Bund Rally Sees Small Extension On DFA Q4 Issuance Cut, ASWs A Touch Firmer

German FI firms a little further with the cuts in the DFA’s Q4 issuance plan a little more sizable than estimates that we had seen, although the EUR31bn reduction in issuance was tilted heavily towards bills (EUR23bn) as opposed to Bunds (EUR8bn), as expected.

• Futures +15-20 on the day, while German cash benchmarks sit 1-3bp richer, flattening a touch.
• ASWs widen a little on the issuance reduction (collateral scarcity feedthrough), but the moves there are relatively contained.
• Commerzbank had flagged their preference to add to ASW shorts around the release “as lower Q4 funding on the back of lower fiscal expenditures this year says little about the prospects for coming years, and the other arguments for tighter swap spreads also remain in place.”