The Deutsche Finanzagentur...>

GERMAN AUCTION PREVIEW: The Deutsche Finanzagentur sells new 0.0% Sep-20 Schatz

today 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.