Daily Musings and Music of a Euromarket Professional

Uncomfortable as it may be, being aware of sitting on a time bomb shouldn't keep us from being able to laugh about it - and to listen to some music!

Daily musings of a euromarket professional

Wednesday, 19 December 2012

19 Dec 2012 – “Oh Come All Ye Faithful ” (Twisted Sister, 2006)

19 Dec 2012 – “Oh Come All Ye Faithful ” (Twisted Sister, 2006)

Would be easy to call this boring, given the state of the market and volumes, but undercover Risk On definitively there. Greek 10s over the moon and far away (up 500 ticks)… Strong EUR. Seems a little easy, but who wants to fight? It’s Yule Time – at least until Friday, then we’ll see what the Mayans really meant.
"Oh Come All Ye Faithful" (Bunds 1,42% +0; Spain 5,25% -4; Stoxx 2658 +0,4%; EUR 1,326 +40)
Another good US close on Tuesday with the S&P adding yet another 1%, as FC discussions seem bound the right way. NASDAQ close shy of 1.5% and all indices closing pretty much HOD. Even Apple is eventually getting greener, too, up 2.90%.
Asia seems to be stuck in a year-end drift as well, positively cautious up 0.5% on average. Shanghai flat. Japan roaring ahead, closing well over 2%, now up nearly 11% from last month.
S&P Upgrading Greece from Selective default all the way up to B-, knowing that that this was less because of the intrinsic values and virtues of Greece, but because of the proven strong EZ support.

No data to kick off the day.

End of year drift. What can one expect? Tendency is to slightly higher risk, but with no impetus for a furious rally.
EGBs by and large flat to kick-off the day after a slightly wobbly start. Bunds 1.42% unchanged with UST finally coming in 1 bp to 1.80%. Nothing else really changed. Periphery quiet.
Equities a couple of ticks better, but just a couple, flashing a light green. Credit unchanged on its lowest level in ages. Commodities about unchanged, if it wasn’t for Gold ticking lower by the day (1674). EUR once more a bit firmer at 1.324.

German IFO mixed, but with a final number just fine enough to keep things balanced: Business Climate a tick better than expected at 102.4 (fcst 102 after 101.4), Current Assessment a little bleak at 107.1 (fcst about unchanged at 108.0 after 108.1), but with a better expectation component at 97.9 (fcst 96.4 after 95.2). Confirms the mood and latest figures: Q4 is in the dumps, but everyone (and all equity buyers) is convinced that things will firm up next year.
Italian Industrial Orders sluggish at 0% MoM sa (fcst +1% after -4%) and Industrial Sales at -0.2% MoM sa after -4.2%.
Finally, unlike in the US, it won’t be Construction that will pull Europe out of the ditch with Output down 4.1% YoY wda (after -2.6%, revised lower to -3.8%) / -1.6% MoM sa after -1.3%.

Bah. Whatever. Figures were all good enough for little bit of ROn during the rest of the morning. Equities up 0.5%, EGBs 1 bp softer and the Periphery ticking tighter.

No government supply.
New Issues market dormant, outside BNPP printing a EUR 1bn 1YR-bond at 3mE +28.

Not much to mention with the midday picture about static on all counts, expect for Greek bonds
Equities up a small 0.5%. Credit flat.
Bunds 1,43% (+1), OBLs 0,39% (unch), BKOs -0,008% (-0,5). UST 1,81% (unch).
Spanish 2s 2,82% (-1), 10s 5,26% (-3). 2-10 YRS spread 244bp (-3).
Italian 2s 1,66% (-6), 10s 4,38% (-7). 2-10 YRS spread 272bp (-1).
EUR still pushing ad push at 1.327. Oil up a small 1% with Gold down 1% to 1668.
Greek 2023s at 48.25 +325 (11.92% -92bp) and 2042s +275 at 37.00 (10.20% -64bp)!!! Wow, all because of S&P putting it back to B-???

EUR ticking slightly over 1.33 ahead of the US open, highest since breaking down in an epic move on 04 Apr (Hi 1.334 Lo 1.311, after FED minutes showed Big Ben then no yet ready for QE3, Supa Mario then not unleashing magic yet and Spain widening over a quarter on a yet again botched auction).
So, back to the future? Not on all counts: Bunds then 1.80%, but Spain spread to Bunds 389, Main then 130, Gold trampled from 1672 down to 1616 that day, Brent at $123 and CRB 306, S&P then 1400, EStoxx 2400… Some things change, some don’t…
Kicking off the afternoon with the only US figures for the day with Housing Starts falling more than expected to 861k (fcst 873k after 894k, rev. a lucky 888k), although Building Permits rose to 899k (fcst 870k after 868k). Put the blame for not starting on Sandy. That should do…

Talking of Spain, its bad bank SAREB is supposed to issue next week (to whom?) and Rajoy has decided not to decide on an a bail-out (for the moment), which he boasts is a decision.

Plan A, B, C, D juggling in the US a little unnerving and keeping US indices close to home and capping European exuberance.
Treasuries and EGBs firming up just a little on back of that.
Periphery firming, kicking Soft Core yields back tighter.

And that’s it, folks… Still won’t get more exciting in the coming days.

