There is only so long that the Bundesbank can keep ignoring the fact that it has recently started piling on failed auction after failed auction. Today, Germany tried to sell €5 billion in 2 Year 1% Schatz notes. And while the official tally on the auction was a 1.1 Bid To Cover at a 0.92% average yield, just above our own 3 Year auction yesterday, (and a drop from the 1.4 previously) this was yet another failed auction, as the bank managed to get only €4.33 billion in competitive and non-competitive bids. The kicker: the Bundesbank retained €995 million of the issue, a whopping 20% of the proposed issue size - this is the amount it could not find any buyers for, and the deficit to what have been a non-failed auction. In other words, after the entire world was rushing to buy German paper, suddenly there is nobody willing to get in.
More from Market News:
The German federal government sold E4.005 billion of the 1.00%-coupon December 2012 two-year notes (Schatzanweisung) at a minimum price of 100.14 the Bundesbank announced Wednesday.
The weighted average price was 100.167. The average yield on the sale was 0.92%, while the bid-cover ratio (excluding retention) stood at 1.1, lower than the 1.4 b/c at the last 2-year auction on November 11.
One hundred percent of bids at the minimum price were accepted. The Bundesbank retained E995 million (or 17.9%) of the issue for its open market operations, bringing the total tranche to E6 billion, as expected. [ZH: this should say 5]
There were a total of E4.575 billion in bids for today's sale. The bids included E2.325 billion in competitive bids and E2.005 billion in non-competitive bids.