20 March 2012 – “Mellow Down Easy” (The Black Crowes, 1996)

20 March 2012 – “Mellow Down Easy” (The Black Crowes, 1996)


Weak Asian markets didn’t take over from the mildly positive US close (although this was mainly due to Apple’s 2.7% performance to its new historic high of $601, given its weight in the indices, as well as some banks) with China down 1-1.5%, dragging the region lower. POBC won’t mellow on property prices and gas prices were hiked. Most European indices down 0.5% at open and then trading lower to -1% by mid morning and down to -1.5% by noon. EUR down a little to 1.32 area, but has lost its risk on / risk off barometer function lately.  Commodities only a touch softer, though. German PPI +3.2%, as expected. No further macro data to lean on.

Credit view complicated by index roll with 16 series slightly softer and the new series setting in stronger. Should balance out in the coming days. New SovX wider, after inclusion of Cyprus in replacement of Greece.

It’s noteworthy that the1%+ equity slide only triggered a mild rebound in Bund futures, barely lifting them to half of yesterday’s high. Obviously, questions about whether safe haven government bonds have reached once and for all inflection point abound.

US figures uneven with Feb housing starts 2k below forecast, but with prior numbers increased by 7k (698k, 706k). Building permits 686k above consensus (686k) with prior data revised up by 6k to 682k. Then again, the influence of a mild winter on US data is an on-going discussion. Probably just underlines the actual sentiment that the US economy has fared about ok lately. It’s the outlook that is hazy. US equity open in sympathy with the ambient mood nevertheless -0.75%, then crawling a little higher.

Spain issued about EUR 5bn in 12 at 1.42% and 18m bills at 1.71%, but here as well the excitement factor has been lost. Likewise for Greece’s EUR 1.3bn 3m bills at 4.25%. Yes, the sizes get circled. Yields have come down, compared to last month. And, yes, bills get bought by local banks and B/C ratios remain comfortable. Only caveat would be the still rather wide tails that these auctions yield.

To round up supply, the EFSF issued EUR 1.9bn of 6m bills at 0.20% with bids for EUR 5.2bn (BC2.7). Last was 0.19% with BC over 3.1 end of Feb.

Despite a lesser supportive environment, new issues remained very active. Or maybe, it’s just the last to jump on the band-wagon before it rolls away again. No less than 5 major corporate deals for over EUR 4bn, plus one senior financial and some SSA activity. It’s noteworthy that New Issue Premium (NIP) has all but vanished, if not, as seen with yesterday’s Veolia, gone negative.

EDF long end 2-trancher EUR 1bn 10s MS+145 & GBP 500m 25 YRS UKT+210; Anglo American EUR 750m 10s MS+112; Vinci EUR 750m MS+125; Daimler EUR 750m 5s MS +65; FIAT EUR 850m 5s MS +530.

ECB deposits added EUR 6bn to EUR 765bn. Top were EUR 827bn on 05 Mar. Btw, the ECB’s SMP (GIIPS buying) yielded once more nothing for last week. Freewheeling in recovering markets and Portugal left on its own.

VIX closed slightly higher at 15 in the US and quoted 15.5 tonight.

Oil trading off $1-1.5 to 106.2 / 124.3 from 107.6 / 125.5 (from European COB) for WTI and Brent. Bit softer, but only so much, despite Saudi Arabia’s pitch of potential supply increase. Gold softer, too, at 1653 (from 1668). CRB down 0.9% on energy, grain, metals.

Baltic Dry’s dry incremental rise by 0.6% a day lately continues to 884 again (from 879).

10 YRS yields: Germany 2.04% (-1 bp), Swaps 2.42% (-2 bp), Finland 2.42% (-2 bp), Luxemburg 2.43% (-2 bp), Netherlands 2.55% (+2 bp), Austria 2.96% (+1 bp), France 3.01% (+2 bp), EFSF 3.20% (-2 bp), Belgium 3.30% (+5 bp), Italy 4.89% (+7 bp), Spain 5.21% (+3 bp)

Spreads: Swaps +36 (unch), Finland +38 (-1), Luxembourg +39 (-1), Netherlands +50 (+2), Austria +92 (+2), France +94 (+3), EFSF +116 (-1), Belgium +126 (+6), Italy +285 (+7), Spain+317 (+4).

Bunds just didn’t manage to get any lift at all from the equity weakness with futures turning even negative in late afternoon, as equities “settled” lower (alongside commodities) and despite some (mild) UST rebound. Warily crawling back into the close. Non Core EZ+ a touch softer. Note that Spain is slowly, but surely drifting away from the 5% mark.

Not sure today’s correction already signals a real change of tack at this stage, rather than just some new highs fatigue. Still, it’s a 1%+ correction, which is stronger than seen lately. You wiggle wiggle wiggle everywhere. Then you mellow down easy.

Tomorrow: German 2 YRS and 10 YRS linkers on Wed.

JP Jan Industry activity -0.7% fcst. US Feb home sales 4.61m fcst. Spring!

Rest of week:

EZ PMI and Indu order Thu. Germany PMI Thu. France PMI and Biz confidence Thu & Fri. Italy Retail sales Fri. ECB Thu.

US housing data throughout the week. Jobless and leading indicators Thu. Chinese PMI on Thu.

Click link on title or below for today’s musical support:

http://www.youtube.com/watch?v=0hlqAZGFKcg&feature=youtube_gdata_player