HALISTER1: AUCTION PREVIEW: 30Y Germany Seen Rich Outright And Versus Swaps

AUCTION PREVIEW: 30Y Germany Seen Rich Outright And Versus Swaps

(Bloomberg) -- Germany to sell EU1b 2.5% 08/2046 at 11:30am CET; issue is expensive based on a number of metrics, analysts say.
  • Commerzbank (David Schnautz)
    • Last four 30y sector taps of same size were technically covered after seven consecutive uncovered auctions; track record still poor for 30Y auctions
    • Expect limited spill-over into secondary-market valuations as ongoing scarcity concerns, hunt for duration ensure demand for ultra-long bunds
  • Mizuho (Antoine Bouvet)
    • Outright vs swaps cheapened this week from recent record rich levels, symptomatic of increased directionality of 10s30s, rather than a sign of demand for the bond on auction today
    • In relative value, however, 08/2046 has richened vs 07/2044 both in yield, z-spreads terms since last week; bond is therefore less attractive in relative value, but suggests good demand
  • BofAML (Erjon Satko)
    • ECB’s extension of QE purchases (in both volumes and average maturity), June risk events have created right mix for rates to go lower, pushed German 30y yields to lowest on record
    • After recent flattening in 10s30s, 30y looks rich on the curve and cross-country, still expect haven bid
    • Risk of a remain outcome prompts a repricing higher in 30Y yields
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
David Schnautz (Commerzbank AG)
Antoine Bouvet (Mizuho Financial Group Inc)
Erjon Satko (Merrill Lynch International)

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