Bund: Lot of activity on the primary market - Natixis

Research Team at Natixis points out that there was a lot of activity on the primary market with 27.9bil. securities on offer in the previous week as the market had a tough time digesting this high number.

Key Quotes

“On Monday, the Italian treasury tapped its BTP 0.05% 10/19, BTP 2.45% 9/33 and BTP 3.25% 9/46 for 3.16bil., 1.66bil. and 1.64bil. respectively. The long BTPs were the best received, as their respective coverage ratios of 1.6 for the 15 year and 1.7 for the 30 year bear out, while the 3 year had a mixed reception with a 1.4 coverage ratio. The same was true for the new benchmark, the BTP 1.85% 5/24, which raised 4.55bil. with only 5.73bil. in orders. On Tuesday, it was the DSTA’s turn to tap the DSL 0% 1/22 for 2.275bil., which is below the upper limit of 3bil. that the treasury had announced. On Wednesday, Germany floated 1bil. in iBund 2.5% 8/46 with a cover ratio of 1.41. Spain came on the market on Thursday in its SPGB 1.30% 10/26, SPGB 5.15% 10/28, SPGB 2.9% 01/46 and SPGB 0.40% 4/22 for 1.4 bil., 1.07bil., 0.67bil. and 1.67bil. respectively. Just as was the case for its counterparts this week, demand was low with an average coverage ratio of 1.47. The AFT placed 8.8bil. in OATs with two successful operations in the 5 year segment: the OAT 0% 5/22 and the OAT 2.25% 10/22, with an average coverage ratio of 2.13. In the 3 year (3.975bil. in OAT 2/20 was issued) and the same thing in indexed bonds with securities that had more trouble than usual finding takers.”

“This week: The expected volume to be floated will be low with only 7.2bil. in securities on offer. On Monday, Slovakia sold 318Mns of its SLOVGB 0% 11/23 and SLOVGB 1.375% 01/27 for an estimated total of 0.7bil. On the same day, the Belgian Treasury will be tapping its OLO 0.80% 22/06/2027, OLO 1.90% 06/2038 and its OLO 4.25% 03/2041 for around €3.5bil. Overall according to estimates. Finally, it will be Finanzagentur’s turn to tap the Bund 10Y 2/27 for 3bil.”

“Flows: Virtually no maturing bonds expected next week (0.4bil.), which implies an unfavorable net flow of 7.16bil.”

“Ratings: Next Friday, Moody’s will be publishing its rating reviews for Cyprus.”