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

GERMAN AUCTION PREVIEW
GERMAN AUCTION PREVIEW: On Wednesday, Germany sells E5bln of the new 10Y bmk,
0.5% Feb-28 
- BACKGROUND: Every January there is an eagerly-awaited brand new German 10Y
benchmark. This time last year the E5bln on offer saw E7.13bln bid. However,
cover ratios in the 10Y auctions have been trending lower and the past two 10Y
auctions have been technically uncovered. Thursday should conclude Grand
Coalition talks in Germany and these talks will not help foreign demand. there
are no reinvestment flows to help on Wednesday.
- RV/HISTORY: The German 10Y swap spread makes 10Y German debt look cheap, at
least based upon the recent movement. However, the yield curve is fairly flat
between 5Y and 10Y and the curve flatness may also discourage hedging the
auction with the Bund future. The fair roll to the Bund 0.5% Aug-27 is around
5.75bp. At the previous 10Y auction, the yield was 0.30%. The 6 auction average
bid-cover ratio is 1.4x (Buba calc) and 1.13x including the retained amount. 
- RESULTS: Auction results are due shortly after bidding close at 1030GMT.

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