26 Nov 2012 – “ Sailing ” (Rod Stewart, 1975)
Hard pressed to find anything remotely exciting today. Equities losing a little shine, but understandable given last week’s 5% rush (and 14% tightening in Credit). Bonds stuck in range. Fiscal Cliff hailing back (in yet rather timid manner, though). Waiting on Greek rescue revelations. Yawn!
"Sailing" (Bunds 1,41% -3; Spain 5,6% unch; Stoxx 2542 -0,4%; EUR 1,296 unch)
Not much going on over the weekend. US equities closed up a further 0.3% after Europe went home in yet another shortened session, in order to go shopping. Divergent views of whether Black Friday was good or not, but obviously, if BF itself was a little below expectations, it’s because the whole thing has morphed into an extended Black Weekend and weekend numbers look like plenty of shopping got done.
Fiscal Cliff potentially back into the limelight with some US politico recognition that not much had been done so far (since the, then well-timed, Boehner intervention Friday, 10 days ago, which turned around markets).
Asian session muted with the Nikkei only gaining 0.25% today (…). Rest mixed. China still on the heavier side, though. Looks like future annual growth targets might be taken down to +7.5%.
Greek pre-session #3 pre-huddles looking to get things done by tonight. Or not… Catalan separatist vote strong, however only on a combined basis, with Mas losing some support. Might just be unruly, after all.
Spanish mortgages still plunging (-35.3% after -33.2% in mortgage-capital loaned). Italian Oct Retail Sales slightly disappointing at +4.3% MoM / +3.3% YoY (fcst +4.6% / +3.6% after -1.3% / +3.1%). German Consumer Confidence less upbeat than last week’s IFO numbers at 5.9 (fcst 6.2 after 6.3 rev. 6.1).
Slightest Risk Off-start of the week, but just so. Bunds picking up some colour (alongside USTs in Asia), down 2 bp to 1.42% (1.67%) with the other EGBs sluggishly following. Equities a wee bit lower with first Credit quotes out by a tick or two. Italy and Spain a tick wider. EUR 1.297. Not much to write home about…
Getting a little more ROff with markets slowly drifting lower with equities off a quarter, Credit ticking a little wider, as did Periphery bonds. No specific trigger. Given last week’s performance, not a huge surprise per se.
We had the last auction out of Belgium for 2012 with the targeted EUR 3.2bn sold with EUR 655m 3.500% Jun 2017 at 0.935% (COB 0.98% and last 1.08% end of Oct), EUR 759m 4.000% Mar 2019 at 1.374% (COB 1.435%), EUR 926m 3.000% Sep 2019 at 1.582% (COB 1.640%) and finally EUR 855m 4.250% Sep 2022 at 2.22% (COB 2.290% and last 2.42% end of Oct). Nice prices, well overbid compared to the Friday close. All bonds done on historical auction lows (and near last week’s all-time lows).
EUR 3bn 12m bills out of Germany at -0.0085% (last -0.0095%), as well as the weekly French 3, 6 and 12m bills for nearly EUR 6.8bn at -0.02%, -0.01% and +0.019% (all about unchanged) to round up today’s supply.
We’ll have up to EUR 3bn Dutch 3 YRS tomorrow (COB 0.135%), next to EUR 4bn Spanish 3 & 6m bills (last 1.415% and 2.023% one month ago).
Italy announced this week’s funding programme with EUR 3.5bn 2 YRS Zeroes tomorrow (last 2.397% in Oct), next to EUR 1bn in ILBs, EUR 7.5bn 6m bills on Wednesday (last 1.347% one month ago) and bonds (details not yet announced) on Thursday. Tomorrow’s CTZ should normally print at their tightest levels in over two year (CTZ jumped from 1.77% to 2.31% in Oct 2010, hitting their 7.81% post-EUR introduction high one year later in Nov 2011. 3 LTROs and 1 OMT later...).
EUR 3bn additional German 5 YRS on Wed.
Midday on mid-morning levels. EGBs a tick firmer for choice, but just so. Periphery a tick wider. Not much happening.
