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/PORTUGAL AUCTION PREVIEW. On Wednesday,...>

PORTUGAL
PORTUGAL: /PORTUGAL AUCTION PREVIEW. On Wednesday, the IGCP reopens its 5-year
PGB 2.2% Oct-22 and its 10-year PGB 4.125% Apr-27 for up to E1.0-1.25bln in
total. 
- BACKGROUND: The ECB has bought around 0.5bln of PGB per month, well down from
the capital key requirement of E1.2bln - there is a large shortage of PGBs to
buy and so there is a natural buyer in the secondary market once these two lines
settle. One issue for PGBs is the higher correlation the volatile Spanish
market. Auction set up is difficult and this is the first outing with an
investment grade rating from S&P. 
- RV: The spread between the 5-year PGB and the 5-year BTP is currently at 10bp,
having collapsed after the S&P upgrade to investment grade one month ago by S&P.
the spread at 10Y is wider at 25bp but on the tight end of recent ranges. This
year, the average cover ratios for the 5Y and 10 PGB have been 2.2x and 1.84x
respectively. 
- RESULTS: Auction results are due around 0935GMT/1035BST.

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