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


Saturday, 6 October 2012

Shuffle Rewind 01-05 Oct " It's Good Enough for Rock N' Roll " (Gilby Clarke, 1997)

Shuffle Rewind 01-05 Oct " It's Good Enough for Rock N' Roll " (Gilby Clarke, 1997)
On the week (compared to Fri 28 Sep COB):
Click on day for related post, on title for song.

We spent the week ending the quarter mostly in the rain, in a wet and autumnally environment. Sad and heavy and closing Friday with a hopeful "After The Rain Has Fallen" (Bunds 1,44% -1; Spain 5,91% -1; Stoxx 2452% -2,0%; EUR 1,285). That was some foresight given that Monday hailed in more upbeat mood "Here Comes The Sun" (Bunds 1,46% +2; Spain 5,84% -7; Stoxx 2496% +1,8%; EUR 1,291). Still, things remained jumpy and nervous amid Spain, yes , no, bail-out hopes and Tuesday was more in a spirit of "Jump, Jive N' Wail" (Bunds 1,46% +0; Spain 5,72% -12; Stoxx 2490% -0,2%; EUR 1,295). Similar to the Chinese water torture, Wednesday was more a case of "Hit Me With Your Rhythm Stick" (Bunds 1,44% -2; Spain 5,79% +7; Stoxx 2485% -0,2%; EUR 1,291), while what could have been the big day with a Super Mario show on the screens on Thursday ended with an uninspiring "So What?" (Bunds 1,44% unch; Spain 5,88% +9; Stoxx 2479% -0,2%; EUR 1,299). Off to a positive European start on Friday, which was further enhanced by amazing NFP. "Let's Work Together" (Bunds 1,52% +8; Spain 5,67% -21; Stoxx 2525% +1,9%; EUR 1,305), although the US close was a drag. To be followed...

Eventually the week wasn’t that bad for Risk, so the change in song material was on spot. After the Rain. Here comes the Sun.
Once more we closed a trading week with the recurrent question “What’s next? Where can we move to WITHOUT support?” And this week brought not much more. OMT, QE, Spanish budget and Stress test figures are all out. Even the iPhone 5 is available. China was closed the whole week for traffic jams, hence less spending. The ECB meeting was mainly dull. Geopolitical risk seemed to have abated a little. Oil crashed, on US supply, but maybe also because tensions have cooled off. Or a mix of both. Gold is shining.

Good recovery of the Periphery after the armour provided by Draghi started to show some chinks with Spain widening 29bp in 2s to hit 3.36% and 18bp to flirt with the 6% at 5.91% to close last week. Italian 2s had widened 15bp to 2.33% and 10 YRS BTP 6bp to 5.16%. So things are better on paper this week, although most of the recovery is Friday action in an empty market. Having tightened down to 400 to Bunds 2 weeks ago, Spain had ticked 450 last week and eventually closes again near the lows at 415.
Hard and Soft Core EGBs roughly range-bound. Soft this afternoon. Not much to delve about. Note the good Belgium performance, cutting through and closing well below 100 to Bunds.
EUR swap curve roughly stable, until steepening today (2-10 133 after 128, 10-30 YRS 2 wider).

Having lost about 4.5% last week, European equities made back half of that, closing the week up 3%. Credit fared well after 2 weeks of purgatory (7% to 12% wider last week, 5% the week before) and managed to claw back at least some of last week’s losses with the Main over 7% tighter (from +7%) and Financials 13% tighter (from +12%), bringing us pretty much back to closing levels around 2 weeks ago (126 & 178, from 127 and 182 on21 Sep)

Commodities about flat on the week, notwithstanding the fact that Oil suffered some serious swings, trading off and than back up. Gold crawling higher. BDY on the rise.

New issue activity to start the quarter was appallingly uninspiring, compared to mid-Sep weeks of EUR 25bn and tons of Periphery supply. After last week's EUR 11bn, this week only showed shy of EUR 7.5bn, of which EUR 2.5bn for the Czech Republic and Poland, as well as EUR 1bn of a German Joint-Länder deal. Rest scattered. Friday supply Periphery-heavy with Telefonica’s EUR 1.2bn

10 YRS Yields: Germany 1,52% (+8); Luxembourg 1,64% (+8); Netherlands 1,78% (+7); Swaps 1,80% (+7); Finland 1,81% (+9); EU 1,96% (+8); Austria 2,04% (+2); EIB 2,24% (+6); France 2,28% (+0); EFSF 2,40% (+3); Belgium 2,46% (-7); Italy 5,04% (-12); Spain 5,67% (-24).

10 YRS Spreads: Luxembourg 12bp (0); Netherlands 26bp (-1); Swaps 28bp (-1); Finland 29bp (+1); EU 44bp (+0); Austria 52bp (-6); EIB 72bp (+7); France 76bp (-8); EFSF 88bp (-5); Belgium 94bp (-15); Italy 352bp (-20); Spain 415bp (-32).

EUR swap curve 2-5 YRS 50bp (+2,0); 5-10 YRS 83bp (+3,0) 10-30 YRS 60bp (+2,0).
2 YRS German BKOs closed 0,055% (+3) and 5 YRS OBLs 0,57% (+5), on the week. with UST at 1,71% (+10)
Swiss 2-years ticking tighter to -0.18% (from -0.16%).

Main at 126 from 136 (7,4% tighter); Financials at 178 after 204 (12,7% tighter). SovX at 138 (-10). Cross at 531 from 568.
Stoxx Futures at 2525 / +3,0% from 2452 with S&P minis at 1463 / +2,2% from 1431, at European COB last week.
VIX index at 14,3 after 15,6 last week.

Oil 90,2/111,8 (WTI/Brent) from 91,8/111,9 (-1,8%/unch). Gold at 1782 after 1773 (+0,5%). Copper at 379 from 376 (+0,8%) . CRB closes 310,0 from 308,0 (+0,6%).
BDY up from last Friday to 875 from 766 (+14.2%). Summer rebound peak had been 1162 early July (33% away). Feb low of 647 26% away. Sep low was 661.

Greek bonds guesstimates: And another good week with 2023 yields tumbling down to 18% (from 19.25% last week and 20% the week before) and 2042s now at 16.5% (from 18%).

EUR 1,305 after 1,285 last Friday

All levels Friday COB 17:30 CET

Next Week:
Next week will be once more appallingly empty on hard data.
Trading will remain rather technical, subject to Periphery rumours and jitters. Italian BTP auction Thu.

