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

ITALY AUCTION PREVIEW: Today, Italy sells E1.5-2.0bln of CCTeu Apr-25,

E1.25-1.75bln BTP 0.9% Aug-22, E4.0-4.5bln BTP 2% Feb-28 (new) and E0.25-0.75bln

BTP 2.8% Mar-67. 

- BACKGROUND: In terms of reinvestment flows, there are E41.4bln of redemptions:

E19.5bln from Spain and E22bln from Italy. Coupon payments amount to E8bln this

week. 

- RV/HISTORY: The new BTP 2.0% Feb-28 is trading at a 10bp spread in the grey

market to the BTP 2.05% Aug-27 and is 3.8bp cheaper in terms of asset swap

spreads. This spread appears to be slightly north of the interpolated asset swap

curve for the liquid BTPs i.e. the security is trading fairly cheap. Relative to

a cubic spline curve, the new security trades at 1bp cheaper than the existing

benchmark. The very large peripheral redemptions are most likely to support the

BTP 0.9% Aug-22 line today, particularly as yields have risen in the front end

of the curve. The 50Y BTP is also expected to be very well bid because it is

difficult to buy this highly convex security.

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