The Deutsche Finanzagentur...>

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

Bund 1.25% Aug-48 for up to E1.5bln on Wednesday. 

- BACKGROUND: The size is slightly higher than last two auction and there are no

redemptions or coupon payments this week. Generally speaking, last year saw a

decline in bid-cover ratios at the 30Y+ section of the curve in EGB space,

particularly since September. 

- RV: There are a couple of natural leap-off points into this auction, the

EuroBuxl contract and the 10Y Bund. The CTD into the contract is the Bund 3.25%

2042 and the spread of today's 2048 is 15.8bp, which is slightly below highs of

16.4bp seen in October. Additionally, the 10-30Y spread has narrowed

aggressively in the past week from 85bp to 72.6bp. 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/for sale

calculation of 1.45x. The previous auction yield was 1.20%. 

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