The Deutsche.................>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagenture re-opens its 10-year

benchmark 0.50% Feb-28 Bund for up to E2.0bln on Wednesday. 

- BACKGROUND: This will be the seventh re-opening of the 0.50% Feb-28 this year.

There is currently E19.0bn outstanding with a successful auction on Wednesday

taking YTD issuance to 53% of target.

- RV: The Feb-28 auction takes place ahead of the ECB monetary policy meeting on

Thursday, with speculation that the Governing Council may hint at an end to QE

in the near future. The benchmark 10-year bund yield has pushed sharply higher,

touching 0.508% on June 12 from a YTD low of 0.260% on May 29. The 2s10s curve

has steepened with the spread increasing to 108bps from 102bps over the same

period. This has been driven in part by  rising inflation expectations, with the

10-year breakeven edging up to 1.37% - the top end of the four-year range. 

- HISTORY: The Feb-28 bund was well covered at the last auction, with a cover

ratio of 2.2x and average yield of 0.62%. Although Buba-cover has been above 1

at the last six auctions, two of those have been technically uncovered. 

- RESULTS: Auction results are due shortly after bidding closes at 0930GMT