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: The ECB is expected to make a QE announcement next Thursday and

the 2Y Schatz sits in the eye of the storm for reactions, particularly against

the swap curve. By this Thursday, the Catalans are facing a deadline to

communicate on their independence declaration and German 2Y might be expected to

reacted strongly to that too. No German coupons or redemptions.

- RV/HISTORY: The 1Y to 2Y Schatz spread is the lowest since 11 Sept. The

outright 2Y yield is also the lowest for a month, following a 4-5bp decline in

the Schatz yield in the past week. 2Y Germany is at the expensive end of recent

ranges to swaps. Bid-cover ratios have averaged 1.5x over the past 6 auctions

and the last time this security was sold produced a -0.72% yield. However, the

2Y regularly fails to get enough bids for the amount of bonds on offer i.e. four

times out of nine auctions this year.

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