Germany's Ultra-Long Bond Auction Completed, Bid-to-Cover Ratios Decline, Demand Weakens

[Germany's ultra-long bond auction completed, bid-to-cover ratios decline, demand weakens]

(1) Germany released auction results for two ultra-long bond tranches, with overall issuance concluding smoothly, but market absorption willingness showed marginal changes.

(2) The 30-year bond saw a tap issuance of approximately €780 million, with an average accepted yield of around 3.8%, slightly lower than the previous auction level.

(3) The 20-year bond saw a tap issuance of approximately €870 million, with an average accepted yield also around 3.8%, keeping overall funding costs at a relatively elevated level.

(4) In terms of subscription, the bid-to-cover ratio for the 30-year tenor was approximately 1.6 times, and for the 20-year tenor approximately 2.1 times, both lower than levels seen at the previous auctions.

(5) The decline in bid-to-cover ratios reflects cooling investor enthusiasm for ultra-long tenors at current yield levels.

(6) This may be linked to heightened uncertainty over the long-term rate path, with institutions turning more cautious in allocating long-end bonds.

(7) The divergence in subscription performance between the 20-year and 30-year tenors also indicates a preference for intermediate duration, with pricing for longer-dated risk becoming more conservative.

(8) Going forward, attention should be paid to euro bond yield trends and primary market subscription momentum to assess the sustainability of demand for German long-term bonds.