GERMAN AUCTION RESULTS: Very soft 10-year Bund auction; still no futures impact
- Another German auction with soft demand - this time for a 10-year Bund.
- That was the smallest volume of bids for a 10-year Bund auction since October 2022.
- Some of this is expected as it is a smaller auction size (E4.0bln rather than the recent E4.5bln) but the bid-to-offer of 1.06x compares to 1.64x earlier this month and the bid-to-cover of 1.38x compares to 2.16x - so those metrics are weak too.
- Still not a big impact on Bund futures.
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EGBS: Weak German Services PMI Buoys Bunds, But Rallies Contained
Bund futures rallied after the German flash March services printed weaker-than-expected at 50.2 (vs 52.0 cons, 51.1 prior), a sign that underlying demand conditions remain subdued. Stronger-than-expected manufacturing prints in France and Germany capped upside though, with Bunds not able to close the opening gap at 128.48 (currently -11 ticks at 128.37). Beyond the opening gap, initial resistance in Bunds is the 20-day EMA at 128.83.
- Overnight weakness came on reports that US President Trump’s April 2 tariff announcement will be more targeted – as opposed to broad-based – than currently expected.
- German yields are up to 1bp higher on the session. The DFA has announced that there are no changes to auction sizes in Q2 for either capital markets or for Bubills. This was broadly as expected.
- Supply is due from the EU at 1030GMT, which will also be limiting rallies in Bunds.
- Earlier, ECB Executive Board member Cipollone provided characteristically dovish comments, suggesting the case for an April rate cut has grown.
- 10-year EGB spreads to Bunds are generally tighter on the session (BTP/Bund is 1.5bps tighter at 109.5bps), even as European equities move away from session highs. IRISH bonds underperform.
MNI: UK FLASH MARCH MANUF PMI 44.6 (FCAST 47.2, FEB 46.9)
- UK FLASH MARCH MANUF PMI 44.6 (FCAST 47.2, FEB 46.9)
- UK FLASH MARCH SERVICES PMI 53.2 (FCAST 51.0, FEB 51.0)
EGB FUNDING UPDATE: German Q2 Funding Update
The DFA has announced that there are no changes to auction sizes in Q2 for either capital markets or for Bubills. This was broadly as expected - with increases in issuance only expected in H2 of this year (if there is an increase in defence spending quickly, that can probably be financed from cash reserves until issuance plans can change for H2). The DFA did, as usual, announce the breakdown of 15/30-year auctions for Q2:
- 15-year Bund auctions:
- 30 April: E1.5bln of the 2.60% May-41 Bund (ISIN: DE000BU2F009) alongside E500mln of another issue.
- 28 May: E1.5bln of the 1.00% May-38 Bund (ISIN: DE0001102598) alongside E500mln of another issue.
- 30-year Bund auctions:
- 16 April: E1.5bln of the 2.90% Aug-56 Bund (ISIN: DE000BU2D012) alongside E1bln of another issue.
- 14 May: E1.5bln of the 2.90% Aug-56 Bund (ISIN: DE000BU2D012) alongside E1bln of another issue.
- 18 June: E1.5bln of the 2.50% Aug-54 Bund (ISIN: DE000BU2D004) alongside E1bln of another issue.
