover of 2.3x. The 1.25% Sep-32 BTPEi was last sold on April 24

with E0.91bln raised with an average yield of 1.93% and bid-to-cover of 1.33x.  

- RV/HISTORY: BTPs have rallied sharply since the beginning of the year, with

the pace accelerating since June. Expectations of a resumption of ECB asset

purchases has particularly benefitted periphery debt markets, while the relative

improvement in the Italian budget drama has contributed to the compression in

the political risk premium (not withstanding the recent coalition ructions) as

reflected in narrowing CDS spreads. Italian breakevens have also fallen; the

5-year benchmark has traded down to 0.4771% from a YTD high of 0.8485 in April.

- TIMING: Results are due after 1000 London time.