Spain taps the market for.....>

SPAIN AUCTION PREVIEW: Spain taps the market for E3.5-4.5bln on Thursday. On

offer are the 0.05% Jan-21 Bono, 0.35% Jul-23 Bono and the 1.40% Jul-28 Obli.

- BACKGROUND: Spain is comfortably on target for issuance this year with 73% of

the 2018 target already met. Among the issues being tapped tomorrow, the 0.35%

Jul-23 Bono and the 1.40% Jul-28 Obli are the 5-year and 10-year benchmarks,

respectively.

- RV/HISTORY: The Spanish curve has steepened over the past month as a result of

the short end outperforming. The 2s10s spread has widened to 175bps from a July

low of 153bps while the 2s30s has increased to 283bps from 270bps.

Market-implied inflation expectations have shifted lower in recent months with

the 10-year breakeven rate edging down to 1.32% from a YTD high of 1.50% on May

15. Trading in the 0.35% Jul-23 Bono has been choppy since May with the yield

oscillating within a 0.24-0.52% range. The yield currently trades at 0.395%,

3.8bps outside the comparable EUR swap. The 1.40% Jul-28 Obli trades at a yield

of 1.449%, 46.6bps above the comparable EUR swap.

- TIMING: Results are due shortly after the auction closes at 0955GMT