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Spain taps E3.0-E4.0bln of....>

SPAIN AUCTION PREVIEW
SPAIN AUCTION PREVIEW: Spain taps E3.0-E4.0bln of SPGB 0.05% Jan-21, SPGB 2.15%
Oct-25 and SPGB 4.7% Jul-41 alongside E0.5-1.0bln of SPGBei 0.65% Nov-27. 
- BACKGROUND: It is a fairly liquid time of the year and on Wednesday, there
were E19.5bln of Spanish redemptions and Thursday sees a E22bln BTP payment.
Usually, Spain issues a quantity somewhere close to the middle of pre-announced
ranges.
- RV/HISTORY: The 10Y Bund-Bonos spread has collapsed to 73bp, its lowest spread
since April 2010 and within the periphery, it has outperformed Italy by 35bp
since mid-December (helped by a Fitch upgrade on Jan 19). Spain's 10Y yield is
now almost equidistant between Germany and Italy. Switching from other Spanish
bonds might determine the success of Thursday's auction. The 2-3Y sector of the
curve has steepened slightly to help the 0.05% Jan-21 line. However, the 5-7Y
spread has flattened dramatically (see SPGB 0.455 Oct-22 vs SPGB 2.15% Oct-25)
and will limit small extension trades into this auction. The 2041 is an
off-the-run and will be a primary dealer request but it's not a cheap security.
- RESULTS: Auction bidding closes at 0930GMT with results around 0940GMT

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