Waiting for that €9.5bn Friday Italian bond auction?
Here are some charts to mull over ahead of (another) litmus-test of demand for peripheral eurozone debt. Italy will be selling three- and 10-year BTPs plus seven-year CCTs.
Courtesy of Marc Ostwald at Monument Securities, the charts show the spread between three- and 10-year German and Italian bonds. The point, Ostwald says, is that there’s already a rather large concezzione priced in to help take down supply in today’s sale (not to mention demand from local banks or European Central Bank buying).
In fact, he says, if you’re looking for an “interesting trade” this Friday, there’s a 98 basis point pick-up to be made by selling the five-year German Bobls from Wednesday’s failed auction, in exchange for Friday’s three-year BTP. That’s right, selling safehaven German debt to buy Club Med Italian bonds.
We expect one of Deutschland’s debt defence brigade to start issuing a statement any second now . . .
DO NOT DIZPUTE ZE ZAFETY OF ZE BOBL
SHOULD YOU CHOOSE TO ZELL ZE BOBL
BAD ZINGS WILL HAPPEN TO YOU
SCHWEINHUND.
Related links:
An Italian M3 mystery – FT Alphaville
Der Bobl ist OK, alles klar? – FT Alphaville