HALISTER1: AUCTION PREVIEW: 30Y Bund Supported by RV, Bund Scarcity

AUCTION PREVIEW: 30Y Bund Supported by RV, Bund Scarcity

(Bloomberg) -- Germany to Sell EU1b 2.5% 08/2046 at 11:30am CET; analysts are optimistic on the sale given value in RV, bund scarcity concerns, supply pause in the sector.
  • Citi (Harvinder Sian)
    • Expect flatter German 10s30s over medium term; in RV, German 30s look cheap vs 20s, also see value vs 30Y DSLs given the recent 30yr bund underperformance vs other core/semi-core EGBs
  • Mizuho (Peter Chatwell)
    • 30Y bund roll (07/2044-08/2046) widened 0.9bps from tightest levels seen in early June, partially down to decision for two auctions in a row of this bond; now 0.5bp cheap to fair value
    • Recent fall in oil prices, subsequent flattening of 10s30s means that 30Y Germany has less allure from a macro perspective
    • Any weakness into auction should be taken in the market’s stride, given ongoing bond scarcity concerns
  • Commerzbank (David Schnautz)
    • Auction should keep streak of record low primary market yields intact, current yields in secondary markets of 0.46% vs 0.65% last tap in June
    • Prior three 30Y bund auctions were technically covered, lack of relaxation of ECB QE depo rate restriction should outweigh concerns following last week’s poor OBL auction
    • Two-month supply pause in 30y sector, three months until the last reopening not just of the Bund Aug46 but in 30y sector in general, expect a smooth, covered auction
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Harvinder Sian (Citigroup Inc)
David Schnautz (Commerzbank AG)
Peter Chatwell (Mizuho Financial Group Inc)

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