Germany sells 4.04bn euro of 10 years bonds

LONDON: Germany sold 4.04 billion euros of 10-year government bonds on Wednesday, drawing just enough bids to cover the total amount issued after strong investor sentiment data on Tuesday suggested Europe's largest economy was bouncing back.

The 10-year paper drew bids worth 1.2 times the amount allocated to investors compared with 1.7 times when the bond was launched in January and below a 1.39 average at 2012 auctions of 10-year bonds.

It was sold at an average yield of 1.66 percent compared with 1.56 percent at January's sale and an average of 1.58 percent at last year's sales.

LATEST COMMENTS:

MICHAEL LEISTER, STRATEGIST, COMMERZBANK, LONDON

"A bit of a mixed bag. The eye-catcher is the low bid cover ratio and the low overall bidding of just above 5 billion which is probably what the market is focused on given the drop in the Bund future.

"That said, overbidding was actually quite strong so the pricing side was very favourable."

LYN GRAHAM-TAYLOR, RATE STRATEGIST, RABOBANK, LONDON

"This is a weak result with the auction only just being covered on a real basis although the tail was still zero and overbidding slightly higher than when this bond was last issued.

This may be explained by the general risk-on tone of recent times and also that many investors are looking to sit on the fence heading into the Italian elections that start at the weekend.

"A risk-off reaction to whatever the election result will be, except (former prime minister Silvio) Berlusconi getting in, is not going to be sustained because in the worst case you are back-stopped by the ECB and that would probably limit your downside."

EARLIER COMMENTS:

ALESSANDRO GIANSANTI, RATE STRATEGIST, ING, AMSTERDAM

"It doesn't seem so great, I think yesterday's release of the ZEW figures led to this poor result, The real indicators in Germany point to substantial growth at the end of the year. Eonia levels are keeping the short-end of the German curve (anchored) but yields can go higher at the longer end."

MARKET REACTION:

Bund future down 45 ticks at 142.37 vs 142.36 before auction.German 10-yr yield last up 4.4 bps at 1.666 percent vs 1.667 percent before auction.