EZ: Mon Sentix Inv Confidence (last -23.2); Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Mon German trade (last Ex +0.4%, Imp +0.7%), IP (last +1.3% MoM), Thu Final CPI 
FR: Mon Biz Sent (last 93); Wed IP (last +0.2% MoM); Fri CPI
Italy: Tue Q2 Deficit; Wed IP (last -0.2%); Fri Final CPI
Spain: Tue House Transactions; Fri Final CPI
US: Mon nothing. Tue not much. Wed Wholesale Inventories fcst +0.4% after +0.7%, Beige Book Thu Import Prices, Claims, Fri PPI, U Michigan Confidence
China : Mon Serv PMI (last 52)

Click link under title or below for today’s musical support:
Fair enough week. Not sure data fits the performance, but if it's good enough...

Friday, 5 October 2012

05 Oct 2012 – “ Let’s Work Together ” (Canned Heat, 1970)

05 Oct 2012 – “ Let’s Work Together ” (Canned Heat, 1970)

What can be said? Rinse, repeat, rinse, repeat. The US closed pretty much unharmed by closing jitters in Europe, although never managed to regain the levels reached at open, following better than expected US factory orders. Had a closing push up of 0.1% to close on broad average up 0.60%. Asian session broadly positive, in line, but far from euphoric. Comfortable end of the week that saw Japan treading water, China closed, Australia positive celebrating its rate cut. Expectations that the Golden Week hasn’t been big in terms of consumption. Then again, when seeing the traffic jam pictures, it is difficult to imagine how people were to spend their money…

European markets repeating yesterday’s slightly positive exercise in the opening hour.
Bunds out by 2 to 1.46%, caught in a sideways range, as are UST compared to the European close. EGB curve roughly unchanged. Periphery tighter by 2, after yesterday’s afternoon widening. Equities up a small 0.50% with Credit a tick tighter. Rinse, repeat. Rinse, repeat.
Commodities in better shape with Oil up 2.5% from yesterday. EUR stuck at 1.30.

Spanish Aug Industrial Output mixed with adjusted figures better than expected at -3.2% (fcst -5.5% after -5.4% revised -5.5%), but NSA tanking 3.1% (after -2.7%). Nothing else to expect until noon figures of German Factory Orders and early afternoon US NFP.
So where’s the next news? No news is good news?!
With not much happening, markets fared positively during the morning with Spain trading 10 tighter throughout the curve, with Italy tagging along. Equities adding a little and Credit, too.
Note that Belgium 10s traded again below the 100 to BUND mark.

Everyone basking into the market truce provided by Super Mario. And taking some easy time off… 

Periphery tightening (with Portugal going through the roof) coming on the back of comments from “sources” (Why wouldn’t have that been presented yesterday during the ECB conference?) OMT buying, if there was, would be massive for the first 2 months with a break thereafter to asses the impact. Oh, and with BuBa support. Hmmm… Believe me, it will be enough… I would have rather had that news from someone credible on ECB level. And not having the German CSU kicking and screaming the BuBa needs veto possibilities. Not sure that won’t be set straight at some time.
Note the irony of the looping world we live in as Greece thinks it has the EUR 900m needed to pay its initial share into the ESM ramp-up. And the EU on massive back-pedalling on the practical timing of the bank recaps.

German Factory Order at noon a further confirmation of a slow down of Europe’s locomotive with Aug at -1.3% (fcst -0.5% after +0.5% revised +0.3%). YoY picture at -4.8% (fcst -4.3% after -4.5%, revised -4.6%). Yes, Q3 growth will be confirmed as a damp squib.

Mid-day levels in Risk On bias. Softer Bunds, Strong Periphery, ok Soft Core.
Bunds 1,48% (+4), OBLs 0,54% (+3), BKOs 0,049% (+1) with UST 1,68% (+4)
Spanish 2s 3,16% (-13), 10s 5,74% (-14). Spanish 2-10s 258bp (-1).
Italian 2s 2,17% (-9), 10s 5,04% (-9). Italian 2-10s 287bp (unch).
Portuguese 5s tighter by 50bp!
Equities up 1% plus. Credit 3% tighter. Oil holding its 2% gains since yesterday. Gold stuck around $1790.

US Non Farm Payrolls to close the week at +114k (fcst +115k, but prior data revised to +142k from +96k, July even to +181k from +141), although Private Payrolls a miss at +104k (fcst 130k after 103k revised 97k) and Manufacturing at -16k (fcst 0 after -15k, revised lower to -22k). Headline unemployment rate dropping to 7.8% (fcst 8.2% after 8.1%), last seen in Jan 2009. Handy a month before elections. All-across puzzlement on the HUGE surge of 857k with an equivalent surge in part-time jobs. Headline figure thus good, quality of it up for discussion (full report link).
All is good! Equity spike of 0.50% and UST4bp softer to 1.72% & Bunds hitting 1.50% (+2).

US equities cash open about +0.50%, supporting European levels. UST 1.72%. But not much more… That BLS report is puzzling. And does this mean that the FED will lift the foot on QE3???

Friday afternoon Periphery squeeze barn stomp with BONOs doubling down their morning performance to over 20bp. Markets keeping their levels, rather directionless to slide into the weekend.
Fair equity performance, closing a week that mainly recovered from last Friday’s bashing on Monday (+1.8%), then drifted sideways with a lower bias every day until today’s close. Credit once more slightly over the top and outperforming equities, before going back in line. Strong financials. 
Weak Bund session, in line with USTs. Hard Core holding a little better, Soft Core stable. Some weakness in the middle part of the EUR curve.
Bunds closed at 1,52% (+8), OBLs at 0,57% (+6) and BKOs 0,055% (+1,6) with UST at 1,71% (+7)
Spanish 2s at 3,05% (-24), 10s at 5,67% (-21). Spanish 2-10s 261bp (+2).
Italian 2s at 2,16% (-10), 10s at 5,04% (-9). Italian 2-10s 288bp (+1).
Not much on the commodities front. Oil still ok, but less strong than in the morning. Gold running a little out of steam, too. EUR stronger, having tested 1.30 after the NFP and, as not broken, squeezed out to 1.3075.

Not much on Monday. German Industrial Production & trade data. US Columbus Day (bonds closed).

After Wednesday’s and Thursday’s quasi primary hiatus, two benchmarks were printed for Periphery issuers with EUR 1.2bn long 7 YRS for Telefonica at MS +330 and EUR 500m 3 YRS at MS +320 for Mediobanca.

