German 30 Year Bund Auction "Unsubscribed"
Earlier today, the Bundesbank tried to sneak through some EUR3 billion in long-dated (30Y) paper. It didn't quite succeed, because if one excludes the retention by the German bank which already has its hands full with TARGET2, the auction was technically a failure. As Newedge points out, without Buba retention, the launch of new 30-yr bund would have been undersubscribed which is just a polite way of saying the above. What happened is that the German debt agency sold EUR2.405b of new 2.5% 30Y Jul-44 Bund, at an average Price 101.93 and average yield of 2.41%. Of this, the Bundesbank retained 595 million as the total target was for EUR3 billion in issuance; Total non-Buba based bids were a "weak" EUR 2.747 billion. The bid/cover was modest 1.142x; with the auction tail 18 cents “further underpinning the weakness of demand." Finally, per Newedge, the new paper looked rich vs previous rolls ahead of today’s auction, “explains the sluggishness of today’s demand.” Of course, with the now daily bipolar market, had this auction taken place on Monday when Europe was again imploding, it would have been a stunning success. Instead, today is one of those risk on days. But for anyone who bought into the "safety" of German paper 48 hours ago, today they are being carted out legs first. Until, of course, the attention shifts to the disaster that is the PIIGS, and as of earlier today, the UK once more.