The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur re-opens the 10-Yr benchmark

0.25% Aug-28 Bund on Wednesday for E3bln.

- BACKGROUND: The Aug-28 launched on July 11, selling at 1.3x real cover (1.6x

Buba cover), and average yield of 0.36%. The sale will bring German issuance to

65% of the 2018 funding target, versus 63% currently.

- RV/HISTORY: Bunds have been under pressure since the beginning of July, with

the most recent catalyst being speculation the Bank of Japan would allow a

significant rise in long-end JGB yields, potentially impacting global bond

markets. Although that particular risk failed to materialise, the German curve

remains steeper, though most of the weakness has been in the belly, with the

rise in 10-Yr to 30-Yr at a fairly uniform 7-8bps. 10-Yrs have drifted cheaper

versus swaps in July, with the spread moving from near multi-year extremes at

-58bps to -50bps according to Tradeweb data, but this is still a premium versus

the 1-Yr average of -46bps. Net supply is likely to be supportive, with around

E37bln net cash flow returned to market this week.

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