Fri Oct 19, 2012 6:45am EDT
* German auction may struggle against better backdrop
* Poor demand may trigger further Bund sell-off
* Italy riding high after BTP Italia sale
By Kirsten Donovan
LONDON, Oct 19 (Reuters) - Germany's 10-year bond auction next week may struggle to attract investors against a backdrop of growing appetite for riskier assets after Spain clung on to its investment grade rating before an expected bailout request.
German bonds have come under heavy selling pressure this week, with 10-year bond yields rising around 15 basis points and Bund futures sliding over a point and half as investors greeted Moody's decision not to cut Spain to "junk" with relief.
Spain has taken centre-stage in the euro zone debt crisis this year, with worries it will lose access to financing markets spurring a flight-to-quality dash by investors who have piled into low-risk German debt.
Madrid is now widely expected to ask for a bailout, although the likely timing of a request is unclear, paving the way for the European Central Bank to buy its bonds. That should prevent borrowing costs becoming unsustainable, leaving longer-dated German bonds with yields still at ultra-low levels in historical terms looking less attractive.
Two previous German 10-year bond auctions in September - including the launch of the September 2022 bond to be sold next week - failed to attract enough bids to cover the amount on offer - a result referred to as a "technical fail".
"With Bunds under pressure and risk appetite flamboyant, it's going to be a tough sale (next week), said Michael Leister, senior rate strategist at Commerzbank.
"That said the spike in yields may just be enough to trigger some demand."
Germany will offer investors 4.0 billion euros of the 10-year bonds next Wednesday and dealers may try and cheapen the paper up ahead of the sale by selling it as they make room for the new tranche on their books.
"The bond has cheapened in relative value terms," said Nomura rate strategist Artis Frankovics. "But that said, it could cheapen more."
A less successful sale would not raise concerns about Germany's ability to fund itself, he added: "It may trigger a further sell-off in Bunds but we don't have concerns about the fiscal situation in Germany at the moment."
There may also be some competition for investors' funds from triple-A rated Finland, which will kick off the week's issuance on Tuesday, selling 10- and 30-year bonds, which offer modestly higher yields than their German equivalents.
Italy - whose bonds are the best performing of the euro zone's liquid issuers year-to-date - will auction zero-coupon and inflation-linked debt next Friday before a sale of conventional five- and 10-year paper the following week.
Italy has seen strong demand for its bonds since the ECB pledged in August to buy the debt of struggling countries which ask for financial assistance.
The most recent Bank of Italy data showed that international investors tentatively bought Italian bonds again in June after dumping them since the middle of last year - a trend which is expected to have continued to the present.
On Thursday, the head of the Treasury's debt management office said Italy would reduce the amount of debt it plans to sell by year-end after selling a hefty 18 billion euros of inflation-linked paper maturing in 2016 to retail investors.
"The huge size now raises questions about how Italy may be driven to adjust its issuance for the rest of the year," Barclays Capital strategists said in a note.
"In the short term though, we believe the inflation-linked 2016 BTP (BTPei) may struggle to perform in relative value as the huge size of the BTP Italia appears to have captured some interest that would otherwise have gone towards BTPeis."
The details of next week's zero-coupon and inflation-linked BTP auctions will be announced on Wednesday, with auctions set to be supported by 17 billion euros of redemption and coupon payments due at the end of the month.
- Link this
- Share this
- Digg this
- Reprints
Anda sedang membaca artikel tentang
EURO DEBT SUPPLY-Germany may struggle for buyers at 10-year sale
Dengan url
http://sarapannasiudak.blogspot.com/2012/10/euro-debt-supply-germany-may-struggle.html
Anda boleh menyebar luaskannya atau mengcopy paste-nya
EURO DEBT SUPPLY-Germany may struggle for buyers at 10-year sale
namun jangan lupa untuk meletakkan link
EURO DEBT SUPPLY-Germany may struggle for buyers at 10-year sale
sebagai sumbernya
0 komentar:
Posting Komentar