The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells a new 2-year 0.0%

Schatz on Tuesday, for up to E4.0bln.

- BACKGROUND: Of the six sales of 2-year bonds in 2018, four have been

technically uncovered. This includes the most recent sale of Jun-20 in June

which saw real bid-to-cover of 0.93x and Buba calculated cover of 1.2x.

- RV/HISTORY: Schatz have weakened since the beginning of July as risk appetite

has edged upward, with yields rising from -0.667% to -0.624%. Since the last

2-year auction on June 19, the German curve has remained fairly flat, with the

6-to-8-year segment underperforming and 2-year yields unchanged. That being

said, this has been against the backdrop of thin trading volumes. The current

2-year benchmark (Jun-20) is trading 45.7bps inside comparable euro swaps,

according to Tradeweb data, having moved slightly further in from a month

earlier (when it was 43.6bps). Large redemption/coupon payments from the

Netherlands could provide a tailwind for EGB auctions this week from a net

supply perspective.

- TIMING: Results are due soon after the auction closes at 0930GMT.