Today the Treasury will hold its medium-to-long term auctions with a maximum amount offered of €8.25 billion: the new 3-year BTP benchmark for €3-3.5 billion, 7-year BTPs for €2.25-2.75 billion and 15-year and 30-year BTPs for a total amount of €1.5-2 billion. The auction size is relatively large due to the new 3-year BTP but €16.2bn in redemptions (paid out on April 15) will support the auction. Yields are expected to rise, particularly in shorter maturities.
As for the 3-year BTP, which was put up for auction at the end of March with a new record low of -0.05%, the yield is expected to slightly rise after the sell-off that hit BTPs last week. The 3-year BTP yesterday traded at 0.08-0.10% on the grey market and according to UniCredit the “cost of funding at this tenor is set to rise slightly compared to last month”. The positive yield, large redemptions and rising ECB liquidity “should support the new bond”, UniCredit said.
For the 7-year BTP this will be the first tap of the new 7-year benchmark launched in March. “The 7-year BTPs are back to mid-March levels but remain rather rich compared the 5-year and 10-year,” analysts at UniCredit added. In March the first tranche of the this BTP was sold with a yield of 0.79%.
As for the longer maturities (15-year and 30-year BTP offered today) the 15-year BTP attracted good demand and traded at relatively rich levels on the curve in the past few days. The 30-year BTP will be tapped for the first time since its launch in early March and it looks attractive compared to other 30-year BTPs in the 2032-2034 area.
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