Spain taps E3.5-E4.5bln of....>

SPAIN AUCTION PREVIEW: Spain taps E3.5-E4.5bln of SPGB 0.05% Jan-21, SPGB 0.45%

Oct-22 and the off-the-run SPGB 5.15% Oct-28 alongside E250-350mln of SPGBei 1%

Nov-30.

- BACKGROUND: This auction sits on the wrong side of the month-end extension

flow and there are no Spanish redemption or coupon payments. 

- RV/HISTORY: The 10Y Bund-Bonos spread has widened from a low of 66bp to 87.5bp

and we suspect that investors have sold Spain into Italy based upon the

commentary we've been receiving. The 3-5Y sector of the SPGB curve has steepened

slightly so as to put the SPGB0.45% Jan-21 vs SPGB0.45% Jan-21 close to multi

month highs of 39bp. Roll and carry for the Oct-22 is 11bp every 3m about the

best on the curve, although an equivalent BTP would be closer to 14bp. Just two

weeks ago, the auction of the 0.45% Oct-22 was sold at 0.39% and cover of 4.06x

(easily the largest cover ratio is years and probably why it's being sold just

two weeks later). The 0.05% Jan-21 was last sold on 1 Feb at -0.02% and 2.57x

cover. The SPGBei was sold in January at 0.48% real yld and 1.89x cover.

- RESULTS: Auction bidding closes at 0930GMT with results around 0940GMT