Primary Market Focus - Recent curve steepening makes BTP Nov22 attractive for extension trades

  • On Wednesday, Italy will sell EUR 3-3.5bn of BTP 0% Nov22 and EUR 0.75-1.25bn of BTPei 0.4% May30, EUR 3.75-4.75bn in total. After the recent steepening, the 2Y area offers value relative to the 6M. Furthermore, BTP 0% Nov22 offers 1.5bp in pickup relative to the slightly longer BTP 0.05% Jan23.
  • In recent weeks, BEs have risen significantly and the liquidity premium offered by BTPei has tightened to its lowest level in two years. The BE curve has flattened significantly, creating the case for maturity extension. We like BTPei May30 vs. BTPei May28.

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