75 bln Bond auction this week

[Zulu89]

im wondering what would happen if the bond auctions due this week weren't heavily participated in. what would it mean for the bund?

 

[Rhody Trader]

First, a minor correction. In Treasury market terms only instruments with a 30-year original maturity are termed "Bonds". The rest are "Notes".

My guess is that if the Treasury Refunding this week doesn't see good participation it wouldn't impact the Bund overly much. It would probably impact the USD, though, and potentially stocks - depending on how bad things went.

 

[cuotes]

I'm new in bonds, but it seem that a failed auction does not represent a shortage of demand: if that Bund had been for sale at a lower price, there would have been plenty of demand. Rather, the failed auction is a failure of the auction mechanism to find the price at which there is demand.

There is another deeper problem lurking beneath the surface. The purchase of a country's debt is based on faith that the government will pay the bondholders back in full. Could it be that investors in Europe are losing faith in their governments? That may be one reason for staying out of these markets.

On wednesday 12th, there is a bund issue. It's a "reopening".
I tried to find info, but still don't know what reopening means

Does anyone know at what time is it?
I would like to follow eurobund future in real time to see what happens.

 

[cuotes]

First, a minor correction. In Treasury market terms only instruments with a 30-year original maturity are termed "Bonds". The rest are "Notes".

thx for the info

Does it apply with german bonds? EuroBund is 8-10 years.

 

[Martinghoul]

I'm new in bonds, but it seem that a failed auction does not represent a shortage of demand: if that Bund had been for sale at a lower price, there would have been plenty of demand. Rather, the failed auction is a failure of the auction mechanism to find the price at which there is demand.

There is another deeper problem lurking beneath the surface. The purchase of a country's debt is based on faith that the government will pay the bondholders back in full. Could it be that investors in Europe are losing faith in their governments? That may be one reason for staying out of these markets.

On wednesday 12th, there is a bund issue. It's a "reopening".
I tried to find info, but still don't know what reopening means

Does anyone know at what time is it?
I would like to follow eurobund future in real time to see what happens.

I am confused about your first point. If, theoretically, an auction fails (i.e. goes uncovered), how exactly does this NOT indicate a lack of demand? This is, after all, an auction process, right...

Now, as to the practical matters, bund auctions, technically, can't fail (neither can gilt, nor USTs, really). The underwriting mechanisms differ, but ultimately there's always a bid (either Finanzagentur/DMO retains the remaining amount at will or the primary dealers submit sufficient bids). However, even if the bond gets picked up by someone, lack of demand sends a very clear signal to the mkt.

If anything, given the stance of the Central Banks in Europe, UK and US, I'd say investors should really worry a lot more about the fate of their USD and GBP holdings, rather than EUR. Obviously, it's a complicated game, with lots of factors at play.

A "reopening" or a "tap" is when the issued bond already exists and the auction is just to sell more of it.

Bund auction results normally come out arnd 10AM.

For Germany:
BuBills - short-dated bills
Schatz (BKO, aka BUNDESSCHATZANWEISUNGEN, aka German Two Year Notes) - 2y
Bobl (OBL, aka BUNDESOBLIGATION, aka German Five Year Bonds) - 5y
Bund (DBR, aka German Government Bonds) - everything else

 

[N Rothschild]

your all forgeting there cant be a failed auction in america due to the way the primary dealers are set up

 

[Martinghoul]

your all forgeting there cant be a failed auction in america due to the way the primary dealers are set up

I wasn't forgetting it...

BTW, there's, apparently, a sh1tload of redemptions/coupons in UST this time around, which is very likely to affect this refunding round in a positive manner.

 

[Rhody Trader]

BTW, there's, apparently, a sh1tload of redemptions/coupons in UST this time around, which is very likely to affect this refunding round in a positive manner.

Yeah, only about $14bln in new debt.

 

[Martinghoul]

Yeah, only about $14bln in new debt.

Apparently, net supply is actually negative (excluding the Fed buybacks). $61bn in redemptions and $23bn in coupons vs $75bn of issuance.

 

[cuotes]

I am confused about your first point. If, theoretically, an auction fails (i.e. goes uncovered), how exactly does this NOT indicate a lack of demand? This is, after all, an auction process, right...

I'm confused too :|
I think it is because US and German auction works different ( I repeat I'm novice in this field).
German is by means of closed-envelopes, so maybe there is demand, but not at that price????

I'll try to look into it in further detail.

 

[Technically Fundamental]

I though if the auction failed it meant that general market sentiment is that buyers thought there was better investment opportunity elsewhere due to a) low interest rates b) risk of inflation

 

[Martinghoul]

I'm confused too :|
I think it is because US and German auction works different ( I repeat I'm novice in this field).
German is by means of closed-envelopes, so maybe there is demand, but not at that price????

I'll try to look into it in further detail.

Well, they do work somewhat differently, but not that differently...

Ultimately, one way or another,if there's a lack of demand for newly issued bonds, the auction process will expose it. Symptoms will vary, but it will be made abundantly clear to the mkt.