Today, Italy sells............>

ITALY AUCTION PREVIEW: Today, Italy sells E1.25-1.75bln of BTP 2.05% Aug-27 and

E1.25-1.75bln of CCTeu Oct-24. 

- BACKGROUND: This is a particularly small auction by Italian standards. Normal

size for the 10Y would be around E2.5bln and the 5Y BTP is not even included in

this auction round. There are E1.64bln of Italian coupon payments this week and

so the auction should be easily absorbed.

- RV/HISTORY: BTPs tightened compared to Germany and Spain in October but the

10Y Bund-BTP spread has traded sideways since. Italian banks may be tame buyers

because they need to expand their loan books aggressively by Jan-18 to achieve

T-LTRO lending growth targets that will qualify for lower interest rates. The

spread between BTP 2.05% Aug-27 and the CTD into IKH8 is -12bp, putting the 10Y

benchmark at the cheap end of recent range to the contract.

- The 6 auction average bid-cover for CCT auctions is 1.60x. For the 10Y BTP,

the equivalent number is 1.53x, with most recent yield of 1.86%. 

- TIMING: Auction cut-off is 1000GMT, results are around 1015GMT.