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/PORTUGAL AUCTION PREVIEW. the Instituto...>

PORTUGAL
PORTUGAL: /PORTUGAL AUCTION PREVIEW. the Instituto de Gestao de Credito Publico
(IGCP) re-opens the 10Y benchmark 4.125% Apr 2027 OT on Wednesday for an
indicative size of between E1.0bln-E1.25bln. 
- BACKGROUND: The 10Y Portuguese yield dropped below 2% for the first time since
2015 and the 10Y Bund-PGB spread also hit a 2Y low. Normally, Portugal does not
issue in December but even if they sell E1.25bln today, gross PGB issuance will
be E1bln short of the lower end of their E14-16bln pre-announced range.
- RV/HISTORY: Portugal's spread compression to Germany has been immense from Apr
to today. However, the market has done better than Spain recently as the credit
story in Portugal is improving rapidly. It's difficult to say Portugal looks
cheap against anything given its performance and even the 5-10Y spread has
flattened aggressively. You buy Portugal on where the credit is going, not where
it has been. The average bid-cover for 10Y auctions has been 1.84x in 2017 and
the previous yield was 2.79%.
- RESULTS: The auction bidding deadline is at 1030GMT and auction results are
announced around 15 minutes after that.

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