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German 10 Year Bund Auction Fails To Cover Issuance As Contagion Rages At The Core

Tyler Durden's picture





 

If that headline is confusing to readers, it simply means, in a polite way, that Germany had a failed Bund auction. The country sold €4.075 billion in 10 Year Bunds after it had attempted to sell €5 billion and got just €4.55 billion in bids. The result made it "technically uncovered" and reflects the fear in the market that Germany will be forced to shoulder the burden of the EFSF expansion. And even with this poor result, the OAT-Bund spread still managed to blow out to another all time record of 115 bps overnight. The contagion at the core is there.

Reuters has more on the internals:

Germany sold 4.075 billion euros in its final reopening of the September 2021 bond, bringing the outstanding amount to 16 billion euros. A new January 2022 benchmark will be launched in November. The bid/cover ratio at the sale was 1.1, below the 1.5 at the previous sale in September and the 2011 average at 10-year Bund sales of 1.61, according to Reuters data. But with a target amount of 5 billion euros -- the Bundesbank retained 0.925 billion euros -- the 4.55 billion euros of bids drawn did not match the amount on offer.

 

The last 10-year auction deemed a technical failure was in July. "Looking at the bid/cover and the fact that ... we're facing an undersubscribed auction it shows that when risk appetite is on the rise it's difficult for the Finanzagentur to find enough demand out there," said WestLB's Leister.

And overall commentary:

Germany saw poor demand for its 10-year bonds at an auction on Wednesday as a modest pick up in equities hit appetite for safe-haven debt and low yields failed to lure investors. It was the second weak result in a row for Germany, with a 30-year bond sale last week also technically uncovered despite chunky cash inflows from coupon and redemption payments. Shares and the euro were higher, and German Bund futures lower, before the sale on optimism policymakers will take major steps at a weekend summit to resolve the euro zone debt crisis. "It's a continuous story that we've had over the past couple of weeks that if risk appetite is somewhat better we have very weak demand for German auctions," said WestLB rate strategist Michael Leister.

 

Bund futures extended losses after the auction, hitting a session low of 134.32, down more than a full point on the day, while 10-year yields in the secondary market were 10 basis points higher at 2.12 percent. "Poor demand for expensive paper," said Annalisa Piazza, a strategist at broker Newedge. "Market dealers seem to have been more driven by valuations this time around." But analysts said there was no threat to Germany's ability to fund itself. "I don't think it's a big worry for German credit perception," said ING rate strategist Alessandro Giansanti. "It's more a technical issue given the low level of yields and no strong appetite to buy at those levels, especially when you have some corporate bond issuance coming at a generous discount with attractive yields."

 

Financial markets have been volatile in recent sessions, as expectations of a swift decisive resolution to the euro zone debt crisis rise and fall. After German Finance Minister Wolfgang Schaeuble warned on Monday that there would be no definitive solution at a European Union leaders' summit this weekend, equities and other riskier assets rallied on Wednesday on reports -- later denied -- that an agreement had been reached to increase the firepower of the euro zone's rescue fund .

 


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Wed, 10/19/2011 - 07:26 | Link to Comment Fips_OnTheSpot
Fips_OnTheSpot's picture

Quarantaine! Douchemark!

Wed, 10/19/2011 - 08:48 | Link to Comment gojam
gojam's picture

Deutschmark, Deutschmark Uber Alles

Uber Alles In Der Welt

Wed, 10/19/2011 - 10:44 | Link to Comment Linus2011
Linus2011's picture

über alles

Wed, 10/19/2011 - 12:58 | Link to Comment RafterManFMJ
RafterManFMJ's picture

Deutschmark, Deutschmark Uber Alles

 

Another Dead Kennedys fan? Sweet!

How about Holiday in Cambodia?

