Pretty boring start into the week on a mainly unchanged basis. The US markets managed to keep their head above water into the close in the tightest range and lack of volatility (the S&P mainly traded between 1435 and 1437…). Asia off to a similar start with most indices closing close to home. Chinese data sets over the weekend were poor, but as stimulus measures had already been announced at the end of last week, the fall-out was thus limited. It’s however a stark reminder that things are slowing off everywhere (Chinese Aug CPI on fcst at 2.0% after 1.8%, PPI below fcst at -3.5% after -2.9%, YoY Industrial production slowing to 8.9% after 9.2%, Retail Sales at 13.2% after 13.1%. Exports up 2.7% after1%, but imports down a dismal -2.7% after +4.7% and +3.5% fcst). To round up soft Asian data, Japanese final Q2 GDP was revised lower to +0.2% QoQ / +0.7% annualized (from +0.3%/ +1% after +0.3 / +1.4%).
On the European front, French macro data were on the brighter side, though, with Biz Sentiment up to 93 (fcst was 89 after90), July IP down to -3.1% YoY (fcst was -3.7% after -2.3% revised lower to -2.5%) and Manufacturing declining as well less than feared to -2.8% (fcst -4.2% after -2.6% revised lower to -2.9%). So all less than feared, but still in absolute terms low data. A bit like last week’s German data, if we are bottoming out somehow, it’s clearly not in v-shape…
Wrangling in Greece with the government so far failing to close a Troika-requested EUR 11.5bn austerity deal.
French 2013 budget to be squared with EUR 20bn in taxes and EUR 10bn of spending cuts.
Moody’s seemingly unimpressed by the OTM, but sees positive time-buying element.
So not exactly the right backdrop for a roaring start, but as seen last week, a good support for further stimulus hopes, this week courtesy of the Federal Reserve’s minting and printing teams. Most indicators unchanged. Commodities a tick stronger, for choice. EGB’s close to Friday closing levels, a tick better for the Core a tick softer for the Periphery. Curves unchanged.
EZ Sentix Investor sentiment actually quite positive eat -23.2 after -30.3 and a fcst that was bleaker at -28.3. Italian final Q2 GDP unfortunately revised lower to -0.8% QoQ/ -2.6% YoY. Third quarter in a row, brings us back to 2008-2009 levels.
Good that there were only bills on the auction front, as the new issue traffic was EXPLOSIVE, comparable to last Tuesday. Flurry of periphery financials and corporates hitting the screens. Experience has shown that periphery windows can be rather small and that one should use these opportunities. Might have been a little too much in choice and range with 19 deals live by mid-morning.
Germany sold EUR 4bn 6m at -0.0147% (after -0.05% last month). EUR 600m retained. Bids for EUR 5.125bn. France sold EUR 4bn 3m bills at -0.021%, EUR 1.6bn 6m at -0.008% and EUR 1.4bn 12m at 0.004%. Roughly unchanged from last week.
The Netherlands will sell up to EUR 2.5bn 10 YRS on tap tomorrow (Last 1.995% end of June. COB 1.89%).
Interesting midday combination of a touch softer equities, softer EGBs, much softer Italy, about unchanged Spain in 10s, but with the Peripherals’ curves going 10 to 20 bp flatter on. Swaps unchanged with Agencies hence about unchanged levels, too.
Odd?!
Bunds 4 bp wider at 1,56%, OBLs at 0,48% (+3) and BKOs 0,043% (+1,3).
Spanish 2s softer at 2,85% (+18), 10 YRS BONOs about unchanged at 5,60%. Italy 10 bp softer at 5,25%.
Spanish 2-10s 275bp (-19). Italian 2-10s 285bp (-10).
Credit tick softer with Main at 127 (+1) and Financials at 207 after 204 (+3). Stoxx Futures down 0.5%. EUR 1,278 from 1,279
No US data to steer things one way or another until NY open, which was rather eventless, slightly negative. En Attendant Godot.
Greek situation doing rounds. Ah, hmm, yes, Greece… Looping with Italian and Spanish bonds up to 5 YRS softening some good 20bp. Not much else to chew on. Risk is lofty and we’re nearing the point where all stimulus measures that were already priced have been delivered. So, what next until the FED? Dutch elections on Wed. German high court might actually deliver some statement tomorrow. Targeted had been for decision by Wednesday - if not blocked by additional calls, demanding to re-consider on the basis of the now-announced OMT. Talking about the German creditor status, Target2 claims rose by EUR 24bn to a record EUR 751bn in August.
Had news leaking that Spain sold EUR6bn of debt to finance the FROB. Details missing (sold to the FROB, then repo’ed by the latter at the ECB?).
Bunds closed at 1,55% (+3), OBLs at 0,47% (+2) and BKOs 0,038% (+0,8).
Spanish 2s closed at 2,79% (+12) and 10 YRS BONOs at 5,67% (+6). Spanish 2-10s 288bp (-6). Italian 2-10s 295bp (unch).
Periphery recouping some losses in the afternoon with both 2s eventually only “only” up 12 bp.
Credit giving back some of its late outperformance with Financials wider by 9 (4.4%).
Quiet commodity front with exception of Copper continuing its rise to 370 (+2%), having now broken this year’s 50% retracement to the upside, and the Baltic Dry continuing its deep sea exploration, now at 666.
