22 Nov 2012 – “ Free Bird ”
(Lynyrd Skynyrd, 1974)
US
closing fine, Asia closing fine. PMIs a tick better than expected. Fine.
Spanish auction fine. Greek bonds fine. All fine. Slight Risk On. Fine. Fine,
fine, fine… All is good. Free that Bird – or Eat it!
"Free
Bird" (Bunds 1,43% +0; Spain 5,64% -6; Stoxx 2534 +0,6%; EUR 1,288 +60)
---
Uneventful close of
a shortened pre-Thanksgiving session in the US.
Asian session
mostly positive, given the limited Greece
non-deal fall-out on Wednesday in Europe.
Nikkei still galloping ahead, unstoppable, although challenges to the BOJ
independence, growth and inflation rate targets of 3% totally etc. outwardly.
But who cares? Nikkei +1.5% (+8.5% in 10 days).
Only worry child is
China,
despite better PMI data, still trading heavily near 4-year lows (the
2000-mark). HSBC Flash at 50.4 after 49.5 and finally above water.
French PMI at cash
open showing a better than expected performance, clocking in at 46.1 in Services (more
important in France)
on a 45 forecast after 44.6. Manufacturing likewise better at 44.7 (fcst 44
after 43.7).
Flattish open,
ahead of German and EZ PMIs. Equities slightly biased to the upside, in absence
of dropping shoes, ticking up to be in line with the US close. No strong follow up to
the Asian session (given the advance already taken lately). EGBs flat (Bunds
1.43%) to slightly firmer, same for the Periphery (Spain 3.08% in 2s and 5.67% -3
in 10s, ahead of the auction later in
the morning, with auction papers quoted in line about 3 tighter than at
Wednesday’s close). Credit still tightening, tick by tick by tick.
Commodities more or
less where left Wednesday evening. EUR still firming up in the underlying ROn mood at 1.285.
German PMI split
with Manufacturing over consensus at 46.8 (fcst 46 unchanged), but Services
sluggish at 48 (fcst 48.3 after 48.4). Given the industry weight in Germany,
that’ll do. EZ PMI split, too, with the Composite at 45.8 (fcst 45.7
unchanged), Manufacturing better at 46.2 (fcst 45.6 after 45.4), but Services
at 45.7 (fcst 46 unchanged). Then again, given low expectations, this seems as
good as it gets.
Composite at
two-month high; Services at 40-month low; Manufacturing at 8-month high; Manufacturing
Output at two-month high. Some bottoming-out that shouldn’t mask that Q4 will
probably crystallize a serious GDP drop.
Final and most
watched auction for this week out of Spain with nearly EUR 3.9bn sold,
exceeding the targeted EUR 3.5bn, with
EUR 1.7bn 3.75% Oct 2015 at 3.617% (COB 3.66%), EUR 645m 5.00% Jul 2017
at 4.477% (COB 4.53%) and especially EUR 1.5bn 5.50% Apr 2021 at 5.517% (COB
5.57%). Bid to cover quite on the light side again and heavy tails (12.5 cts in
3s, 17.7 cts in 5s and 25cts in 2021s), but nice screen results.
[Sorry.
Had a wrong input at COB yesterday night showing all bonds 10bp wider. Levels
corrected]
Last 3 YRS auctions
3.66% 2 weeks ago, 3.23% one month ago; 5 YRS 4.68% & 4.77%.
This followed
(astutely) leaked news that Spain
had privately placed EUR 3.28bn 5 YRS recently at 4.792% (albeit, released
after the auction, with its own social security fund - and thus not with some
convinced real-money investor). No, no,
no… Spain
definitively not interested in putting an end to possible negative feedback
loops. Muddling to make the whole country TBTF. Seems to work, though..
In the meantime,
the hostage-taking strategy (Help me – or
I’ll blow up!) seems to be working fine with Greek 2023s hitting 16% and
2042s 13.25% (both 75bp tighter).
It’s probably what
Cyprus is up to as well when stating that differences with the Troika could be
bridged – and then breached.
Should this go on,
that would be a real reason for Core EGBs to remain under pressure with Germany and France as biggest paymasters on the
frontline, as this could be interpreted as a de-facto ex post mutualisation of
(past) debt.
Give it 25-30bbp
more bp, let’s say above 1.75% in Bunds and 2.50% in France, and suddenly the tone might
change.
Markets settled
comfortably on late morning levels, in foreseeable absence of (most) of the US
players during the afternoon session.
Midday levels show
EGBs mostly unchanged, give or take. Periphery doing ok, albeit with Spain
off tightest levels.
Bunds 1,44% (+1),
OBLs at 0,44% (+0) and BKOs 0,005% (-0,2).
Spanish 2s at 3,04%
(-5), 10s at 5,65% (-5). 2-10 YRS spread 261bp (+0).
Italian 2s at 1,90%
(-5), 10s at 4,82% (-2). 2-10 YRS spread 292bp (+3).
Equities up 0.5%,
Credit 2.5% tighter.
EUR happy to fly on
its own, staging a solo Risk On chant
to hit 1.288.
Commodities mostly
unchanged.
