On Wednesday, Germany........>

GERMAN AUCTION PREVIEW: On Wednesday, Germany sells E3bln of the 10Y bmk, 0.5%

Aug-27

BACKGROUND: There is E13bln of Schatz redeeming on Thursday. Such redemptions

are likely heavily-owned by the ECB/Buba and so cannot be reinvested at the

auction but only in secondary trading. However, this is still a small benefit. 

- RV: A good concession was built in on Tuesday but statistically there has been

no strong evidence of daily mean-reversion for the 10Y Bund since early July. On

the positive side, the 5-10Y German spread has steepened in the past week and

the more important spread between the Bund future and 10Y bmk is at its steepest

since the Aug-27 was issued. This offers an easy hedge, better than using swaps

to get into the auction.

- HISTORY: Bidding at 10Y Bund auctions are modest but there is generally more

than available for sale. According to the Buba's bid-cover calculation, the six

auction average is 1.45x and the yield at the Aug 23 auction was 0.41%.

- RESULTS: Auction results are due after bidding close at 0930GMT.