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Germany sells 2.50% Aug-46...>

GERMAN AUCTION PREVIEW
GERMAN AUCTION PREVIEW: Germany sells 2.50% Aug-46 Bund on Wednesday for E1bln.
- BACKGROUND: The last time Germany auctioned a bond around this segment of the
curve, the 1.25% Aug-48 sold on May 15 at 0.53% yield, 1.44x bid-to-cover, and
1.8x Buba cover. Back in February, the last time the 2.50% Aug-46 was sold, it
saw average yield of 0.72% and 1.2x cover. Germany has completed over 51% of its
planned 2019 issuance thus far.
- RV: There has arguably never been a more auspicious time for Germany to go to
auction: nearly the entire curve hit all-time low yields on Tuesday as ECB
President Draghi hinted strongly at future monetary stimulus if the economic
outlook does not improve. The 2.50% 2046 Bund hit an all-time low yield of
0.224%, with swap spreads moving out very slightly (around 1bps to 53.8bps).
This is at or around the flattest the curve has been since July 2016, whether
looking at 2s30s, 5s30s or 10s30s. With increasing speculation that the ECB
could be eyeing a policy rate cut (some banks saying as early as July), this
auction will be an interesting sign of demand for duration.
- TIMING: Results are due out around 1030UK time.

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