Germany sells 2.50% Aug-46...>

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.