The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur re-opens the 2.5% Aug-46 Buxl

on Wednesday for E1bln, the only EGB auction of the week.

- BACKGROUND: The Aug-46 was last tapped on Apr 11, for E1.5bln at 1.12% average

yield in a technically uncovered auction (real cover 0.7x, Buba cover 1.0x).

- RV/HISTORY: In a thin week of supply, Wednesday`s auction could provide

indications of safe-haven appetite. German bonds have rallied since the middle

of last week, on both Italian and Turkish concerns. At 0.934%, the Aug-46 Buxl

is yielding the least since Apr 2017, and 19bps below the previous auction.

While the curve has greatly flattened since the beginning of the year, with the

25-30-yr segment outperforming partly on speculation of ECB `Operation Twist`,

the belly of the curve has been outperforming since the Apr 11 Buxl auction.

Amid the past week`s risk aversion, the Aug-46 is near its lifetime largest

spread inside the Italian BTP equivalent 2046 at 261.9bps, surpassing the May

premium. That said, the Aug-46 is now trading the cheapest to equivalent swaps

(58.8bps inside) of any German bond between 2028 and 2046 maturity.

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