Bunds 1,42% (-2), OBLs at 0,43% (unch) and BKOs -0,005% (-0,2). UST 1,67% (-2).
Spanish 2s at 2,98% (+2), 10s at 5,62% (+2). 2-10 YRS spread 264bp (unch). Italian 2s at 1,85% (+3), 10s at 4,76% (+1). 2-10 YRS spread 291bp (-1).
Equities down 0.5%, Credit 3 ticks wider (+2.%).
EUR 1.297. Commodities flat from Friday’s close.
Waiting for the US view of things and input with no early figures to kick-start the week.
Getting a little more pressure with US accounts coming in after lunch, but with the softness concentrated mainly on equities.
US cash open in line with futures, slightly below the level of European COB, thus stabilizing European equities there, although UST are on the firmer side at 1.65 (-4).
Not much on Greece outside that OSI is supposedly rejected by all but one EUR member (...)(Hey, worth a try, no?). Question is how bespoke and on what conditions will this latest round of brinkmanship be?
Bank of England getting maple-leaved and squidded (…).
Bit of end of day wariness with the Dow nowhere near the 13-handle. European stocks about back on Thursday evening levels (except Germany), basically in sync with the US. Credit correcting last week’s excesses, 3% wider across the curve. Crossover back above 500.
EGBs holding ok, but not looking overly eager either. Hard Core 3 tighter, Soft 2 tighter. Periphery flat. Belgium still 13 over France. Greek bonds about unchanged.
Bunds closed at 1,41% (-3), OBLs at 0,42% (-1) and BKOs -0,005% (-0,2). UST at 1,64% (-5) COB.
Spanish 2s at 2,98% (+2), 10s at 5,60% (unch). 2-10 YRS spread 262bp (-2). Italian 2s at 1,81% (-1), 10s at 4,75% (unch). 2-10 YRS spread 294bp (+2).
EUR barely moving, tightest of range. Commodities yawn!
10 YRS Bunds still sluggishly trading on the lower end of their range (1.13% - 2.07% between retracements at 1.35%, where they remained stuck for a week a fortnight ago, and then 1.49% and 1.60%.
Take-away: Hard pressed to find anything remotely exciting today. Equities losing a little shine, but understandable given last week’s 5% rush (and 14% tightening in Credit). Bonds stuck in range. Fiscal Cliff hailing back (in yet rather timid manner, though). Waiting on Greek rescue revelations. Yawn!
Outlook: The Italian zeroes should normally print at the tightest levels in over two year (CTZ jumped from 1.77% to 2.31% in Oct 2010, hitting their 7.81% post-EUR introduction high one year later in Nov 2011). Spanish bills shouldn’t rattle the market. EGBs caught in range. Dropping shoes Risk on the short –term solely out of Greece or on the US Fiscal Cliff. Macro numbers mainly in the US with Durable Goods (Could rise on Sandy), Housing (Case-Shiller and House Prices) and Consumer Confidence. Need to see whether housing will really turn around the economy.
Otherwise, as mentioned on Friday: All is good, unless, that is, if not… (paste any given possible worry or fundamental flaw) resurfaces…
European 50 & 100d averages: EStoxx 2510/2447, DAX 7274/7069, CAC 3448/3404, MIB 15594/15048, IBEX 7843/7462.
US 50, 100 & 200d averages: INDU 13253/13131/12993, S&P 1426/1407/1383, NASDAQ 3041/3017/2985 with AAPL 100/200d at 626/598.
EUR: 50d 1.291, 100d 1.267 & 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 .
Quite some traffic in New Issues after last week slightly lacklustre activity (given the general ROn spirit), especially in corporates, with BASF for EUR 1bn 10 YRS at MS +40, BMW EUR 750m Jun 2018s at MS +53, Belgian utility EANDIS for EUR 500m 10 YRS at MS +115 and even non-IG FIAT with a EUR 400m increase of an outstanding Oct 2016, priced at 7.40% (ca. MS +670). Coventry BS with EUR 500m senior 5 YRS at MS +145. BBVA in Spanish covered bonds for a chunky EUR 2bn 5 YRS at MS +260 (some 90 through Spain). Muencher Hypo EUR 500m 2 YRS at MS -20, a pricing reminiscent of past years of glory and credit folly. Land Niedersachsen for a EUR 150m increase of an outstanding Sep 2019 at MS +4.