Risk On in disguise on-going with the Main closing at 110. Soft Core EGBs on the ramp with Belgium zooming close to its all-time low of 10 days ago and closing in on France (9 bp spread)(Maybe because the wealth French tax exiles are seen bringing to the country???).
Greeks now over the moon with especially 2023s at 50.0 +500 points (11.46% -138bp) and 2042s +275 at 37.00 (10.20% -64bp)!!!
Bunds closed at 1,42% (unch), OBLs at 0,38% unch) and BKOs -0,008% (-0,5). UST at 1,78% (-3) COB.
Spanish 2s at 2,81% (-2), 10s at 5,25% (-4). 2-10 YRS spread 244bp (-3).
Italian 2s at 1,65% (-7), 10s at 4,38% (-7). 2-10 YRS spread 273bp (unch).
Portuguese 10s at 6.89%, 11bp tighter.
Equities eking out another 0.5% and another high at 2661.
EUR still riding (ever) high(er). Commodities mixed again with Oil split up (WTI 2% and Brent 1.2% to just over $110), Gold softer and especially Copper losing some shine at 359 (-1.6%).
Still watching the Baltic Dry getting wacked on a daily basis and getting itchy seeing my coalmine canary getting so pale.

Take-away: Would be easy to call this boring, given the state of the market and volumes, but undercover Risk On definitively there. Greek 10s over the moon and far away (up 500 ticks)… Strong EUR. Seems a little easy, but who wants to fight? It’s Yule Time – at least until Friday, then we’ll see what the Mayans really meant.

Outlook: Same. Sideways with an upwards bias, subject to Fiscal Cliff discussions.
Just the saaaaaaaaaaaame – until Santa comes. Or the Mayans.
We will have yet another revision of US Q3 GDP with an uptick to 2.8% QoQ seen. Claims forecast 360k after 343k and Continuous ones seen at 3200k after 3198k, Existing Homes sales for Nov fcst 4.90m after 4.79m, Philly Fed fcst -3 after -10.7

European 50 & 100d averages: EStoxx 2535/2506, DAX 7325/7228, CAC 3494/3472, MIB 15614/15445, IBEX 7837/7704.
US 50, 100 & 200d averages: INDU 13110/13187/13007, S&P 1414/1417/1388, NASDAQ 2990/3031/2989 with AAPL at 580/618/601.
EUR: 50d 1.294, 100d 1.281 & 200d 1.279. Fibo retracement (of May 2011 1.494 to Jul 2012 1.204 down-leg) at 1.273&1.315, then 1.349 (50%).

Closing levels:
10 YRS Yields: Germany 1,42% (unch); Luxembourg 1,46% (+1); Netherlands 1,62% (-1); Finland 1,64% (unch); EU 1,64% (+1); Swaps 1,65% (+1), Austria 1,77% (-4); EIB 1,81% (+1); EFSF 1,89% (unch); France 2,01% (-3); Belgium 2,10% (-7); Italy 4,38% (-7); Spain 5,25% (-4).

10 YRS Spreads: Luxembourg 4bp (+1); Netherlands 20bp (-1); Finland 22bp (unch); EU 22bp (+1); Swaps 23bp (+1); Austria 35bp (-4); EIB 39bp (+1); EFSF 47bp (unch); France 59bp (-3); Belgium 68bp (-7); Italy 296bp (-7); Spain 383bp (-4).

EUR swap curve 2-5 YRS 45bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 67bp (unch).
2 YRS German BKOs closed -0,008% (-0,5) and 5 YRS OBLs 0,38% (unch).

Main -1 to 110 (-0,9% tighter); Financials -1 to 138 (-0,7% tighter); Cross -1 to 444 (-0,2% tighter).
Stoxx Futures at 2658 / +0,4% (from 2647) with S&P minis at 1441 (+0,3% from 1437, at European close).
VIX index at 16,5 after 15,5 yesterday same time.

Oil 89,8/110,1 (WTI/Brent) from 88,0/108,8 (+2,0%/+1,2%). Gold at 1672 after 1685 (-0,7%). Copper at 359 from 365 (-1,6%). CRB at EU COB unch at 296,0.
Wack the Balt! Daily slide. Baltic Dry purge on-going and confirming a fourth week of consolidation, down another 3% to 720. I reckon 661 and 647 next stops soon.
The latest dip from the post-Summer high of 1109 in Oct had been halted at 916, before that we slipped from 1162 in July to 661 mid-September. 21st century low was 647 in Feb 2012. Upcoming Chinese New Year (10 Feb 2013)… Seems a little far, no?

EUR 1,326 from 1,322

Greeks now over the moon with especially 2023s at 50.0 +500 points (11.46% -138bp) and 2042s +275 at 37.00 (10.20% -64bp)!!!

All levels COB 17:30 CET

Fast-forward Macro and Events:
Preciously few things… Dragging into Year End, unless next Friday proves the Mayan right.
Big Friday US data dump.

EC: Thu Cons Confidence. No data next week.
GE: Thu PPI fcst -0.2% after flat MoM; Fr Consumer Conf fcst 5.9 unch. No data next week.
FR: Fri BIZ Confidence fcst 89 after 88. Thu 27 Dec Cons Conf , PPI, Claims, Q3 GDP revision
Italy: Thu Retail Sales fcst flat after +0.1% MoM sa; Fri Consumer Conf fcst 85.1 after 84.8; Thu 27 Dec Biz Confidence, Fri 28 PPI
Spain: Thu Housing Permits prior -51.3% YoY, Fri PPI -0.2% after -0.1% MoM; Thu 27 Dec Mortgages; Fri 28 Retail Sales
US: Thu Existing Homes Sales fcst 4.90m after 4.79m; Claims and yet another Q3 GDP revision; Big Friday with Chicago FED, Pers Income & Spending fcst +0.3% after 0% and +0.4% after -0.2%, Durable Goods fcst +0.3% after rev. +0.5%/ EX -0..2% after rev. +1.8%, Michigan Conf fcst 75 after 74.5; Wed 26 Dec Case Shiller; Thu 27 Claims, Cons Conf, New Homes Sales; Fri 28 Pending Home Sales

Click link under title or below for today’s musical support:
Definitively the right time to dig and unearth some more Xmas rock songs…

Of course, I know you're longing for THAT alternative.

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