LONDON: Germany sold 3.3 billion euros of two-year bonds on Wednesday, finding strong demand due to the risk of recession-inducing fiscal tightening in the US and on bets that official rates will stay low in Europe for some time.
The bonds sold at a yield of -0.01 percent, versus -0.02 percent at last month's auction and a 0.099 percent average at sales of similar-dated paper this year.
Investors bid 1.9 times the amount allotted, the same as the previous sale and compared with a 2012 average of 1.88.
PATRICK JACQ, RATE STRATEGIST, BNP PARIBAS, PARIS
"It's in line with the previous one. You have some investors that have no choice - they have to be invested in short-dated, triple-A, core paper. But it's expensive. I would not be long Schatz at these levels."
ARTIS FRANKOVICS, RATE STRATEGIST, NOMURA, LONDON
"The auction was good. It's the last auction for this year so they ended the programme pretty well. If you look at all the auction statistics the bid/cover was good although compared to the last auction maybe it's not as excellent. But looking at the average bid/cover for the sector it's a good auction.
"Fundamentals haven't changed for the Schatz. There's still demand for high quality collateral."
ANNALISA PIAZZA, MARKET ECONOMIST, NEWEDGE, LONDON
"Demand was strong, with total bids at 6.44 billion euros and a bid/cover of 1.9 times, in line with the November auction when the paper was launched. The auction tail was 2 cents, also in line with the previous auction. All in all, demand was solid and the tap was easily absorbed."
MARKET REACTION:
- Bund future up 24 ticks on day at 142.98 vs 142.96 before auction.
- Two-year Schatz yields were 1.3 basis points lower on the day at 0.003 percent vs 0.005 percent before the sale.
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