To fail one German bond auction is a coincidence…
To fail two is a bad sign…
To fail three is, well, we’re not sure what.
On Wednesday the German government re-opened the 1 per cent December 2012 Schatz with the planned auction of up to €5bn worth of the short-term debt. Planned because in actuality, it only sold about €4bn of the bonds. The stats via Bloomberg:
08/12/2010 10/11/2010 06/10/2010 08/09/2010 =========================================================================== Total bids 4.575 6.801 9.070 8.230 Competitive 2.325 3.735 5.880 5.455 Non-competitive 2.250 3.066 3.190 2.775 Allotment 4.005 4.926 4.121 4.839 Low price 100.140 100.030 99.965 100.340 Average price 100.167 100.040 99.973 100.348 Average yield 0.920% 0.980% 0.760% 0.580% Allotted at low 100.0% 100.0% 100.0% 40.0% Non-comps allotted 100.0% 85.0% 95.0% 100.0% Bid-to-cover 1.1 1.4 2.2 1.7
This doesn’t technically count as a failed auction — it did achieve that 1.1 bid-to-cover ratio because of the reduced allotted amount — but it doesn’t look healthy with that total bid figure of €4.58bn either. Also worth noting this auction had been expected by some to see better demand than some of the previous bund-flops.
From MNI:
The auction is seen underpinned by strong reinvestment flows this week from Germany, which includes a redemption payment for E14.0bln and coupon payment for E320mln. In addition, the 1.00% 2012 Schatz is the CTD into Mar 2012 Schatz futures contract. That said, the last 2 German auctions were uncovered, mainly due to “flight-to-quality premia”, but this has been unwound in recent sessions as peripheral spreads have tightened. Historic results for Schatz auctions have been mixed. At the inaugural auction on Nov 10 for E6.0bln at average yield 0.98% and covered 1.4 times, with Buba retaining 17.8% of the sale. Prior to this, the old 0.75% 2012 Schatz on Oct 6 for E5.0bln it was sold at 0.76% and then covered an impressive 2.2 times.
Geez, does no one care about year-end window dressing anymore?
And what does this bode for the 11am (New York time) US Treasury auction?
Related link:
Bloodbath of the bonds - FT Alphaville
Fiscal pooling in the eurozone - FT Alphaville