The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells a 2-year benchmark 0%

Sep 2019 Schatz issue Tuesday for up to E4bln in size. 

- BACKGROUND: This is the second outing for this issue. The next Schatz auction

is not until 17 Oct. There are no German redemption or coupon payments this

week. 

- RV/HISTORY: The 2Y Schatz has risen marginally since it was first auctioned

but is hardly cheap at -0.703%. Cross-country wise, spreads to the Schatz from

the core/semi-core look neither expensive nor cheap. There is more value against

shorter maturity German paper as the curve has shown marginal steepening in the

past ten days. The Sep-19 Schatz is also the CTD into the Dec-17 Schatz contract

making hedging this auction easier for dealers. The Schatz looks quite good to

the swap curve, having cheapened by around 4-5bp since the start of the month.

The inaugural sale of this Schatz was technically uncovered, as they often are.

The yield was -0.74% with a Buba calculated bid-ask spread of 1.2x

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