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

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

Feb-28 

- BACKGROUND: This is just the fourth outing for this particular security and

will not be issued again until 18 April. There are no large coupon or redemption

payments in the core until mid-April. Bidding was reasonable at the Schatz

auction earlier today.

- RV/HISTORY: The yield curve has lower yields (currently 0.58% compared to

0.67% last time) and is flatter than it was when this bond was last sold. Of the

past five 10Y Bund auctions four have failed to attract bids in excess of the

amount available for sale. On Tuesday, the 10Y section of the curve

underperformed both 5Y and 15Y areas - concession building into the auction. The

natural hedge for this auction is the Bund future and the spread to the CTD into

the Jun-18 contract (Bund 0.25% Feb-27) doesn't look too bad compared to history

at 11.8bp. As with all German bonds the Feb-28 has become expensive to swaps in

the past 2-3 months and the ASW is close to lows.

- RESULTS: Auction results are due shortly after bidding close at 1030GMT.