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AUSTRIA AUCTION PREVIEW: On Tuesday, the Austrian Federal Financing Agency
(AFFA) re-opens E1.1bln total of and RAGB 0.0% Sep-22 and RAGB 0.75% Feb-28.
- BACKGROUND: There are no coupon and redemptions. The Feb-28 only has E4.5bln
outstanding; the benchmark needs building.
- RV: Despite its low liquidity, at the longer end of the curve Austrian debt
yields a good amount less the French yield curve, but not below 5Y. For example,
the RAGB Feb-28 is ASW-22.8bp, whereas the OAT is ASW-18.9bp. There is a notch
credit rating difference between Austria and France but with economic growth
improving, credit spreads have tended to occupy the back-seat so making the 3bp
spread look okay. The Sep-22 yields -0.03%, a positive yield would have helped
the auction but it is a cheap security on the Austrian curve when valued vs
swaps. Plus the security is quite small, which usually helps since liquidity
will improve quickly with any issuance. In Sept, the 0% Sep-22 yielded -0.165%
when syndicated, the Feb-28 was last auctioned yielding 0.86% and 2.6x cover.
- RESULTS: Bidding closes at 1000GMT. Auction results are due around 15 minutes