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The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW
GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur re-opens its 2-year benchmark
0% Dec 2019 Schatz issue Tuesday for up to E5bln in size. 
- BACKGROUND: At the weekend, the German SPD decided to enter formal Grand
Coalition talks but there is still a long way to go before a government is
formed. There are no coupon or redemption flows to help bidding this week.
- RV/HISTORY: The 2Y Schatz swap spread is often seen as a repo or
collateral-driven trade but currently, the spread is responding to the lighter
touch of ECB buying and the expectation that it will get lighter still later in
the year ahead. The ASW spreads of all the Schatz trade in a very tight range of
-43bp to -45bp, with the higher maturities more expensive. The Dec-19 trades
roughly where is should in this regard. Outright, the 2Y German yield is
-0.602%, towards the high end of its six month range. A six month
Buba-calculated cover ratio is 1.6x, or 1.3x calculated more conventionally. 
- TIMING: Auction results are due shortly after bidding closes at 1030GMT

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