Closing levels:
New French Oct 2022 ref (was Apr 22 +11)
10 YRS Yields: Germany 1,52% (+8); Luxembourg 1,64% (+6); Netherlands 1,78% (+6); Swaps 1,80% (+4); Finland 1,81% (+6); EU 1,96% (+5), Austria 2,04% (+2); EIB 2,24% (+5); France 2,28% (unch); EFSF 2,40% (+5); Belgium 2,46% (-3); Italy 5,04% (-9); Spain 5,67% (-21).

10 YRS Spreads: Luxembourg 12bp (-2); Netherlands 26bp (-2); Swaps 28bp (-4); Finland 29bp (-2); EU 44bp (-3); Austria 52bp (-6); EIB 72bp (-3); France 76bp (-8); EFSF 88bp (-3); Belgium 94bp (-11); Italy 352bp (-17); Spain 415bp (-29).

EUR swap curve 2-5 YRS 50bp (+3,0); 5-10 YRS 83bp (+1,0) 10-30 YRS 60bp (+1,0).
2 YRS German BKOs closed 0,055% (+1,6) and 5 YRS OBLs 0,57% (+6).

Main at 126 from 129 (2,3% tighter); Financials at 178 after 187 (4,8% tighter ). SovX at 138 (-5). Cross at 531 (-15).
Stoxx Futures at 2525 / +1,9% (from 2479) with S&P minis at 1463 (+0,8% from 1452, at European close).
VIX index at 14,3 after 15,3 yesterday same time.

Oil 90,2/111,8 (WTI/Brent) from 89,2/109,5 (+1,1%/+2,2%). Gold at 1782 after 1790 (-0,4%). Copper at 379 from 378 (+0,3%). CRB at EU COB 310,0 from 307,0 (+1,0%).
Baltic Dry up again 30 points to 875 (3.6%). Summer rebound peak had been 1162 early July (33% away). 32% rebound from 12 Sep low of 661. 912 thus mid-point.

EUR 1,305 from 1,299

Greek bonds guesstimates: Greece 2023s at 18% (from 19%) and 2042s at 16.5% (from 17%). Hmm. Ok. Highest close since end of March this year. All because Merkel volunteered to visit Greece????

All levels COB 17:30 CET

On the week (compared to Fri 28 Sep COB):

We spent the week ending the quarter mostly in the rain, in a wet and autumnally environment. Sad and heavy and closing Friday with a hopeful "After The Rain Has Fallen" (Bunds 1,44% -1; Spain 5,91% -1; Stoxx 2452% -2,0%; EUR 1,285). That was some foresight given that Monday hailed in more upbeat mood "Here Comes The Sun" (Bunds 1,46% +2; Spain 5,84% -7; Stoxx 2496% +1,8%; EUR 1,291). Still, things remained jumpy and nervous amid Spain, yes , no, bail-out hopes and Tuesday was more in a spirit of "Jump, Jive N' Wail" (Bunds 1,46% +0; Spain 5,72% -12; Stoxx 2490% -0,2%; EUR 1,295). Similar to the Chinese water torture, Wednesday was more a case of "Hit Me With Your Rhythm Stick" (Bunds 1,44% -2; Spain 5,79% +7; Stoxx 2485% -0,2%; EUR 1,291), while what could have been the big day with a Super Mario show on the screens on Thursday ended with an uninspiring "So What?" (Bunds 1,44% unch; Spain 5,88% +9; Stoxx 2479% -0,2%; EUR 1,299).
Eventually the week wasn’t that bad for Risk, so the change in song material was on spot. After the Rain. Here comes the Sun.
Once more we closed a trading week with the recurrent question “What’s next? Where can we move to WITHOUT support?” And this week brought not much more. OMT, QE, Spanish budget and Stress test figures are all out. Even the iPhone 5 is available. China was closed the whole week for traffic jams, hence less spending. The ECB meeting was mainly dull. Geopolitical risk seemed to have abated a little. Oil crashed, on US supply, but maybe also because tensions have cooled off. Or a mix of both. Gold is shining.

Good recovery of the Periphery after the armour provided by Draghi started to show some chinks with Spain widening 29bp in 2s to hit 3.36% and 18bp to flirt with the 6% at 5.91% to close last week. Italian 2s had widened 15bp to 2.33% and 10 YRS BTP 6bp to 5.16%. So things are better on paper this week, although most of the recovery is Friday action in an empty market. Having tightened down to 400 to Bunds 2 weeks ago, Spain had ticked 450 last week and eventually closes again near the lows at 415.
Hard and Soft Core EGBs roughly range-bound. Soft this afternoon. Not much to delve about. Note the good Belgium performance, cutting through and closing well below 100 to Bunds.
EUR swap curve roughly stable, until steepening today (2-10 133 after 128, 10-30 YRS 2 wider).

Having lost about 4.5% last week, European equities made back half of that, closing the week up 3%. Credit fared well after 2 weeks of purgatory (7% to 12% wider last week, 5% the week before) and managed to claw back at least some of last week’s losses with the Main over 7% tighter (from +7%) and Financials 13% tighter (from +12%), bringing us pretty much back to closing levels around 2 weeks ago (126 & 178, from 127 and 182 on21 Sep)

Commodities about flat on the week, notwithstanding the fact that Oil suffered some serious swings, trading off and than back up. Gold crawling higher. BDY on the rise.

New issue activity to start the quarter was appallingly uninspiring, compared to mid-Sep weeks of EUR 25bn and tons of Periphery supply. After last weeks EUR 11bn, this week only showed shy of EUR 7.5bn, of which EUR 2.5bn for the Czech Republic and Poland, as well as EUR 1bn of a German Joint-Länder deal. Rest scattered. Friday supply Periphery-heavy with Telefonica’s EUR 1.2bn

10 YRS Yields: Germany 1,52% (+8); Luxembourg 1,64% (+8); Netherlands 1,78% (+7); Swaps 1,80% (+7); Finland 1,81% (+9); EU 1,96% (+8); Austria 2,04% (+2); EIB 2,24% (+6); France 2,28% (+0); EFSF 2,40% (+3); Belgium 2,46% (-7); Italy 5,04% (-12); Spain 5,67% (-24).

10 YRS Spreads: Luxembourg 12bp (0); Netherlands 26bp (-1); Swaps 28bp (-1); Finland 29bp (+1); EU 44bp (+0); Austria 52bp (-6); EIB 72bp (+7); France 76bp (-8); EFSF 88bp (-5); Belgium 94bp (-15); Italy 352bp (-20); Spain 415bp (-32).

