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GERMAN AUCTION PREVIEW: Germany sells E3bln in 10-Yr benchmark 0.25% Feb-29 Bund
- BACKGROUND: The Feb-29 Bund was last auctioned on March 27, at an average
yield of -0.05%, Buba cover of 2.6x, and real bid-to-cover of 1.2x.
- RV/HISTORY: The German curve has bear steepened over the past month, despite
an overall bull flattening move in the curve over the past year. The 10-Yr yield
is 5.6bps higher than at last month's auction, with 5s10s widening by 3.8bps.
Nonetheless, there is little obvious relative value overall. Swap spreads are on
net roughly unchanged over the past month, with the Bund trading 50bps inside
the equivalent EUR swap, around the lowest levels since mid-2018. Versus other
core/semi-core, Bunds are marginally less expensive now than a month ago -
Netherlands 10-Yr spread is 1.8bps narrower at 13bps. Versus 0.25% Aug-28 Bunds,
Feb-29 is about 0.4bps cheaper than a month ago.
- Large cash flows of E35.3bln coming back to EGB markets this week in the form
of coupons and redemptions are seen supporting demand.
- TIMING: Results are due shortly after the auction closes at 1030BST.