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Primary Market Focus - The 5Y area remains the most attractive on the BTP curve, while we like BTP Aug31 vs. its Spanish peer

  • On Friday, Italy will reopen BTP Apr26 for EUR 2.5-3bn, BTP 0.6% Aug31 for EUR 3-3.5bn and CCTeu Apr26 for EUR 1.5-2bn. The sale will be supported by EUR 15.7bn of redemptions. The auction comes two weeks before the next ECB meeting where ECB officials are likely to discuss the future pace of bond purchases under the PEPP.
  • The 5Y bucket of the curve remains the most attractive in terms of roll-down returns. In addition, BTP Apr26 is cheap in RV. Moreover, we like BTP Aug31 in a 3/10/30Y fly and relative to its Spanish peer.
  • On the other hand, CCTeu Apr26 looks expensive relative to BTPs with a similar tenor. Further outperformance of CCTeus relative to BTPs is likely only if the 10Y BTP-Bund spread widens further.

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