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GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur re-opens the 0.00% Apr-23
Bobl for E2.0bln Wednesday.
- BACKGROUND: This is the fifth tap of the 5-year benchmark Apr-23 in 2018. It
was last sold May 2, with E2.48bln allotted at average yield of -0.04% and
bid-to-cover of 1.3x (with 17.5% retained).
- RV: The Apr-23 Bobl is not obviously mispriced. The yield has fallen from
0.085% to -0.238% since it was last tapped on May 2, owing to a flight-to-safety
due to Italian political concerns during which the yield dropped as far as
-0.432%. Even so, the five-year segment has modestly underperformed other parts
of the German curve since that auction, amid an overall flattening of the curve.
1-2Yr yields are down 4-8bps, and while 5s are down 33.9bps, the 7-10Y segment
has rallied by 36.7bps-37.7bps. At E2.0bln, this will be the smallest 5-year
sale since at least the beginning of 2017, so size should not be an issue. While
it is trading well inside the likes of Italy 5Y (152bps), it is trading 25bps
inside French OATs, which is the average spread over the past 5 years.
- TIMING: Results are due soon after the auction closes at 0930GMT.