how to trade during bond auctions? fundamentally confused

[jagat]

I am a 1 lot German bund trader.I have been told that strong bid to cover ratio means heavy demand of bond. If it is so then in anticipation of strong bid to cover ratio, Bond market should go up(logic of demand and supply).What i have observed is that just few minutes that is 2 to 3 minutes before auction announcement , there comes heavy sell off in bond future contracts. my colleagues tell me that it is because new supply will reduce demand. which one is true? My doubt in simple sentence: why there is sell off in bond future contracts just 1 to 3 minutes before the announcement of auction results?

 

[Mpoufos]

banks already know the auction results beforehand more or less since they trade with eachother

 

[arabianights]

as a general rule you're much better off fading the move after the results are out when people are unwinding their hedges. Doesn't apply during nasty surprises mind

 

[Martinghoul]

The selloff comes because bad people at banks' desks are do bad things... You have to be careful, especially if it's a syndicated issue. Also, looking at bid/cover can be misleading especially with german auctions.

Ultimately the thing to think about is the game-theoretic stuff that happens during the auction setup. There's all sorts of people trying to front-run the supply. Other people, in turn, will be trying to front-run the front-runners and so the game goes on. You have to be careful.