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GERMAN AUCTION PREVIEW
GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells new 0.0% Sep-20 Schatz
on Tuesday for E4.0bln.
- BACKGROUND: Of the seven sales of 2-year bonds so far in 2018, four have been
technically uncovered. The last sale on July 17 of Jun-20 Schatz received 2.0x
real cover and 2.5x Buba cover, at -0.63% yield.
- RV/HISTORY: Schatz have rallied since the beginning of August as Turkey-and
Italy-related risk aversion has mounted, with yields falling from -0.559% on Aug
1 to -0.653%. This move erased all losses in the preceding three weeks. But
while the German curve has rallied as a whole since Aug 1, most gains have been
focused around the 10-to-15- year segment (17.5bps lower), while the short end
has lagged (a comparatively modest 9.2bps drop) in a bull flattening move. Net
supply could potentially impact the auction. Germany is the sole EGB issuer this
week, also selling E3bln in Bunds Wednesday. However, with virtually zero
redemptions or coupon payments in EMU this week, net cash flow could be a slight
restraint on demand.
- TIMING: Results are due soon after the auction closes at 0930GMT.

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