New Issues bonanza with EUR 14.5bn printed in 19 trades, of which 7 totalling EUR 7.9bn for Italian and Spanish borrowers. Will need to be digested.
SSA: NRW.Bank EUR 1bn 10 YRS MS +19, ICO EUR 600m 3.5 YRS MS +410, EIB EUR 250m increase 2025 MS +45.
Covereds: CASA PS EUR 1bn 7 YRS MS +50, Banesto EUR 500m Jan 2017 MS +395, Hypo NOE EUR 500m 7 YRS MS +32.
Senior Financials: BBVA EUR 1.5bn 3 YRS MS +380, Intesa SanPaolo EUR 1.25bn 4 YRS MS +345.
Corporates: SNAM (Italian Gas) 2-trancher EUR 1.5bn long 5 YRS MS +285 & EUR 1bn 10 YRS MS +350 (final books were an impressive EUR 12bn), Gas Natural EUR 800m Jan 2020 MS +465, Iberdrola EUR 750m 5 YRS MS +360, Dong Energy EUR 750m 10 YRS MS +88, RTE (French electricity grid) EUR 600m 7 YRS MS +75, Klepierre (French real estate) EUR 500m 7 YRS MS +145, LeasePlan EUR 500m 4 YRS MS +172, as well as US biotech AMGen with EUR 675m 7 YRS MS +80 & GBP 700m 17 YRS UKT +185.
Finally, unrated Austrian retailer Spar for EUR 200m 5 YRS at 3.50% (ca. MS +251) and non- IG Renault EUR 600m 5 YRS MS +365.
Closing levels:
10 YRS Yields: Germany 1,55% (+3); Luxembourg 1,65% (-1); Finland 1,87% (+5); Swaps 1,82% (-1); Netherlands 1,89% (+4); EU 1,95% (unch), Austria 2,13% (+5); France 2,25% (+5); EIB 2,21% (unch); EFSF 2,47% (-1); Belgium 2,67% (+5); Italy 5,23% (+8); Spain 5,67% (+6).
10 YRS Spreads: Luxembourg 10bp (-4); Finland 32bp (+2); Swaps 27bp (-4); Netherlands 34bp (+1); EU 40bp (-3); Austria 58bp (+2); France 70bp (+2); EIB 66bp (-3); EFSF 92bp (-4); Belgium 112bp (+2); Italy 368bp (+5); Spain 412bp (+3).
EUR swap curve 2-5 YRS 50bp (unch); 5-10 YRS 82bp (+1,0) 10-30 YRS 56bp (+1,0).
2 YRS German BKOs closed 0,038% (+0,8) and 5 YRS OBLs 0,47% (+2).
Main at 129 from 126 (2,4% wider); Financials at 213 after 204 (4,4% wider). SovX at 193 from 189. Cross at 510 from 508.
Stoxx Futures at 2531 / -0,5% (from 2544) with S&P minis at 1437 (+0,2% from 1434, at European close).
VIX index at 14,2 after 14,8 yesterday same time.
Oil 96,5/114,9 (WTI/Brent) from 95,6/113,6 (+0,9%/+1,1%). Gold at 1732 after 1735 (-0,2%). Copper at 371 from 364 (+1,9%). CRB at EU COB 312,0 from 310,0 (+0,6%).
Baltic Dry down 0.4% to a beastly 666 from 669. Another 2.9% until hitting the Feb low at 647.
EUR 1,280 from 1,279
ECB deposits at EUR 327bn after EUR 342bn.
SMP buying of course unchanged. Outstanding EUR 209bn. Will most probably not increase anymore…
Greek bonds guesstimates: Unchanged in 2023s at 21.50% and a 25bp wider to 18.50% in 2042s. Tame, given the on-going jitters.
All levels COB 17:30 CET
This Week:
Pretty much a minor macro week. End of week brisker in the US, but anyhow subordinated to the FED decision on Thursday.
No exciting auctions. Will check the Italian 3YRS auction on Thursday to assess the Draghi put after one week.
EZ: Wed Jul IP fcst -3.4% after -2.1%; Fri EZ Aug CPI fcst +2.6% after +2.4%
Germany: Tue Wholesale PX; Wed final CPI 2.2%
France: Wed final CPI +2.3%
Italy: Wed IP fcst -0.5% Mom after -1.4% / -7.6% YoY after -8.2%, Thu final CPI +3.5%, Gov Debt
Spain: Tue Aug House transactions prior -11.4%; Wed final CPI +2.7%; Fri Q2 House prices prior -12.6% YoY
US: Mon cons credits; Tue Trade Balance; Wed Imp Prices, Jul Inventories fcst +0.3% after -0.2%; Thu PPI fcst +1.7% after +0.5% YoY; Claims fcst +370k after 365k; Fri Aug CPI fcst +1.6% after +1.4%, Retail Sales fcst +0.6% after +0.8%; IP +0.2% after +0.6%, Mich Conf 74 after 74.3
China: New Yuan loans figures this week
Click link on title or below for today’s musical support:
The Number of the Beast is the numerical value of the name of the person symbolised by the Beast from the sea. The Baltic Dry incarnated????
And the cheesy video…The 80s produced great music and ridiculous videos. Oh, and there was that thing about Spandex trousers…
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