EUR swap curve 2-5 YRS 50bp (+2,0); 5-10 YRS 83bp (+3,0) 10-30 YRS 60bp (+2,0).
2 YRS German BKOs closed 0,055% (+3) and 5 YRS OBLs 0,57% (+5), on the week. with UST at 1,71% (+10)
Swiss 2-years ticking tighter to -0.18% (from -0.16%).

Main at 126 from 136 (7,4% tighter); Financials at 178 after 204 (12,7% tighter). SovX at 138 (-10). Cross at 531 from 568.
Stoxx Futures at 2525 / +3,0% from 2452 with S&P minis at 1463 / +2,2% from 1431, at European COB last week.
VIX index at 14,3 after 15,6 last week.

Oil 90,2/111,8 (WTI/Brent) from 91,8/111,9 (-1,8%/unch). Gold at 1782 after 1773 (+0,5%). Copper at 379 from 376 (+0,8%) . CRB closes 310,0 from 308,0 (+0,6%).
BDY up from last Friday to 875 from 766 (+14.2%). Summer rebound peak had been 1162 early July (33% away). Feb low of 647 26% away. Sep low was 661.

Greek bonds guesstimates: And another good week with 2023 yields tumbling down to 18% (from 19.25% last week and 20% the week before) and 2042s now at 16.5% (from 18%).

EUR 1,305 after 1,285 last Friday

All levels Friday COB 17:30 CET

Next Week:
Next week will be more appallingly empty on hard data.
Trading will remain rather technical, subject to Periphery rumours and jitters. Italian BTP auction Thu.

EZ: Mon Sentix Inv Confidence (last -23.2); Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Mon German trade (last Ex +0.4%, Imp +0.7%), IP (last +1.3% MoM), Thu Final CPI 
FR: Mon Biz Sent (last 93); Wed IP (last +0.2% MoM); Fri CPI
Italy: Tue Q2 Deficit; Wed IP (last -0.2%); Fri Final CPI
Spain: Tue House Transactions; Fri Final CPI
US: Mon nothing. Tue not much. Wed Wholesale Inventories fcst +0.4% after +0.7%, Beige Book Thu Import Prices, Claims, Fri PPI, U Michigan Confidence
China : Mon Serv PMI (last 52)

Click link under title or below for today’s musical support:
Let’s hail today’s NFP figures, whether suspicious or not!

Thursday, 4 October 2012

04 Oct 2012 – “ So What? ” (Anti-Nowhere League, 1981)

04 Oct 2012 – “ So What? ” (Anti-Nowhere League, 1981)

He he he. Repetitive patterns. Just made it into the US close with the S&P adding the extra 0.25% in the last hour of trading, robo-traded, probably. That is after robots gone wild turned Kraft into a flash fondue. Helpfully, wealth effect generator Apple up 1.5%, thanks Jobs (RIP). Still, off highs US settlement, but 0.50% higher than at European close.
Good Japanese session, with China still off. Oil still licking wounds. Gold crawling up again. EUR flat overnight and rising at European open. Looks like the first presidential debate was good enough to lower the bar for future expectations. No hard data. Not much more to say in overnight action or news.
No news out of Spain, with the head of Catalonia calling the 2013 sovereign budget unrealistic and demanding a twice higher regional deficit leeway (and thus immediately breaking a Tuesday agreement on a spirit of loyalty cooperation) and saying any bail-out request could be weeks away (for instance after the Catalan elections on Oct 25…).
Unclear German tango steps on Spailout, being at once supportive and obviously standing with both feet on the breaks.

Had a short-lived up to 1% surge in futures at cash open, but eventually things rapidly balanced out in more subdued manner.
Equities up a small half percentage point, matching US futures crawling slightly higher after close. Credit a tick tighter. EGBs flat up to the Soft Core. Italian bonds a bit softer. Spanish bonds softer ahead of the auction with 2 YRS out 8bp and 10s 4bp. UST unchanged from European COB. Settling in for probable sideways trading ahead of the Spanish auction and the ECB press conference.

Closing auction supply for this week: Spanish EUR 4bn target reached with EUR 2bn SPGB Oct 2014 at 3.282% (Stop 3.39%; COB 3.20%, ahead of auction 3.27%) EUR 710m Oct 2015 at 3.956% (Stop 4.03%; COB 3.90%; ahead of auction 3.96%) and EUR 1.28bn Jul 2007 at 4.766% (Stop 4.83%; COB 4.73%, ahead of auction 4.76%). All lines in comfortable bid to cover of 2 to 2.5, but once more with some heavy tails of 7 to 11bp between average and stop-out price. No overbidding whatsoever this time.
Last auction was 20 Sep with 3s sold at 3.85%, before that 06 Sep with 2s at 2.80%, 3s at 3.68% and 4s at 4.60%. So funding costs on the rise. Need a new Mario super pill…
Disappointing auction results coincided with Cyprus revealing EUR 11bn bail-out needs (62% of 2011 GDP of EUR 17.7bn). Add the recurrent rumour of the AAA nation pushing for delaying Greek loan tranches. Leading to a general Risk Off movement. Add ISTAT revising Italian 2011 debt/GDP to 120.7% (from 120.1) and you get the feel.

The Trésor managed to put the new OAT on liquid rails with EUR 4.8bn OAT Oct 2022 sold at a tight 2.28% (COB 2.30%, unch ahead of auction Apr 2022 +11.5bp). No discount here. ISIN FR0011337880. Last auction in 10s was at 2.21% (Apr 2022). Additionally, off –the-runs fared well with EUR 1.4bn Oct 2018 at 1.29% (COB 1.30%, unch ahead of auction) and EUR 1.8bn Apr 2041 at 3.17% (COB 3.19%, unch ahead of auction) (to be seen relatively to Austria’s 2044 on Monday at 2.88%). No discount here either. Low tails of 3 to 4 cts. B/C between 2.2 and 3.8.
Very benevolent markets, given the late economic proposals and ideas of the government.
Had France immediately tightening by 3bp, next to being supported by the aforementioned ROff move. Given the curve effect, spread to Bunds obviously wider, and back into the low 80s from mid 70s.

