Italy is due to tap its 2-year zero coupon Sep 2013 CTZ issue Wednesday for between E1.5bln-E2.5bln indicative size. The auction comes amid a heavy slew of issuance from Italy for up to E20bln, which completes its funding programme for this year, but settlement of these issues are 2012. In addition, the auction also comes as the 10-year benchmark BTP yield trades at 7.00%, i.e. the threshold level that is seen as marker where Greece, Ireland and Portugal breached before requesting external aid for bailout in the past. The recent Spanish auctions show investor appetite for high yield, and most traders expect the recent large take-up at the ECB’s 3-year LTRO to be recycled back into peripheral bonds. The 2-year CTZ was last sold on Nov 25 for E2.0bln at an average yield of 7.814% and then covered 1.59 times. Prior to this, it was sold on Oct 26 also for E2.0bln at an average yield of 4.628% and then covered 2.01 times. Auction results are due at around 1010GMT.
EasyForexNews Research Team