Today, Spain sells............>

SPAIN AUCTION PREVIEW: Today, Spain sells E3.5-4.5bln of SPGB 0.4% Apr-22, SPGB

1.45% Oct-27, SPGB 2.35% Jul-33 and E0.25-0.75bln SPGBei 1% Nov-30. 

- BACKGROUND: Spain has done over 80% of their annual issuance. The Oct-27 is

fairly new but has not been issued since Jul 20th and this might help demand.

There are no offsetting coupons or redemptions and perhaps the Catalan issue

holds back demand slightly. Mutual funds have seen small flows (slightly away

from long term funds) but more importantly banks have been exiting their large

SPGB positions.

- RV/HISTORY: For the past year, the Spanish 10Y spread to Germany can be

accurately replicated by a linear combination of Italian and French spreads.

But, in the past two weeks Spain has underperformed that relationship by 11bp;

Spain looks optically cheap. Spain also built in a strong concession on

Wednesday. The 10Y hedge vs future looks attractive as the spread between 5.9%

Jul-26 and SPGB 2.355 Jul-33 is close to a high of 91bp. The 10-15Y sector of

Spain also looks quite steep. 

- RESULTS: Auction cut-off is 0930GMT, results due around 0940GMT