What’s best than to enter a pre-ECB meeting slot on an unchanged basis? Hence most indicators unchanged. Equities slightly down. Credit flat. France 3 tighter after a successful auction, Austria 2 tighter in the wake of its Soft Core peer. Italy about flat, slightly off on the short end. Spain wider after its less stellar auction performance, but eventually in rather dignified manner (have seen worse immediate reactions to auctions) with 2s out by 10 and 10s by 6. Auction paper settling between average and stop-out price at this morning’s slightly depleted levels. At least, for once Primary Dealers weren’t force to overbid on ongoing short-squeeze fears after having been squeezed out 25bp the day before, as happened so often over the last 6 months.
The fact that we don’t get nervous breakdowns (or, more seldom, euphoric highs) at each and every Periphery auction, the diminishing volatility, is probably in itself a sign that things are getting more cool-headed. The question whether Spain (and Italy) can afford these – mor stable levels – on the long run is obviously a different one.
But the OMT is there, offered, not yet taken… BoS Linde on the ticker, acknowledging budget targets are on the optimistic side, but that bail-out conditions ought to be “manageable” (in his personal opinion).

BOE unchanged. Mid-day levels just ahead of the ECB announcements, unsurprisingly unchanged:
Bunds 1,46% (+2), OBLs 0,53% (+1), BKOs 0,042% (+1,3). UST 1,63% (unch). Note softer Bunds.
Spanish 2s 3,24% (+3), 10s 5,84% (+5). Spanish 2-10s 259bp (+1).
Italian 2s 2,21% (+2), 10s 5,07% (-3). Italian 2-10s 286bp (-5). Note recovering Italians.
Equities up 0.25%. Credit 1 tick tighter. Commodities mixed, flattish overall with Gold 1789, trying to retake YTD highs at $1791. EUR 1.295.
No reaction whatsoever. So what?

US numbers, just ahead of the ECB press conference, with Claims at 367k (fcst 370k after 359k, revised 363k – so squared) with Continuous Claims higher than foreseen, but eventually stable at 3281k (fcst 3275k after 3271k, revised 3281k). Mixed to slightly negative. So what?

ECB Conf starting with unsurprising comments on growth concerns, inflation bla bla etc. solutions to transmission provided by the ECB via OMT and governments asked to do their job, yada yada within mandate etc. etc. EUR irreversible. Repeating the ECB would exit in case of non-compliance. Growth on the downside. Duh! Then again, can’t pull out a rabbit every month. CPI of 2.7% squarely explained by taxes and energy prices.
On Q&A: Rate setting wasn’t even discussed (here goes some pent-up wishful thinking). Squarely no OSI nor rescheduling in sight on Greek holdings (as seen as government financing)(here goes some more wishful thinking). ESM financing of legacy assets (to be haggled out by the stake holders). Conditionality strictly needed to keep moral hazard in check. No target rates disclosed, as what would be acceptable in case of OMT.
Yawn! Can’t always be a rainmaker and light fireworks every month. Take-aways? None really. So what?

And then again… Market reaction, ticking up down up down, but close to home, shows that eventually no one actually expected much more. Would have been nice, but doesn’t matter. Let’s surf some rumours, then. No rumour? Let’s stay put.
As stated above on the auction aftermath, there’s some immunization to (S)pain taking place. Will pick again sooner or later on some detail that will have been out in the light for weeks, but ignored by all and catapulted into the limelight by some paper picking it up…

US cash open ok, supported by positive US Aug Factory Orders at -5.2% (fcst -5.9% after +2.8%, revised +2.2%). Ok, on to tomorrow’s NFP.

Not much else. That the EU doubts the viability of Spain’s budget numbers is less a wonder than that it actually seems to state it. Bit of a let-down in the last half hour of the session. Boo! That Greece keeps trading tight is a mystery, too.

Bad case of unlucky timing with those EU doubts hitting Spanish bonds on the chin into the close and dragging Risk along (a little). France keeping 2bp on the nice auction results. Rest about unchanged. Curves unchanged. Italy falling prey to Spanish weakness.
Bunds closed at 1,44% (unch), OBLs at 0,51% (unch) and BKOs 0,039% (+1) with UST at 1,64% (+1)
Spanish 2s at 3,29% (+8), 10s at 5,88% (+9). Spanish 2-10s 259bp (+1).
Italian 2s at 2,26% (+7), 10s at 5,13% (+3). Italian 2-10s 287bp (-4).
Equities down just a little. Credit unchanged. Oil trying to creep back out of yesterday’s well. Gold took at new high at 1795. EUR tried and failed to break 1.30 for good, knowing that an ECB non-rate discussion is not enough at this stage to propel things higher.

Auction paper closing with SPGB Oct 2014 at 3.29% (auction average 3.282%) Oct 2015 at 3.95% (auction 3.956%) and EUR 1.28bn Jul 2007 at 4.78% (auction 4.766%). OAT 2022 closing at 2.275% (auction average 2.28%). Not much damage done on Spain, as levels already reached ahead of auction. Did someone yawn here?

No European data to spice up tomorrow. Germany Factory Orders fcst +0% after +0.5%. US NFP, of course.

New issue trickle with EUR 350m 5 YRS for Alstom at MS +143 and a EUR 250m FRN 2018 increase by the EIB at 3mE +11.

Closing levels:
New French Oct 2022 ref (was Apr 22 +11)
10 YRS Yields: Germany 1,44% (unch; Luxembourg 1,58% (unch); Netherlands 1,72% (unch); Finland 1,75% (+2); Swaps 1,76% (+1); EU 1,91% (+1), Austria 2,02% (unch); EIB 2,19% (unch); France 2,28% (-2); EFSF 2,35% (unch); Belgium 2,49% (-2); Italy 5,13% (+3); Spain 5,88% (+9).

10 YRS Spreads: Luxembourg 14bp (unch); Netherlands 28bp (unch); Finland 31bp (+2); Swaps 32bp (+1); EU 47bp (+1); Austria 58bp (unch); EIB 75bp (unch); France 84bp (-2); EFSF 91bp (unch); Belgium 105bp (-2); Italy 369bp (+3); Spain 444bp (+9).

EUR swap curve 2-5 YRS 47bp (-1,0); 5-10 YRS 82bp (unch) 10-30 YRS 59bp (unch).
2 YRS German BKOs closed 0,039% (+1) and 5 YRS OBLs 0,51% (unch).

Main unchanged at 129; Financials unchanged at 187. SovX at 143 from 146. Cross at 546 from 550.
Stoxx Futures at 2479 / -0,2% (from 2485) with S&P minis at 1452 (+0,5% from 1445, at European close).
VIX index at 15,3 after 15,2 yesterday same time.