10 YRS Yields: Germany 1,41% (-3); Luxembourg 1,54% (-1); Netherlands 1,66% (-3); Finland 1,66% (-3); Swaps 1,72% (-2); EU 1,76% (-2), Austria 1,82% (-2); EIB 1,93% (-1); EFSF 2,05% (-2); France 2,14% (-2); Belgium 2,27% (-2); Italy 4,75% (unch); Spain 5,60% (unch).
10 YRS Spreads: Luxembourg 13bp (+2); Netherlands 25bp (unch); Finland 25bp (unch); Swaps 31bp (+1); EU 35bp (+1); Austria 41bp (+1); EIB 52bp (+2); EFSF 64bp (+1); France 73bp (+1); Belgium 86bp (+1); Italy 334bp (+3); Spain 419bp (+3).
EUR swap curve 2-5 YRS 47bp (-1,0); 5-10 YRS 83bp (unch) 10-30 YRS 62bp (+1,0).
2 YRS German BKOs closed -0,005% (-0,2) and 5 YRS OBLs 0,42% (-1).
Main +4 to 125 (3,3% wider); Financials +5 to 166 (3,1% wider); Cross +15 to 511 (3,0% wider).
Stoxx Futures at 2542 / -0,4% (from 2552) with S&P minis at 1397 (-0,4% from 1402, at European close).
VIX index at 15,8 after 15,1 yesterday same time.
Oil 87,4/110,4 (WTI/Brent) from 88,2/111,0 (-0,9%/-0,5%). Gold +1 at 1749. Copper +1 at 353. CRB at EU COB +1 at 299.
BDIY, still on the rise, but running out of steam, up 4 ticks to 1094. Target 1162-high seen in July, post-Chinese New Year slide.
EUR 1,296 from 1,296
Greek guesstimate: Greek bonds initial unchanged, then a little softer with 2023s a 16.375% and 13.50% unchanged for 2042s. Off last week’s tightest levels (about 16% and 13.25%), but still faring quite well.
All levels COB 17:30 CET
Fast-forward Macro and Events:
European end of month data drought.
Busy data Tuesday in the US. Need to see whether housing will really turn around the economy.
Govie supply: Tue EUR 3bn Dutch 3 YRS, Spanish 6m bills, Italian 2 YRS zeroes. Wed EUR 3bn OBLs in Germany & Italian bills. Thu Italian bonds.
US Tue $35bn 2 YRS, Wed $35bn 5 YRS and Thu $29bn 7 YRS
EC: Tue OECD outlook; Wed M3; Thu Biz Climate and Consumer Conf; Fri CPI
GE: Wed CPI fcst 2% after 2.1%; Thu Unemployment; Fri Retail Sales
FR: Tue Consumer Conf fcst 83 after 84; Wed Unemployment; Fri PPI and Consumer Spending
Italy: Tue Wages; Thu Biz Conf; Fri Unemployment, CPI & PPI
Spain: Tue Budget Balance; Wed Retail Sales fcst -10.7% after -10.9%; Thu Housing Permits; Fri CPI
US: Durable Goods fcst -0.8% after +9.8%, Case Schiller, House Px +0.4%after +0.7% MoM & Consumer Confidence fcst +73 after 72.2; Wed New Home Sales & Beige Book; Thu Q3 GDP 2nd revision, Claims, Pending Home Sales; Fri Personal Income & Spending, NAPM and Chicago PM.
Click link under title or below for today’s musical support:
I am flying, I am flying,
Like a bird 'cross the sky.
Boring day. Boring song. Although a nice one… The guitar player spicing up things is Paul Warren, a session and studio veteran.