The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells its 30-year benchmark

Bund 1.25% Aug-48 for up to E1bln on Wednesday. 

- BACKGROUND: The size is quite small but the 2Y Schatz auction was poorly

received on Tuesday. There are no redemptions or coupon payments. The market

believes that there will be a nine month extension to the APP when the ECB meets

next week.

- RV: An optically attractive way to get into this auction is via the EuroBuxl

contract. The CTD into the contract is the Bund 1.25% 2042 and the spread of

today's 2048 is almost 16bp and easily the most generous spread since the first

auction of this bond in mid-Sept. Less attractive is the spread versus swaps. As

always, 30Y Dutch paper looks expensive against 30Y Germany as a result of a

heavy pension fund presence in the Dutch market. 

HISTORY. German 30Y auctions are usually well covered. The past six auctions

have averaged a Buba-calculated 1.75x and a bid/offered calculation of 1.44x.

The previous auction yield was 1.27%.

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