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The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur unusually sells 2 linkers
today for E0.5bln each: Bundei 0.1% Apr 2026 and Bundei 0.5% 30
- BACKGROUND: There are no coupon or redemption payments to help and real yield
carry turns quite negative in March. Linker supply has been elevated in Jan/Feb
2018, but demand has been there. The ECB decision on Thursday may well be quite
influential upon longer dated breakeven developments.
- RV: Real yields have largely risen and fallen with the pattern of nominal
issuance and so the real yield of the Bundei26 is at -0.91%, close to the one
year average of -0.98%. The real yield curve is very flat, likely exaggerated by
the negative carry in March. The Bundei26 to Bundei30 spread is 30bp and the
lowest for almost a year. Bidding at Germany linker auctions is usually good. A
conventionally calculated 6 auction bid-cover ratio is 1.6x or 2.05x when
calculated by the Buba.
- Timing: Auction results are due shortly after bidding closes at 1030GMT.

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