INDIA: India Reportedly Considering Tariff Cuts as Trump Duties Loom

Italy will hold a BTP Short Term and BTPei auction this morning. The new 2.55% Feb-27 BTP Short Term (ISIN: IT0005633794) will be launched for E2.75-3.00bln. Alongside this, E1.00-1.25bln of the 1.50% May-29 BTPei (ISIN: IT0005543803) and E1.00-1.25bln of the 1.80% May-36 BTPei (ISIN: IT0005588881) will be on offer.

• The launch size of the BTP Short Term is a little smaller than the previous on-the-run 3.10% Aug-26 BTP Short Term, which saw a E3.5bln launch in July last year.
• The four re-openings of this BTP Short Term between August and November attracted an average bid-to-cover ratio of 1.67x, with amounts issued of between E2-2.75bln. The last re-opening attracted a bid-to-cover ratio of 1.81x for the E2bln issued.
• The 2-year BTP/Schatz (using previous on-the-run lines) spread has tightened since mid-January (alongside 10-year counterparts), last at 28.3bps from a closing high of 37bps on Jan 13.
• On Thursday, Italy will hold an auction to sell 5/10-year BTPs and a CCTeu. On offer will be the on the-run 5-year 3.00% Oct-29 BTP alongside two off-the-run BTPs in the 10-year area (following the new 10-year syndication earlier this month) and the Apr-33 CCTeu.
• The 2.55% Feb-27 BTP Short Term will likely be re-opened on Feb 25.
• Timing: Results will be available shortly after the bidding window closes at 10:00GMT / 11:00CET.

Citi note that yesterday’s price action “highlights the resilience of EGB spreads and is even more impressive in the context of 10-12bp tightening in BTP/Bund (and OAT/Bund) spreads over the last two weeks.”

• They suggest that “this might be partly due to BTP spreads having underperformed YtD on our fair value model (regressing against Bund yields, Bund ASW, equities, vol, financial conditions and € rating-matched credit), with BTPs cheapening by 5bp vs. an average richening of 4bp over this period across the last 5 years.”
• They also note that “BTP spreads no longer look rich vs. Euro Stoxx 50.”
• On net and “with supply front-loading ending,” they remain constructive on the periphery.

SFRH5/M5 paper paid -16.0 on ~12.1K, taken bid over briefly, with ~1.7K then given, leaving market -16.5/-16.0 (tiny offer) last.