Thursday, Italy sells.........>

ITALY AUCTION PREVIEW: Thursday, Italy sells E1.5-2.0bln of 3Y BTP 0.2% Oct-20,

E2.0-2.5bln of BTP 1.45% Nov-24 and E1.0-1.5bln of BTP 2.45% Sep-33. 

- BACKGROUND: There is a E22.3bln BTP redemption today together with E0.3bln of

Italian coupons, which might help the shorter maturity issues here. The E6bln

maximum for a mid-month auction is fairly low but there is a BTP Italia being

sold this week.

- RV: The Italian 10Y spread to Germany has collapsed from 170bp to 130bp over

the past month. Outright BTP yields are also on the lower end of their one year

ranges, if not quite at extremes. The 3Y BTP is trading at an 9.4bp roll to the

previous 3Y, BTP 0.35% Jun-20, which is generous compared to recent history.

There is not much juice in rolling from BTP 1.85% May-24 to BTP 1.45% Nov-24,

which is near lows. The 7Y may suffer more than others today from the BTP Italia

auction. Best, is the BTP 2.45% Sep-33, which is cheap to the 10Y.

- HISTORY: The 6 auction average bid-cover for 3Y auctions is 1.8x at latest

auction yield was 0.15%. 6m averages for the 7Y and 30Y are 1.44x and 1.81x. 

- TIMING: Auction cut-off is 1000GMT/1100GMT, results are around 1020GMT.