AUCTION PREVIEW: Value in RV, Macro Backdrop Supports 10Y Bund
(Bloomberg) -- Germany to sell 0.5% 02/2026 for EU5b at 11:30am CET. Analysts suggest attractive relative valuation and macro backdrop will support, though some concerns remain given recent string of technically uncovered auctions.
- Barclays (Giuseppe Maraffino)
- 10Y bund looks cheap on the German ASW curve vs OIS, given broad cheapness of the sector; issue has put on some concession vs previous benchmarks, cheapening by ~1bp over the past two weeks
- 10Y+ German yields are rich in outright terms, though near term uncertainty around global macro backdrop should help auction go smoothly
- ING (Martin van Vliet)
- Bond is expensive in the repo market, trading ~50bps special yesterday; still looks fairly attractive on the fly against the 1% 08/2024, 4.75% 07/2028
- Mizuho (Antoine Bouvet)
- Size larger than EU3b-4b seen in recent reopenings; supply will compete with yday’s 10Y, 30Y Austria syndication; trades cheap on curve, cheapest issue in 9-10Y sector
- UBS (Nishay Patel)
- Last auction in Jan. technically failed, real bid-to- cover ratio of 0.9x; prior four re-openings 10Y bunds also technically failed
- Sector has underperformed slightly on 5s10s30s over past week, remains close to the rich end of 6-month range, driven by flattening of Germany 5s10s
- Cross-market, 10Y bund is around richest level in 6 months vs other core issues; close to cheaper end of range on butterfly with 10Y USTs, gilts
- Commerzbank (Rainer Guntermann)
- Risk of technically uncovered auction looms large given the sluggish market, track record of five consecutive uncovered nominal 10Y Bund auctions
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Giuseppe Maraffino (Barclays PLC)
Antoine Bouvet (Mizuho Financial Group Inc)
Martin Van Vliet (ING Groep NV)
Nishay Patel (UBS Global Asset Management Japan Ltd)
Rainer Guntermann (Commerzbank AG)
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