Spain taps E4.0-5.0bln of.....>

SPAIN AUCTION PREVIEW: Spain taps E4.0-5.0bln of SPGB 0.45% Oct-22, SPGB 1.4%

Apr-28 and SPGB 2.35% Jul-33 on Thursday. 

- BACKGROUND: There has been a lot of peripheral supply this week but almost no

coupons/redemptions to help. There was chatter that Spain might also syndicate a

30Y as early as next week, which weighed heavily on the sector this week. In

January, domestic mutual fund flows were heading towards equities, rather than

fixed income. Talking to contacts, we believe that most investors are already

overweight Bonos.

- RV/HISTORY: Spain has outperformed Italy as the latter heads toward elections.

The spread between SPGB Oct-22 and BTP Aug-22 is close to highs at 35bp. This is

not good news for Thursday's auction although the absolute yield on the Oct-22

is 0.396%, the best this year. The 10Y has cheapened to Germany this week,

making the concession going into this auction appear attractive. The Apr-28

spread to the Bonos future CTD, the 1.3% 2026 is the best this year at 26.7bp.

The 2033 spread to 10Y Spain has steepened.

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