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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 | 1788178 Fips_OnTheSpot
Fips_OnTheSpot's picture

Quarantaine! Douchemark!

Wed, 10/19/2011 - 08:48 | 1788353 gojam
gojam's picture

Deutschmark, Deutschmark Uber Alles

Uber Alles In Der Welt

Wed, 10/19/2011 - 10:44 | 1788829 Linus2011
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über alles

Wed, 10/19/2011 - 12:58 | 1789416 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 | 1788183 jcaz
jcaz's picture


Wed, 10/19/2011 - 07:54 | 1788225 The Limerick King
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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 | 1788278 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 | 1788184 goldfreak
goldfreak's picture

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

Wed, 10/19/2011 - 07:55 | 1788234 Bobbyrib
Bobbyrib's picture


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

Wed, 10/19/2011 - 07:29 | 1788185 El Gordo
El Gordo's picture

Just another green shoot.

Wed, 10/19/2011 - 07:31 | 1788186 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 can make fiat doing that..

Wed, 10/19/2011 - 07:31 | 1788188 bernorange
bernorange's picture

Was it over when the Germans bombed Pearl Harbor?

Wed, 10/19/2011 - 08:49 | 1788366 afdestruction
afdestruction's picture

Forget it, he's rolling...

Wed, 10/19/2011 - 07:31 | 1788189 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 | 1788193 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 | 1788190 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 | 1788262 YesWeKahn
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Ignored by the market.

Wed, 10/19/2011 - 07:56 | 1788196 Zero Debt
Zero Debt's picture

And Germany is still AAA ...

Wed, 10/19/2011 - 07:49 | 1788219 maxmad
maxmad's picture

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

Wed, 10/19/2011 - 07:54 | 1788229 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 | 1788231 Dick Darlington
Dick Darlington's picture

Seriously, u can't make this shit up:



Wed, 10/19/2011 - 08:01 | 1788252 Bobbyrib
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In current market talk hypothetical means realistic until the rumor is officially discredited. 

Wed, 10/19/2011 - 07:59 | 1788244 johngaltfla
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Wait until they try to roll over their 2012 CMBS. Germany is F#@ked.

Wed, 10/19/2011 - 08:05 | 1788261 Bobbyrib
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Name one country that isn't.

Wed, 10/19/2011 - 08:14 | 1788284 maxmad
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Wed, 10/19/2011 - 12:17 | 1789261 johngaltfla
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Boom. Winning.

Wed, 10/19/2011 - 08:03 | 1788258 Schmuck Raker
Schmuck Raker's picture

The true result of new CDS rules?

Wed, 10/19/2011 - 08:07 | 1788264 YesWeKahn
YesWeKahn's picture

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

Wed, 10/19/2011 - 08:09 | 1788268 jtmo3
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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 | 1788277 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 | 1788338 BarryG
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Deutsche Bank's London Offices were raided yesterday, in an investigation into manipulation of markets during the last crisis, and fixing euribor rates....

Wed, 10/19/2011 - 08:41 | 1788344 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 | 1788359 Mike2756
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Gyro says otherwise, up .01.

Wed, 10/19/2011 - 08:47 | 1788360 Thunder_Downunder
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... and the Euro rallies.. of course.


Trading this market does my frikkin head in.

Wed, 10/19/2011 - 09:12 | 1788422 Mike2756
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Time for the entire u.s. to go on strike, guaranteed to rally the buck.

Wed, 10/19/2011 - 09:14 | 1788428 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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