29 Nov 2012 – “ Sea of Love ” (The Honeydrippers, 1984)
Looks like yesterday put into practice:
Let’s thank everyone to turn around markets, when they sink. Nothing to break the barn stomp in Periphery bonds (but themselves). Italy
brilliantly stuffed its primary dealer at a 2-year low. Core EGBs holding quite steady, given ROn in Risk and Periphery. Strong US GDP
revision – but, as expected anyway. Given the
actual level in Risk, good numbers are seen as given. Nothing weak, no more,
never. Swimming in a Sea of (Risk) Love. Watch the Event / Headline risk on FC
(& Greece.
The math still seems quite odd…). Hard Periphery (especially
Spain) slap-back in the afternoon, though.
"Sea Of Love" (Bunds 1,37% unch;
Spain 5,32% +1; Stoxx 2579 +1,3%; EUR 1,298 +50)
---
Fiscal
Cliff Ping-Pong, part II. First floored then pepped up, the INDU grabbed some
200 points from yesterday’s lows to close, along side the other indices, a
healthy +0.8%. S&P back over the 1400-mark, and over its 100d average.
NASDAQ likewise back over its 200d mark. The FED Beige Book noted an activity
generally expanding at a measured
pace from prior modest. All is Good!
All
was good in Asia (generally up 1%), too, except for China, which after initially
holding throughout the session, was dumped 1% in the closing hour. Tough love.
See yesterday’s comments on Chinese index levels.
Europe,
swimming in a Sea of Love, and nothing overnight.
Spanish
housing still in the dumps with housing permits +23.2% MoM, but down 51.3% YoY.
I guess, at some stage the base effects becomes such that counting in unit would
be more representative.
German
unemployment a positive surprise with +5k (fcst +16k after +19k), stable at
6.9%.
Italian
Biz Confidence slightly better, too, at 88.5 (fcst 88 after 87.8).
Unsurprisingly,
the day started on a stronger footing in (moderate) Risk On with European
equities up 0.7% (matching the rise in US equities from closing levels).
Adequate, although muted reaction in EGBs with Bunds a tick softer (1.38% +1,
UST 1.63% +1). Not much of a reaction curve-wise, be it in Bunds or in swaps
(on their all-time lows). EGBs in line, flat to a shade softer in the Hard
Core.
Periphery tightening 3-3bp at open with BONOs at 5.30% and Italian 10s at
4.560% (ahead of the 5 YRS, opening at 3.335%, and 10 YRS auction later).
Credit
snapping back yesterday’s widening and opening 3-6 tighter (-2.4%/-3.6%).
EUR
1.297 (from 1.293 close) and Commodities just about 0.4% stronger across the
curve.
Good
traction in Periphery bonds throughout the morning.
EZ
Confidence numbers beating estimates, too (albeit on a low base): Services
-11.9 (fcts -12.5 after -12.1), Biz Climate seen at -1.2 (fcst -1.6 unchanged),
Industrial Confidence at -15.1 (fcst -17% after rev. -18.3) and overall
Economic Confidence at 85.7 (fcst 84.5 unchanged, revised 84.3).
Last
month would thus have been the through for the moment.
Closing
this month government supply with EUR 3bn 5 YRS at 3.23% average yield (COB
3.385%, this morning’s open 3.335%. last 3.80% last month) and just shy of EUR
3bn 10 YRS at 4.45% (COB 4.585%, open 4.56%. Last 4.81% - for off-the-runs -
mid Nov and 4.92% one month ago). Last month’s on-the-run auction had been for
EUR 7bn.
Bid to cover reaaaaally modest at 1.2 for
both. But then, as in late auctions, great prices, but 25bp tighter in 24
hours… Who reaaaaally wants to buy that stuff for real? Honestly?
10s back to mid-Dec 2010 levels. 5 YRS
through the March 2012 lows and hitting, too, Dec 2010 levels. We had hit
2.60-lows in Oct 2010 before rapidly drifting to the 3.75%-4.00% area within 2
months. Not quite there yet for Spain…
Had hence a temporary break in the love for
Italian bonds, although disappointment initially restricted. Cooled off Risk
appetite marginally with equities entering lunch near their highs, 1% above
yesterday’s closing levels.
Credit still strong, on early morning
levels (-3/-6 ticks) with the Crossover back below the 500-mark.
Core EGBs 2 wider, Soft Core flat to a tick
tighter. Periphery good looking, although slightly put off by the Italian
auction results and 8bp wider than the tightest levels seen during in the
morning (and in the last couple of months, as it is). Lows tested at 4.45% in
BTPs and 5.15% in BONOs. Sea of Love!
Note that the correction in Periphery bonds
didn’t really prop up Hard Core demand, as their tightening didn’t trigger
massive sales either.
Bunds 1,39% (+2), OBLs 0,41% (+2), BKOs
0,007% (+2). UST 1,64% (+2) COB.
