Rate strategists at Unicredit looks at the.....>

BTPS: Rate strategists at Unicredit looks at the Italian auctions this morning

that includes a new 3Y. In general, they see the 3Y as a defensive play in a

rising yield environment.

- More specifically in terms of valuing the new bond, "When interpolating the

BTP 0.45% Jun20 and the BTP 0.65% Nov20 we get a roll vs. the old 3Y benchmark

(BTP 0.45% Jun20) of 7bp (ms+25bp) or 1.75bp/month. As a reference, the roll of

the BTP Jun20 vs. the BTP 0.05% Oct19 at issuance was 13bp for an 8-month

extension (1.6bp/month) and the roll of the BTP Oct19 vs. the BTP 0.1% Apr19 was

4.7bp for a six-month extension (0.77bp/month)"

- Looking at the bigger picture they see BTP net supply as E7bln negative into

the end of the year with E44bln of BTP and BTPi issuance and E51bln of

redemptions. November sees large negative supply but October and December net

issuance is small but positive.