 

You're a star-belly sneech
You suck like a leach
You want everyone to act like you
Kiss ass while you bitch
So you can get rich
But your boss gets richer off you 

Well you'll work harder
With a gun in your back
For a bowl of rice a day
Slave for soldiers
Till you starve
Then your head is skewered on a stake 

Now you can go where people are one
Now you can go where they get things done
What you need, my son:. 

Is a holiday in Cambodia
Where people dress in black
A holiday in Cambodia
Where you'll kiss ass or crack 

Wed, 10/19/2011 - 07:28 | Link to Comment jcaz
jcaz's picture

Buwahahahahahaahah!!!!

Wed, 10/19/2011 - 07:54 | Link to Comment The Limerick King
The Limerick King's picture

 

 

The Germans are starting to shake

The EFSF is a fake

With bund auctions failing

And citizens wailing

Perhaps they have made a mistake

Wed, 10/19/2011 - 08:13 | Link to Comment RichyRoo
RichyRoo's picture

If interest rates do rise

The banksters have a suprise

ECB duty of power

Printing loads by the hour

Their ship surely will capsize

Wed, 10/19/2011 - 07:28 | Link to Comment goldfreak
goldfreak's picture

thanks for the simple language so a moron like me can get it

Wed, 10/19/2011 - 07:55 | Link to Comment Bobbyrib
Bobbyrib's picture

+1

I thought what it meant is was it meant, but I wasn't positive.

Wed, 10/19/2011 - 07:29 | Link to Comment El Gordo
El Gordo's picture

Just another green shoot.

Wed, 10/19/2011 - 07:31 | Link to Comment youngman
youngman's picture

So if the Engine of the train is having problems...what does that mean to the cabose????  Now its Sunday..we wait for Sunday...but there are three more 2 o´clock headlines to come out before for the day traders...200 point manufactured swings...you can make fiat doing that..

Wed, 10/19/2011 - 07:31 | Link to Comment bernorange
bernorange's picture

Was it over when the Germans bombed Pearl Harbor?

Wed, 10/19/2011 - 08:49 | Link to Comment afdestruction
afdestruction's picture

Forget it, he's rolling...

Wed, 10/19/2011 - 07:31 | Link to Comment Ronaldo
Ronaldo's picture

More time and people will begin to feel the actual pain of rising credit costs.  This is just the beginning.  If Germany shoulders the debt of the EZ rates are going to negatively impact the GDP, populace and future voting for these fools.

Wed, 10/19/2011 - 07:35 | Link to Comment Al Gorerhythm
Al Gorerhythm's picture

Bah! It's just a technical problem. Didn't you read that an analysist said so. Nothing to see folks. All is good.

Wed, 10/19/2011 - 07:31 | Link to Comment myne
myne's picture

I'm calling 'tipping point'.

Could be wrong. My gut just says it's time.

Wed, 10/19/2011 - 08:05 | Link to Comment YesWeKahn
YesWeKahn's picture

Ignored by the market.

Wed, 10/19/2011 - 07:56 | Link to Comment Zero Debt
Zero Debt's picture

And Germany is still AAA ...

Wed, 10/19/2011 - 07:49 | Link to Comment maxmad
maxmad's picture

this is good for a 10 handle drop in the SP!

Wed, 10/19/2011 - 07:54 | Link to Comment RichyRoo
RichyRoo's picture

so if Germany wants to raise more money at any time in the near future, its likely they will either have to have access to a multi-trillion euro backstop, or they will have to pay higher interest rates which is of course unsustainable in this environment. How can FED swap lines fund future bund purchases? Its the only fiscally responsible thing to do. Sovereign Yield bitchez!