Not much on the
ticker. Quips of “united, we’ll manage” (on Greece), ahead of the (less
manageable) EU Budget summit.
Drifting during the
afternoon.
Free.
Bird.
Food.
Mood barely dented
by EZ Consumer Confidence sinking 26.9 (fcst -25.9 after -25.7), a new low in
the on-going slide (Latest high -9.8 in Nov 2010. Negative high 20s take us
back to Q2/2009).
Just closing the
afternoon. Not much more. Having braved the odds so far, the Periphery
tightened just a little more. EGBs mostly flat to a tick better after the
confidence data. France a tick softer. A bit of steepening. Schätze trading a
round zero.
Bunds closed at
1,43% (unch), OBLs at 0,44% (unch) and BKOs 0,000% (-0,7).
Spanish 2s at 3,02%
(-7), 10s at 5,64% (-6). 2-10 YRS spread 262bp (+1).
Italian 2s at 1,86%
(-9), 10s at 4,78% (-6). 2-10 YRS spread 292bp (+3).
Spanish auction
paper for once even-keeled in the close at 3.615%, 4.47% and 5.525% (mid).
Commodities rather
drifting sideways. EUR 1.288 (after hitting 1.29).
Take-away: US closing fine, Asia
closing fine. PMIs a tick better than expected. Fine. Spanish auction fine.
Greek bonds fine. All fine. Slight Risk On. Fine. Fine, fine, fine… All is
good. Free that Bird – or Eat it!
Outlook: Final
German GDP & IFO Nov Biz Climate fcst 99.5 after 100, Current fcst 106.3
after 107.3, Expectations fcst 93 after 93.2. French Biz Sentiment fcst 87
after 85, Outlook -53 after -56. Italian Retail Sales and Spanish PPI.
European 50 &
100d averages: EStoxx 2511/2441, DAX 7277/7053, CAC 3449/3398, MIB 15628/15020,
IBEX 7849/7441.
US 100 & 200d
averages: INDU 13130/12992, S&P 1406/1383, NASDAQ 3017/2985 with AAPL
100/200d at 626/597.
EUR: 100d 1.266 &
200d 1.280. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg)
at 1.273 & 1.315, then 1.349 (50%).
Jul 2012 to Sep
rebound levels: 1.231 – 1.247 – 1.261 – 1.274 – 1.291 -1.317 .
New Issues from
Intesa SanPaolo in OBG format (covered bonds) for EUR 1.25bn 10 YRS at MS +200.
Senior FRN ware with ING selling EUR 1.75bn 2 YRS at 3mE +49 and Aktia with EUR
200m 3 YRS at 3mE +113.
Closing
levels:
10 YRS Yields:
Germany 1,43% (unch); Luxembourg 1,55% (-1); Netherlands 1,69% (-1); Finland
1,68% (-2); Swaps 1,74% (unch); EU 1,78% (-1), Austria 1,86% (unch); EIB 1,95%
(unch); EFSF 2,07% (-1); France 2,18% (+1); Belgium 2,33% (-1); Italy 4,78%
(-6); Spain 5,64% (-6).
10 YRS Spreads:
Luxembourg 12bp (-1); Netherlands 26bp (-1); Finland 25bp (-2); Swaps 31bp
(unch); EU 35bp (-1); Austria 43bp (unch); EIB 52bp (unch); EFSF 64bp (-1);
France 75bp (+1); Belgium 90bp (-1); Italy 335bp (-6); Spain 421bp (-6).
EUR swap curve 2-5
YRS 49bp (unch); 5-10 YRS 83bp (+1,0) 10-30 YRS 61bp (+1,0).
2 YRS German BKOs
closed 0,000% (-0,7) and 5 YRS OBLs 0,44% (unch).
Main -3 to 123
(-2,4% tighter); Financials -4 to 162 (-2,4% tighter); Cross -5 to 505 (-1,0%
tighter).
Stoxx Futures at
2534 / +0,6% (from 2518).
Oil 87,2/110,5
(WTI/Brent) from 87,5/110,8 (-0,2%/-0,2%). Gold at 1731 after 1728 (+0,2%).
Copper at 351 from 349 (+0,6%). CRB closed in the US 298,0.
BDIY, up again, +11
to 1084. Target is now the 1162-high seen in July, post-Chinese New year slide.
EUR 1,288 from
1,282
Greek guesstimate:
Greek bonds 16.25% (-50) for 2023s and 13.50% (-50) for 2042s, 25 bp off
today’s tightest levels, but still on the ramp. Hey, everyone seems so keen to
help…
All levels COB
17:30 CET
Fast-forward
Macro and Events:
Elections in
Catalonia will take place coming Sunday.
GE: Fri 23 Final
GDP, IFO Nov Biz Climate fcst 99.5 after last, Current fcst 106.3 after 107.3,
Expectations fcst 93 after 93.2
FR: Fri Biz Conf fcst
87 after 85
Italy: Fri Retail
Sales last +0.% MoM
Spain: Fri PPI
US: Monday Dallas
and Chicago Fed indices). Tue Durable Goods, Case Schiller, Consumer Confidence
and Beige Book
Click
link under title or below for today’s musical support:
Free that bird!!!
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