Oil 89,2/109,5 (WTI/Brent) from 88,9/108,6 (+0,4%/+0,8%). Gold at 1790 after 1778 (+0,7%). Copper at 378 from 378 (unch). CRB at EU COB 307,0 from 311,0 (-1,3%).
Baltic Dry surging 5.9% to 845 from 798. Summer rebound peak had been 1162 early July. Fall rebound had initially stalled at 774. That has been taken for good.

EUR 1,299 from 1,291

Greek bonds guesstimates: Unchanged with Greece 2023s at 19% and 2042s at 17%. Odd, odd, odd… Odd… The more news pop up the Troika is haggling, the tighter it gets… Odd… No OSI. So what?

All levels COB 17:30 CET

Tomorrow and Next Week:
Hard data lacking in Europe to get things anywhere. German Factory orders tomorrow. Of course, US NFP.
Next week will once more be appallingly empty on hard data. Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Mon 08 Sentix Inv Confidence (last -23.2); Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Fri Fact Orders fcst 0% after 0.5%; Mon German trade (last Ex +0.4%, Imp +0.7%), IP (last +1.3% MoM), Thu Final CPI 
FR: done for the week; Mon Biz Sent (last 93); Wed IP (last +0.2% MoM); Fri CPI
Italy: done for the week; Tue Q2 Deficit; Wed IP (last -0.2%); Fri Final CPI
Spain: Fri Indu Output (last -5.4%); Tue House Transactions; Fri Final CPI
US: Thu evening FED minutes; Fri NFP fcst 115k after 96k, Rate 8.2% after 8.1%
China : Mon Serv PMI (last 52)

Click link under title or below for today’s musical support:
Will let everyone chew on the lyrics… But seems to have been today’s attitude. Seen this, done that…


Wednesday, 3 October 2012

03 Oct 2012 – “ Hit Me With Your Rhythm Stick ” (Ian Dury & The Blockheads, 1978)

03 Oct 2012 –  “ Hit Me With Your Rhythm Stick ” (Ian Dury & The Blockheads, 1978)

This remains an odd environment. As Spanish PM Rajoy mentioned just after closing time yesterday that Spailout wasn’t yet there (one of the main updraft drivers yesterday and behind the Spanish tightening), things got awry in equities and the US session tainted red, without ever really managing to get its head out of the water again, until during the closing hour, when Apple set things straight. US equities broadly managed to eek out a flat close. Quiero un iPhone para salvar el Mundo! Then, given the lack of hard data, it has always been clear that these days would be headline and rumour-driven.
Other overnight news all on the heavy side with the ADB shaving Asian 2013 growth estimates from 7.3% to 6.7% (and for 2012 to 6.1 from 6.9%), Chinese non-Mfg PMI at 53.7 (after 56.3), the CIC SWF stating the obvious that it (and others) wouldn’t touch “unsafe” EZ bonds with a flagpole and (belatedly) people getting itchy at the umpteenth revised deficit outlook of Spain (latest seems to be now -7.4% after previously 6.3% after previously -5.3% previously and an initial -4.4% forecast). Add to this that computing the Spanish stress test (as did Moody’s) tends to sketch a picture that the so-called stress factors are already nearing reality and that stressing these levels for “real”, and based on capital ratios more in line with international standards would probably double the needed funds. Finally, the Troika odyssey remains afloat with now EUR 3.5bn haggled over (up from EUR 2bn) out of EUR 13.5bn. Talking of Greece, New Normal champion Bill Gross sees the US doing a Greece by 2020, if they remain hooked on budgetary speed (always a good read).

Whatever, Europe starting the day on the back foot in rather classical manner: Bunds tighter by 2, matching Treasuries, with the Periphery however just out by 1. Equities down 0.5%, retesting yesterday’s morning and after-market lows. EUR down 60 pips in similar manner, slightly below the 29-handle. Credit flattish. Nothing major in commodities, although Oil is down 1%.

Macro data mainly in form of final Service PMI numbers, which were rather a mixed bag: While the overall EZ Service and then Composite number crawled up a tick or two to 46.1 and 46.1 (Flash 46 and 45.9, after 47.2 and 46.3), hence solely reducing the pain, EZ economy driver Germany dipped under the expansion mark at 49.7 (flash 50.6 after 48.3), while France sunk squarely to 45 (flash was 46.1 after 49.2). Spain was even worse with a final number at 40.2 after 44 in Aug. Italy’s flash was raised to 44.5 after prior 44.
In any case, a further confirmation that Q3 GDP won’t look good.

Spanish EM Guindos outlining the Bad Bank with the idea that the private sector will own at least 55% of it. You bet they will, if the asset-transfer takes place at “threshold” prices (meaning above FV), which in turn will mean that the transferring banks would be extremely ungrateful, if they wouldn’t keep a stake. Assets to be sold over 15 years. Nothing new. To be finalized. Looks like Spain actually enjoys the sovereign-regions-banks negative loop with no wish to cut the Gordian knot.

EZ Aug Retail Sales (and July upwards revisions) were an unexpected “positive” surprise at +0.1% MoM/-1.3% YoY (fcst -0.1%/-1.9% after -0.2%/-1.7% revised up +0.1%/-1.4%). So, ok, the summer period still saw some buying, stabilizing on low levels. Somehow, like the PMI data sets, at best we have stopped sinking, but Europe remains well under water.
Was good for a short uptick in equities, until people came to the same conclusion, before pushing equities back to unchanged levels. Wait and See.

From the other half of the Iberian pair, we have bailed-out Portugal moving on and trying to hark back its way to market access with a liability management exercise, akin the Irish one, with an exchange of Sep 2013 into Oct 2015 bonds. This is a first since April last year, when the Portugal sought shelter.
Looks like a very decent result with EUR 3.757bn exchanged out of outstanding EUR 9.74bn (39%). Nice streamlining exercise, bringing down Portuguese 2013 redemptions down from about EUR 20bn (bonds, bills and guaranteed issuers) and adding to debt due in 2015 of currently EUR 11.4bn.
Unfortunately, exact swap terms remained undisclosed, but I reckon the whole thing was mainly a domestic affair with local banks (as for he bills sales) and at the end of the day, if there was an element of subsidy in there, who could blame the Portuguese Treasury?
In any case, this puts Portugal on track for OMT support, at some stage, existing capital markets access being one of the conditions.
3 YRS reference around 5.25% at the time of announcement, driven down just through 5% in the aftermath. Whole OT curve down about 25bp.