Wed, 10/19/2011 - 07:54 | Link to Comment Dick Darlington
Dick Darlington's picture

Seriously, u can't make this shit up:

RTRS-GERMAN  FINMIN SPOKESMAN - DISCUSSIONS AHEAD OF SUMMIT ARE PRODUCTIVE AND
POSITIVE
RTRS-GERMAN  FINMIN SPOKESMAN - SCHAEUBLE MAY HAVE MENTIONED A HYPOTHETICAL
FIGURE FOR LEVERAGING THE EFSF IN PARTY TALKS ON TUES
RTRS-GERMAN FINMIN SPOKESMAN-LEVERAGING DISCUSSION CENTERS ON HOW WE CAN USE
EXISTING 440 BLN EURO EFSF  MOST EFFECTIVELY
RTRS-GERMAN FINMIN SPOKESMAN-THE UPPER LIMIT OF EFSF IS 440 BLN, THAT IS CLEAR
RTRS-GERMAN FINMIN SPOKESMAN- THE DEBATE IS HOW DO WE USE THIS AMOUNT MOST
EFFECIENTLY

Loooooool!!!

Wed, 10/19/2011 - 08:01 | Link to Comment Bobbyrib
Bobbyrib's picture

In current market talk hypothetical means realistic until the rumor is officially discredited. 

Wed, 10/19/2011 - 07:59 | Link to Comment johngaltfla
johngaltfla's picture

Wait until they try to roll over their 2012 CMBS. Germany is F#@ked.

Wed, 10/19/2011 - 08:05 | Link to Comment Bobbyrib
Bobbyrib's picture

Name one country that isn't.

Wed, 10/19/2011 - 08:14 | Link to Comment maxmad
maxmad's picture

ICELAND

Wed, 10/19/2011 - 12:17 | Link to Comment johngaltfla
johngaltfla's picture

Boom. Winning.

Wed, 10/19/2011 - 08:03 | Link to Comment Schmuck Raker
Schmuck Raker's picture

The true result of new CDS rules?

Wed, 10/19/2011 - 08:07 | Link to Comment YesWeKahn
YesWeKahn's picture

Another melt up today. The market only focuses on one thing. That's scary.

Wed, 10/19/2011 - 08:09 | Link to Comment jtmo3
jtmo3's picture

So....

 

I mean really, what does it matter and who really cares? They've proven over, and over, and over again, that debt, bad news, bk's, whatever, mean nothing. Reality is what they tell us it is and money is only a bankers toy. They get whatever they want and it will continue until something explodes. And that day ain't that close yet.

Wed, 10/19/2011 - 08:12 | Link to Comment lolmao500
lolmao500's picture

Germans need to kick those scumbags in office, hang a few, and take back their country.

Then tell the euro shills to DIAF and leave the euro.

Wed, 10/19/2011 - 08:38 | Link to Comment BarryG
BarryG's picture

Deutsche Bank's London Offices were raided yesterday, in an investigation into manipulation of markets during the last crisis, and fixing euribor rates....

http://germanywatch.blogspot.com/2011/10/deutsche-banks-london-offices-raided.html

Wed, 10/19/2011 - 08:41 | Link to Comment Spigot
Spigot's picture

STDs - State Transmitted Diseases: in this case Germany is no better than the worst case for southern europe. They voted and legislated to fuck the greeks (debt) and now they come home with a nasty case of the Clapp. Anyone paying any attention to this morality play?? Europe is lost. They have no anchor. No one in europe is big enough to save europe, but man, what a party till the hang over, huh?

Wed, 10/19/2011 - 08:46 | Link to Comment Mike2756
Mike2756's picture

Gyro says otherwise, up .01.

Wed, 10/19/2011 - 08:47 | Link to Comment Thunder_Downunder
Thunder_Downunder's picture

... and the Euro rallies.. of course.

 

Trading this market does my frikkin head in.

Wed, 10/19/2011 - 09:12 | Link to Comment Mike2756
Mike2756's picture

Time for the entire u.s. to go on strike, guaranteed to rally the buck.

Wed, 10/19/2011 - 09:14 | Link to Comment Belarus
Belarus's picture

Next week is when things get interesting. There is so much hope that "The Plan" is literrally going to fix everything this is going to be the mother of sell the rumor news when it finally arrives. 

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