02 January 2012

02 January 2012

A first “get back into shape” day marked by mainly closed non-European markets, hence not much to chew on. Equities once more on the bright side of things, as during last 2 trading weeks of the year (+7%), which saw sentiment squeezed to the upside, mainly by equities trading up in thin volume with credit in line on Main. Main tightened to 173 (-13 or 7%) over the last 2 weeks, Financials enjoyed the best run back to +276 (-35 or 11%), while SovX moved from +368 to +356 (-12 or 3%).

German bonds closed the year with yet unseen levels with BKOs trading in negative yield territory, 2 YRS OBLs at 0.13%, 5 YRS at 0.80% and 10 YRS at 1.90%.

Spreads to German 10 YRS: Netherlands +38, Finland +48, Austria +114, France +133, Belgium +232, Spain +321 and Italy +502 (down 25 bp today, having – bravely- swallowed a final auction on Friday).

Primary markets were in stand-by throughout the holiday period with one notable single-handed EUR 750m increase for a KfW July 2015 FRN note.

Chart levels (still valid going into 2012):

Main 155 – 169 – 187 – 215 // Financials 241- 270 – 307 – 365 // SovX 274- 303 – 338 – 394

Euro Stoxx 1936 – 2205 – 2372 – 2506

2 YRS swaps 1.20% - 1.50% - 1.69% - 1.85% // 10 YRS swaps 2.34% - 2.68% - 2.89% - 3.06%

EUR 1.19 – 1.26 – 1.265 – 1.2870 – 1.30 – 1.329 – 1.335

Thank you again for business, support, feedback and loyal readership throughout 2011 and a Happy & Healthy 2012! Keep Douglas Adams’ advice in mind in tackling 2012: Know where your towel is; the Absolute Answer is 42; as well as, DON’T PANIC.