Today, the Italian Treasury will undertake.....>

BTPS: Today, the Italian Treasury will undertake an exchange auction.

- The offered bond is the BTP 5% 1 Aug 2039 and size if up to E2bln. Five bonds

can be swapped into it.

- CTZ Mar-18, CCTeu Apr-18, BTP 4.5% Aug-18, BTP 2.5% May-19 and BTP 1.5% Aug-19

- The BTP 4.5% Aug-18 offers a very expensive asset swap spread that together

with poor liquidity might encourage some sellers. The same could be said of the

1.5% Aug-19, although it is slightly more liquid.

- By contrast, the money market equivalent yield of the CTZ 0% Mar-18 is quite

generous when compared to the BOT curve. The CTZ is 14 days longer in maturity

than the BOT 14 Mar 2018 but has a money market yield pick up of around 20bp. 

- On the buyside, the BTP 2039 has a very high coupon and thus price (a

136-handle). This exercise will flatter the year end debt-GDP ratio. The 2039

cheapened to peers today and appears cheap to some other high coupons in the

15-20Y sector.

- Timing: 0900-1000GMT.