We have interesting auction supply tomorrow with Spain’s EUR 4bn in 2 YRS, the new 3 YRS and 5 YRS auction, as well as EUR 8bn in French OATs Oct 2018, new 10 YRS Oct 2022 and Apr 2041.
COB levels of tomorrow’s auction issues: SPGB Oct 2014 3.20%, Oct 205 3.90% and Jul 2007 4.73%. Last auction was 20 Sep with 3s sold at 3.85%, before that 06 Sep with 2s at 2.80%, 3s at 3.68% and 4s at 4.60%.
COB level OAT Oct 2022 2.30%.2022 (Spread 11bp to the outstanding Apr 2022, swap curve worth 7bp) ISIN FR0011337880. Last auction in 10s was at 2.21% (Apr 2022). COB Oct 2018 1.30% & Apr 2041 3.19% (compare again with Austria’s 2044 on Monday at 2.88%).

Mid-day sentiment again rather lukewarm to slightly depressed, although off lows and off rebound highs.
Bunds 1,45% (-1), OBLs 0,52% (-1), BKOs 0,036% (-0,5). UST 1,61% (-1).
Spanish 2s 3,08% (-3) and 10s at 5,70% (-2). Spanish 2-10s 263bp (+3).
Italian 2s 2,16% (+0) and 10s at 5,05% (-3). Italian 2-10s 289bp (-2).
Oil still down 1% with EUR still on 29.

Lunch period detrimental to the Periphery with the late  erasing all gains and giving back up to 10bp on the short end in Spain and pushing longer bonds back to closing levels or slightly wider.

US ADP report better than expected with 162k added (fcst 140k after 201k, revised lower though to 189k). Here again, good for a slight 0.25% equity rebound, back to unchanged.

US cash open starting, slightly in the red ahead of the ISM Non-mfg with the latter printing over expectations (once more for US data) at 55.1 (fcst was a light contraction to 53.4 after 55.1). New orders, activity, prices all rising. Employment sinking, though. Ok, some profits, some margin. Inflated prices. No jobs…
Not much of an immediate reaction, though. UST a wider, equities a tick tighter, before reversing both courses and treading water.

Afternoon titbits scarce. Greek ECB holding extension discussions doing rounds, but probably more a counterfire lit to fight Troika demands.

Once more decorrelation between Credit and equities, and to some extend EGBs, as we close with a small (by past standard) credit torsion in EGBs and barely a flight into bonds.
France lagging a little ahead of tomorrow’s auction with Spanish bonds, for once, as well. Auction paper 10 bp wider than in the morning, following the shift back.
Bunds closed at 1,44% (-2), OBLs at 0,51% (-3) and BKOs 0,029% (-1,3) with UST at 1,63% (+1)
Spanish 2s at 3,19% (+8), 10s at 5,79% (+7). Spanish 2-10s 260bp (unch).
Italian 2s at 2,19% (+3), 10s at 5,10% (+2). Italian 2-10s 291bp (unch). 
Quite a beating for Oil, adding over 2% losses to this morning’s 1%, on highest output figures in the US in ages, although stockpiles declined today. Equities eventually just slightly lower. EUR holding above 29.

No European data to spice up tomorrow. Mario D, the floor is all yours, after Mariano D’s bond sales.
US claims (fcst 370k after 359k, Continuous Claims fcst 3275k after 3271k) and Aug Factory Orders (fcst -5.9% after +2.8%) in the European afternoon with FED minutes released later. NFP and Unemployment on Friday, of course.

New issues brought to a halt. Nothing of interest.

Closing levels:
10 YRS Yields: Germany 1,44% (-2); Luxembourg 1,58% (-1); Netherlands 1,72% (-2); Finland 1,73% (-2); Swaps 1,75% (-1); EU 1,90% (-1), Austria 2,02% (-1); France 2,19% (unch); EIB 2,19% (-1); EFSF 2,35% (-2); Belgium 2,51% (-3); Italy 5,10% (+2); Spain 5,79% (+7).

10 YRS Spreads: Luxembourg 14bp (+1); Netherlands 28bp (unch); Finland 29bp (unch); Swaps 31bp (+1); EU 46bp (+1); Austria 58bp (+1); France 75bp (+2); EIB 75bp (+1); EFSF 91bp (unch); Belgium 107bp (-1); Italy 366bp (+4); Spain 435bp (+9).

EUR swap curve 2-5 YRS 48bp (unch); 5-10 YRS 82bp (+2,0) 10-30 YRS 59bp (-1,0).
2 YRS German BKOs closed 0,029% (-1,3) and 5 YRS OBLs 0,51% (-3).

Main at 129 from 132 (2,3% tighter); Financials at 187 after 195 (4,1% tighter). SovX at 146 (+1). Cross at 550 (-6).
Stoxx Futures at 2485 / -0,2% (from 2490) with S&P minis at 1445 (+0,4% from 1439, at European close).
VIX index at 15,2 after 16,1 yesterday same time.

Oil 88,9/108,6 (WTI/Brent) from 92,4/112,0 (-3,8%/-3,0%). Gold at 1778 after 1780 (-0,1%). Copper at 378 from 380 (-0,5%). CRB at EU COB 311,0 from 311,0 (unch).
Baltic Dry rising 20 to 798 (+2.6%). Summer rebound peak had been 1162 early July. Fall rebound had initially stalled at 774.

EUR 1,291 from 1,295

Greek bonds guesstimates: Greece 2023s unchanged 19% with 2042s much tighter, now at 17% (yield) after 17.75%. Odd… The more news pop up the Troika is haggling, the tighter it gets… Odd…

All levels COB 17:30 CET

Rest of this week:
Hard data lacking in Europe to get things anywhere. Further Final PMI data on Wed. German Factory orders at the end of the week. Unemployment figures across Europe. Of course, US NFP on Friday.
ECB on Thursday won’t do much on rates. Difficult to see the input here, unless Mario was to pull yet another rabbit out of his hat, but the mandate is quite stretched by now.
Should remain rather technical, subject to Periphery rumours and jitters.
Next week will once more be appallingly empty on hard data.

EZ: Thu ECB (unchanged); Mon 08 Sentix Inv Confidence (last -23.2); Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Fri Fact Orders fcst 0% after 0.5%; Mon German trade (last Ex +0.4%, Imp +0.7%), IP (last +1.3% MoM), Thu Final CPI 
FR: done for the week; Mon Biz Sent (last 93); Wed IP (last +0.2% MoM); Fri CPI
Italy: done for the week; Tue Q2 Deficit; Wed IP (last -0.2%); Fri Final CPI
Spain: Fri Indu Output (last -5.4%); Tue House Transactions; Fri Final CPI
US: Wed ADP fcst 140k after 201k, Non-MfG ISM 53.4 after 53.7 ; Thu Claims fcst 370k after 359k, Aug Fact Orders fcst -5.9% after +2.8%, FED minutes; Fri NFP fcst 115k after 96k, Rate 8.2% after 8.1%
China closed for the whole week.

