20 February 2012 – “Korobeiniki [Tetris Music]” (Hirokazu Tanaka, 1989)

20 February 2012 – “Korobeiniki [Tetris Music]” (Hirokazu Tanaka, 1989)

Once more positive open with good backing from an Asian market supported by Greek solution hopes, as well as the 0.50% cut of Chinese reserve requirements, worth roughly EUR50bn in added liquidity. Asia initially maybe a little over-optimistic, as second thoughts about why the POBC would cut rates and on the back of Japan’s trade deficit figures weakened some of the rally. Still, good enough for about 1% in equities, adding to Friday’s +1.5% close. Credit playing catch-up on open, having lagged into last week’s close. Periphery initially only slightly tighter to Bunds, then performing. Brent flirting with $ 121 on further Iran news, now pre-empting EU embargo and cutting delivery to France and UK (after Southern EU last week). Spot approaching fast the 125.50 high of May 2011. EUR hovering over 1.32 . French and Italian figures slightly better then expected. Belgian consumer confidence falling an nearing post-Lehman levels.

Markets entering wait and see mode on morning levels, while checking screens on Greece deal updates, noting that first reports of “progresses” late morning were hardly market movers. Lots of positive vibes leaked on pre-talks, knowing the Eurogroup meeting as such was only due to start at 15:30 CET. Obviously discussions were on official sector involvement versus PSI.

Markets in stand-still mode, not trading on comments.

Dutch FinMin a bit of a dampener, though, when asking for rigidity and “by the letter compliance” of Greek promises. Escrow accounts and permanent Troika presence in Greece. Had then news that 90% of issues were solved, which is certainly less than what was pitched during the (sunny) morning. Market lull in absence of US and concrete news.

Euro Stoxx highest since 02 Aug 2011. Main and Financials coming back well, but had underperformed in the close of the week.

Realized everyone was always talking about the EUR 14.5bn 4.3% 20 Mar 2012 redemption (of which the actual outstanding amount is EUR 14.35bn), but always omitting the coupon payment that goes with it (EUR 617m), which is no small change, when considering the late bickering about how to achieve a further EUR 325m in savings. In any case, the amount due on 20 Mar is EUR 14.967m – unless PSI’ed on time.

Rumour has it that the exchange will take place between 08 and 11 March (10 and 11 falling on a WE), so no room for hick-ups, if confirmed. Talking of which, checked Bloomberg for “missing” ECB bonds, but couldn’t trace any major changes.

Dutch EUR 2.25bn 3 and 6m bills at 0.05% both and EUR 8bn French bills (Range 0.127% to 0.38%, 3 to 12m). Stable. Eventless. Some more bills tomorrow. Sole “long” end auction this week are EUR 5bn German 2 YRS on Wednesday.

Mixed, although limited bag of primary supply with AAA French UNEDIC printing a sizeable, although generous EUR 2.5bn 3 YRS deal, The Czech Republic in 10 YRS EUR, Intesa with 5 YRS senior, Pohjola with 10 YRS sub and GE on the corporate front.

ECB deposits up EUR 37bn to EUR 454bn. Sounds big, but last month day 3 rise after the reserve period started was sharper (EUR 25bn the first day, EUR 72bn the day thereafter).

Had no ECB buying of bonds last week, a first since Aug 2011, from a mere EUR 59m the week before. February clocking in at EUR 250m. Then again, the ECB’s Greek bond swap, of which not much more was heard today, is certainly a reminder of the possible conflict of interest, once PSI and other official loss sharing discussions come up. Lots of mulling of the bond subordination in the press.

VIX closed down at 17.8 from 19.2 on Thursday. US closed today.

Baltic Dry down slightly again to 715 from 717. Then again China slow, Japan record slow. No trade, no shipping, no surprise. Let’s keep an eye on it.

Spreads to Germany again tighter. 10 YRS swaps +40 (-1), Finland +44 (-2), Netherlands +48 (-2), Austria +110 (-6) France +112 (-5), Belgium +161 (-5), Spain+317 (-13) and Italy +350 (-13). DBR 2022 1.96%, up 3bp.

Spain nearing the 5% mark (5.13%), which is rather the lower end of a broad 5 to 5.50% range (with spikes) 10 YRS SPGBs traded since Nov 2010.

In comparison, Italy closing in on last summer’s pre- and post-August crisis levels of 4.85-5.00%, but not there yet (5.46%).

Tomorrow: Spain 3 and 6m bills for up to EUR 2.5bn. EFSF 6m bills. EZ consumer confidence. Not much else – outside Greece…

Soooo… Waiting for the pieces to fall into place, accelerating… Better not miss those bricks…