Spanish 2s at 2,63% (-6), 10s at 5,24%
(-7). 2-10 YRS spread 262bp (-1).
Italian 2s at 1,67% (+1), 10s at 4,52%
(-7). 2-10 YRS spread 285bp (-7).
EUR 1.299, having briefly flirted with the
30-handle, but just so. Oil up 1% throughout the morning. Rest about unchanged.
US figures to start the afternoon with
quite a revision in US GDP, which was actually expected, taking Q3 to 2.7%
(from 2% with forecasts of the revision to 2.8%). Personal Consumption
obviously NOT the driver, as revised down to 1.4% (from 2%, fcst of revision
1.9%). Thanks for government spending!
To round up figures, Claims came a tick over forecasts at 393k (fcst 390k after
410k revised 416k). Continuous Claims at 3287k (fcst 3325 after 3337, rev.
3357).
While the GDP revision remained good in
absolute terms, expectations were a bit higher. Add claims falling less the
expected and bonds got a leg up again, tightening back a little. Risk initially
slightly refreshed, however only so slightly.
US cash gapping up 0.5%, leading Europe
back higher in full sync. Pending Home Sales on the rise, up an unexpected 5.2%
MoM (fcst 1% after rev. 04%), a staggering 18% on a YoY basis (fcst 8.9% after
rev. 8.7%). Can’t be Sandy, can it?
EGBs
put, although the softening in Periphery bonds continued with Spain erasing all
morning gains and Italy back over the 4.50%-mark.
Cherry topping the Sea of Love cup cake:
S&P affirming China’s AA-, given the “exceptional” growth outlook (Might
finally give Shanghai some wings to end the month tomorrow). Worth a good
quarter point extra boost in equities. Ding! Same player schmoozes again.
It remained that Spain is NOT China and
that it remained on the weakish side into the close.
Which can’t be said of long Greeks, still
soaring, given that the buy-back price discussion remains seemingly open and
hitting a new price high of 28.5% of par (12.5% yield), up from 25.75% (13.5%
yield) on Friday, while the 2023s seem stuck at 16.25% (about 35% of par).
European equities closing HOD (+1.3%), about
1% away from March highs. Credit 2.5% tighter (10 ticks from March lows) with
Financials even down to 159 (4.2% tighter).
Core EGBs remain decoupled from the ROn
environment and closed unchanged. Maybe driven by the weakness of the Periphery
short end? Italian 2s hitting 1.57% in the morning, before being ripped back to
1.80% and recovering a little. Similar picture in short BONOs, down to 2.52%,
back to 2.79%, before regaining some 3bps. Tough
Love, here!
Bunds closed at 1,37% (unch), OBLs at 0,40%
(+1) and BKOs 0,005% (+1,7). UST at 1,63% (+1) COB.
Spanish 2s at 2,76% (+7), 10s at 5,32% (+1).
2-10 YRS spread 256bp (-7)
Italian 2s at 1,76% (+10), 10s at 4,56% (-3).
2-10 YRS spread 280bp (-12).
EUR stuck and closing below 1.30. Good
drive in Oil (+2%). Copper (China) +2%, too. Gold still rather sideways, after
being slammed lately. Gold? Who wants
Gold?
Take-away: Looks like yesterday put into
practice: Let’s thank everyone to turn around markets, when they sink (Good
timing yesterday). Nothing to break the barn stomp in Periphery bonds (but
themselves), so people might as well side-step going short into strength. Italy
brilliantly stuffed its primary dealer at a 2-year low, but then, they hadn’t
to bid that aggressively. Core EGBs holding quite steady, given ROn in Risk and Periphery. Strong US GDP
revision – but, as expected anyway, meeting some yawning folks. Given the
actual level in Risk, good numbers are seen as given. Nothing weak, no more,
never. Swimming in a Sea of (Risk) Love. Watch the Event / Headline risk on FC
(& Greece.
The math still seems quite odd… Must be
missing some Greek numbers in the equation). Hard Periphery (especially
Spain) slap-back in the afternoon, though.
Outlook: German Oct Retail Sales expected
to fall 0.4% after rev. 0.8% MoM, as is French Consumer Spending (fcst -0.2%
after +0.1% MoM) with PPI put at 2.9% YoY. EZ Unemployment figures should rise
to 11.7% from 11.6%. Italian and Spanish CPI. A sad reminder. Closing the month
with US Personal Income expected to grow 0.2% MoM, flay YoY, NAPM at 47 after
43.3 and Chicago PM rising above the 50-mark to 50.5 from just below 49.9.
European 50 & 100d averages: EStoxx
2509/2456, DAX 7271/7096, CAC 3446/3414, MIB 15550/15098, IBEX 7828/7496.
US 50, 100 & 200d averages: INDU
13220/13132/12994, S&P 1423/1408/1384, NASDAQ 3030/3018/2986 with AAPL
100/200d at 626/599.
