Germany returns to the.......>

GERMAN AUCTION PREVIEW: Germany returns to the market for a second time this

week on Wednesday to sell the 1.25% Aug-48 bund for E1.5bn.

- BACKGROUND: At the last auction of the 1.25% Aug-48 bund on 13 May, E0.63bn

was allotted at an average yield of -0.13%, Buba cover of 2.50x and bid-to-cover

of 2.14x.

- RV/HISTORY: While the very short-end of the bund curve has been anchored by

monetary policy (and the inertia on further deposit rate cuts), the longer end

has has rallied sharply since early July with the entire curve now negative

yielding. The 1.25% Aug-48 bund trades at a yield of -0.044%, down from a July

high of 0.228% and 5bp insider the comparable EUR swap. While the EU recovery

fund, agreed by the 27 member states on Tuesday, will support risk, heightened

economic uncertainty will limit the extent of any steepening of the bund curve

for now.

- TIMING: Results are due out around 1030BST.