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GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells the 2-year benchmark 0%
Mar-20 Schatz on Tuesday for up to E4bln in size.
- BACKGROUND: There was large German redemption and coupon payments last week
and these could help support today's Schatz auction. ECB expectations continue
to shift slightly as talk of mid-19 rate hikes grow.
- RV/HISTORY: 2Y Schatz auctions are often technically uncovered, in fact the
last two of three have been. Valuations look a little more enticing though
today. The roll from the Schatz Dec-19 is at 3.5bp up from 2.6bp seen on Mar 23
and the 2Y German yield is the close to 1-month highs as fear of a slow down in
the German economy fades slightly. The asset swap spread for the Mar-20 was
-43bp when it was launched a 2-months ago and is ASW-40.8bp today. At the
auction a month ago, the Buba calculated cover was 1.41x, the yield was -0.59%
(4.2bp above the current yield).
- TIMING: Auction results are due shortly after bidding closes at 0930GMT