AUCTION PREVIEW: German 2Y Tap Seen Supported by Redemptions
(Bloomberg) -- Germany taps the 2y BKO, March 2018, for EU4b at 11:30am CET.
- NOTE: Germany OBL 2.75% April 2016 matures on Friday with coupon and redemptions eligible for reinvestment at today’s auction
- 2Y Germany is on the cheaper end of the 1y range on ASW, see chart here
- Next Schatz auction will be the sale of a new 2y benchmark, June 2018, on May 11
- BofAML (Erjon Satko)
- EU18b in coupon and redemptions due to the maturing OBL may support the sale of the bond
- ECB releases minutes of the last meeting tomorrow which may provide insight on the possible path of the ECB monetary policy in case inflation disappoints further; likelihood of future rate cuts concerns specifically BKOs after this last tap
- Citigroup (Puja Sawant)
- 2y sector is trading cheap vs fitted curve and four out of the five cheapest bonds on the German curve are from the 2y sector
- Schatz March 2018 looks cheap vs its surrounding issues
- UBS (Nishay Patel)
- Cash flow support due from Germany when OBL 2.75% April 16 matures could provide support for the auction due to T+2 settlement
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
Tickers 3413Z GR (Federal Republic of Germany)
People Erjon Satko (Merrill Lynch International)
Nishay Patel (UBS Global Asset Management Japan Ltd)
Puja Sawant (Citigroup Inc)
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