EUR: 50d 1.290, 100d 1.269 & 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 saw a chunky, really chunky FADE
deal for EUR 1.75bn 3 YRS, priced at 70bp over Spain / about MS +360. Took a
while to get that one going (Investor call was on 12 Nov), but met with EUR 2.5bn
in demand. Spanish water tariff deficit financing vehicle, explicit Spanish
government-guarantee. Hadn’t really managed to issue in benchmarks for over a
year. Allocation might have been on the high side, priced at Spanish lows… To
be followed. Happily the margin to Spain was fixed in the morning, while the
pricing was in the afternoon with Spanish 2s correcting from 3.15% to 3.35%...
Otherwise, it was BBB corporate day with
SabMiller quenching investor thirst for household names with EUR 1bn Jan 2020s
at MS +70, next to EUR 500m for Bilfinger in 7 YRS at MS +115 and EUR 500m for
G4S at MS +167.
Closing
levels:
10 YRS Yields: Germany 1,37% (unch);
Luxembourg 1,49% (unch); Netherlands 1,60% (unch); Finland 1,61% (+1); Swaps
1,68% (unch); EU 1,70% (-1), Austria 1,74% (unch); EIB 1,87% (-1); EFSF 1,99%
(-1); France 2,04% (-1); Belgium 2,17% (-3); Italy 4,56% (-3); Spain 5,32%
(+1).
10 YRS Spreads: Luxembourg 12bp (unch);
Netherlands 23bp (unch); Finland 24bp (+1); Swaps 31bp (unch); EU 33bp (-1);
Austria 37bp (unch); EIB 50bp (-1); EFSF 62bp (-1); France 67bp (-1); Belgium
80bp (-3); Italy 319bp (-3); Spain 395bp (+1).
EUR swap curve 2-5 YRS 45bp (unch); 5-10
YRS 81bp (-1,0) 10-30 YRS 63bp (unch).
2 YRS German BKOs closed 0,005% (+1,7) and
5 YRS OBLs 0,40% (+1).
Main -3 to 122 (-2,4% tighter); Financials
-7 to 159 (-4,2% tighter); Cross -14 to 494 (-2,8% tighter).
Stoxx Futures at 2579 / +1,3% (from 2547)
with S&P minis at 1416 (+1,2% from 1399, at European close).
VIX index at 15,2 after 16,1 yesterday same
time.
Oil 88,2/110,9 (WTI/Brent) from 86,4/109,1
(+2,1%/+1,7%). Gold at 1727 after 1717 (+0,6%). Copper at 360 from 353 (+2,0%).
CRB at EU COB 297,0 from 298,0 (-0,3%).
First fall in 2 weeks for the BDIY, giving
back yesterday’s 7 ticks and fixing at 1097. Target 1162-high seen in July,
post-Chinese New Year slide (5.25% away).
EUR 1,298 from 1,293
Greek guesstimate:
Greek bonds closing unchanged in 2023s at 16.25%, but once more tighter in
2042s at 12.50% (-25) for 2042s, as the last word on the price level doesn’t
seem to have been said yet.
All levels COB 17:30 CET
All levels COB 17:30 CET
Fast-forward
Macro and Events:
Hm… Bits and pieces on the macro front.
Industrial output in Spain on Wed. Factory Orders in Germany on Thu. Fri NFP in
the US.
Thursday ECB & BOE (FED on 12 Dec)
The start of next week will be flushed with
bills (Belgium, France, Germany, Netherlands), see additional EUR 4bn German 2
YRS. Spain will hold an auction in 3, 7 and (short) 10 YRS on Wednesday (as
Thursday will be closed) and France supply its monthly OAT auction on Thursday.
EC:
Fri CPI fcst 2.4% after 2.5% YoY, Unemployment fcst 11.7% after 11.6%; Final
MfG PMI; Tue PPI fcst +2.5% after +2.7% YoY; Wed Final Comp PMI, Retail Sales;
Thu EZ GDP and ECB
GE: Fri Retail Sales; Mon Final MfG PMI;
Wed Final Serv PMI; Thu Factory Orders last -3.3 MoM, Friday Industrial
Production last -1.8% MoM/-1.2% YoY
FR: Fri PPI and Consumer Spending; Monday
Final MfG PMI; Wed Final Serv PMI; Thu Q3 unemployment
Italy: Fri Unemployment, CPI & PPI; Mon
Budget Balance, Car Sales; Wed Final Serv PMI
Spain: Fri CPI; Tue Unemployment; Wed
Industrial Output (last 7% wda).
US: Fri Personal Income & Spending,
NAPM and Chicago PM. Mon Final PMI, MfG ISM & Construction Spending; Tue
ISM NY; Wed Factory Orders, Productivity and Labour Costs; Thu Claims; Fri NFP
Click
link under title or below for today’s musical support:
Original
by Phil Philipps, 1959, of course.
Ok,
admittedly that song IS cheesy, but how could Robert Plant fall soooo loooww… Even
tongue in cheek, this is low.
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