German bond issuance faces lukewarm demand; what is the market afraid of as funds flow to safe havens?

⑴ Germany issued 12-month Bubills on Monday, with a new bond auction size reaching 2.77 billion euros, and a reissue of 1.89 billion euros, absorbing a total of 4.66 billion euros in funds. ⑵ The average winning yield of the reissued portion dropped to 2.331%, lower than the previous 2.366%, but the bid-to-cover ratio plummeted from 1.6 to 1.2, indicating a sharp decline in willingness to chase the rally. ⑶ The average winning yield of the new bond auction rose to 2.478%, significantly higher than the previous 2.366%, with the bid-to-cover ratio staying flat at 1.6 and showing no improvement. ⑷ Divergent yields and low bid-to-cover ratios indicate weakening primary market absorption capacity, a shift towards defensive trading sentiment, and more selective allocations to short-term European bonds. ⑸ Combined with global trade concerns sparked by Trump’s tariff remarks, funds have tended to move from risk assets to highly liquid government bonds. The result of the German bond auction reflects supply and demand imbalances as risk-aversion sentiment intensifies.