German 2 Year Auction Fails By 20% Of Notional As Rush From Government Paper Intensifies

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.