The Dipartimento del Tesoro...>

ITALY AUCTION PREVIEW: The Dipartimento del Tesoro will tap the market for

E4.75-6.0bln on Thursday. On offer are the Jan-25 CCTeu, 1.75% Jul-24 BTP, 2.00%

Dec-25 BTP and the 3.00% Aug-29 BTP.  

- BACKGROUND: Italy has so far met 40% of planned issuance for 2019 compared to

48% for the wider euro area. The Jan-25 CCTeu was last re-opened on April 30

with E1.0bln sold at an average yield of 1.77% and bid-to-cover of 1.89x. Also

tapped on April 30 were the the 1.75% Jul-24 BTP (E2.5bln sold, average yield

1.72%, cover 1.52x) and the 3.00% Aug-29 BTP (E3.0bln, average yield 2.59%,

cover 1.4x). 

- RV/HISTORY: The BTP curve has flattened since March on the back of the short

end selling off. With populist rhetoric around the budget ramping up during the

European election campaign, spreads over bunds have also widened. The 2-year

BTP-Bund spread trades at 127.9bp up from a YTD low of 62.9bp in March.

Breakevens have dropped sharply with the 5-year benchmark falling to 0.479% from

a YTD high of 0.848% in April as concerns about the economic outlook intensify.

- TIMING: Results are due shortly after the auction closes at 1000BST.