AUCTION PREVIEW: Bund Sale View Mixed as Yields Linger Near Zero
(Bloomberg) -- Germany to Sell 0.5% 02/2026 for EU4b at 11:30am CET. Analysts views are mixed on the auction outcome given the record low yields, though highlight the attractiveness of the bond in RV, particularly vs 8Y and 11-12Y issues.
- Citi (Aman Bansal)
- Continue to target -0.15% in 10Y bund yield with Brexit risk potentially accelerating negative convexity effect
- Auction will be first test for negative yields; EU3.8b of redemptions on June 20, while not eligible for reinvestment in the auction, should be supportive to bunds at the margin
- In RV, bond looks cheap vs fitted curve, has also cheapened on the 2024/26/27 fly
- Mizuho (Antoine Bouvet)
- 10Y to be sold at/near negative yields for first time in history; expect poor auction statistics given the record low outright yields, see some RV interest in the bond
- Has richened on the roll vs 08/2025s, from cheap levels; 10Y sector offers value on the 2024/26/28s butterfly; extending from 02/2024 to 02/2026 offers a 26bps yield pick-up
- ING (Martin van Vliet)
- Auction bonds trades at 2.5bps concession to the DBR 07/2027, should proceed smoothly, despite the extraordinary low yield level
- Brexit scenario could easily see 10y bund yields plunge to the -0.20% area
- Commerzbank (Michael Leister)
- Non-trivial task to find buyers for 10Y bunds with yields around zero, swap spreads close to 4y highs
- Traditional RV metrics have lost relevance for bunds due to the intensifying safety, PSPP demand which should ensure sufficient interest in the auction
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Aman Bansal (Citigroup Inc)
Antoine Bouvet (Mizuho Financial Group Inc)
Martin Van Vliet (ING Groep NV)
Michael Leister (Commerzbank AG)
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