Click link under title or below for today’s musical support:
Hit me with your rhythm stick! Hit me, hit me!
Das ist gut! C'est fantastique! Hit me, hit me, hit me!

Tuesday, 2 October 2012

02 Oct 2012 – “ Jump, Jive N' Wail ” (Brian Setzer, 1998)

02 Oct 2012 –  “ Jump, Jive N' Wail ” (Brian Setzer, 1998)

Risk Off start in Europe, following the steady reversal of early US gains (with a spike after the positive US PMI publication that lifted US shares up to +1.20%), which slid lower into the close. In the case of the S&P, shares closed some 1% below the top; for the NASDAQ, it’s even some 1.4% with Apple weighting heavily. Asian session sideways to negative into the close (as Europe woke up and opened hung over from yesterday’s rebound). Japan negative. China closed. Australia cut rates 0.25% to 3.25%, giving in to ambient gloom and need for stimulus.
Rabid reaction with European equities rapidly giving back half of yesterday’s gains and down about 1%. Credit a couple of ticks wider, in line (+1.5%). European govies all a bit tighter, but with no particular outlier. BUNDs 1.45% (-1), as are USTs at 1.62%. Spain & Italy a tick or two tighter with short end outperforming another bp. Commodities drifting about 0.50% lower, compared to yesterday’s European closing levels. EUR just under 1.29. Not much else. Correction of the correction of the correction.

Appalling lack of hard data to steer the day. Markets will surf technicals and need to improvise and to be on the look-out for snippets, mainly from the Southern Front. Spanish Sep jobless claims doubling to 79.6k (from +38.2k), half more than expected. Quite seasonal data. End of summer jobs.

Nevertheless, things started to rather rapidly chill out, with Spanish bond tightening (pushing some 10bp tighter) leading a Risk recovery. Other EGBs rather sidelined, though with no real credit torsion seen at that stage. Recovery led by rumours some EU official acknowledged Spain was readying up bail-out demands. Long chain, nothing concrete nor official.

Spanish debt at this point eventually unabated by Moody’s comments about the bail-out numbers being rather on the optimistic side (in case of real stress) and seeing capital needs of EUR 70 to 105bn, should things go awry. There’s likewise a doubt, as others have previously delved on, whether the “bad bank” would be able to attract private capital, especially if the asset-transfers don’t take place at levels previously witnessed for instance in Ireland.

European PPI at 2.7% YoY beating 2.6% forecasts (after 1.8%, albeit revised down to 1.6%); +0.9% after 0.3% on a MoM basis. Certainly just another reason for the ECB to not touch rates this week, as all price indicators have been to the upside lately. A rate cut wouldn’t solve the transmission problem anyway.

Austria sold EUR 550m 2019 at 1.326% and EUR 770m 2044 at 2.88% (compares to 2044 Bunds at 2.31% and 2041 OAT at 3.17% - quite different long-term outlooks at work here). Belgian EUR 1.8bn 3m bills at -0.003% (from 0.023% mid Sep) and EUR 1.3bn 6m bills at +0.017% (after +0.004% early Sep). The EFSF rounded up supply with EUR 2bn 3m at -0.043% (after -0.045% last month).
Nothing on sales tomorrow. Spain’s EUR 4bn 2, 3 and 5 YRS auction on Thursday will be more interesting, as well as France new 10 YRS Oct 2022.

Mid-day sentiment much more upbeat than at the open – still with no more tangible reason. Good periphery performance, supporting equities up 0.50% compared to the close and over 1.5% from the early morning lows. Credit 1-1.5% tighter in response.
Bunds 1,48% (+2), OBLs at 0,55% (+0), BKOs 0,041% (-1) with UST unchanged at 1,63%.
Spanish 2s 3,09% (-16), 10s 5,72% (-12). Spanish 2-10s 262bp (+2).
Italian 2s 2,17% (-8), 10s 5,07% (-6). Italian 2-10s 290bp (+2).
Commodities around flat to yesterday evening and up 0.5% from the morning lows. EUR at slightly over 1.29 on COB levels.

Drifting sideways on the highs attained with nothing to actually trade on after lunch.

ISM NY at 52.9 after 51.4 the lone piece of US data popping up during the afternoon. Better than Q2 below the 50-mark, and a rebound from Aug, but less than the 55.2 of July and far less than the 60-plus in Q1.
Soft US equities, after a tentative +0.30-0.50% open, which rapidly drifted half a percentage point lower, to the dismay of European Risk.

Had furthermore a WSJ piece stating that those final EUR 2bn were still haggled over (a repeat of previous days’ rumours, suddenly reheated) and Moody’s stating it would postpone its decision on Spain by a month. While rather credit positive for the banks, the bail-out and possible ESM support by Spain have obviously a different implication for the sovereign. Duh! No fresh news, either, but suddenly acknowledged differently. Periphery bonds staying put, though, near today’s tightest prints.

Wow! Good equity swings in Europe. EStoxx down about 1% from COB to the morning lows, up nearly 2% from these lows to noon highs and tanking back over 1.25% into the close.
Core & Soft EGBs rather muted in volatility, closing by and large unchanged, with Periphery bonds running a separate path.
Again that decorrelation. Jump, Jive & Wail…
Bunds closed at 1,46% (unch), OBLs at 0,54% (-1) and BKOs 0,041% (-1) with UST at 1,62% (-1)
Spanish 2s at 3,11% (-14), 10s at 5,72% (-12). Spanish 2-10s 260bp (unch).
Italian 2s at 2,16% (-9), 10s at 5,08% (-5). Italian 2-10s 291bp (+3).
EUR holding steady at 1.295. Commodities by and large flat. Gold trying to tickle YTD high at $ 1787/oz.

Still light on data tomorrow with Final Composite and Service PMIs all around (NB: Final MfG added up 0.1 on European data on Monday, with only Italy a more positive outlier).

New issue supply still on the light side, despite the more upbeat environment. Still, pretty much alone on the floor Poland attracted a multi-billion book for a new 12 YRS deal, finally printing EUR 1.75bn at MS +143, following the (about a notch better) Czech 10 YRS tap at +116 yesterday.
A EUR 1bn joint-Länder was launched in 7 YRS at MS +8, while the corporate side saw Origin Energy for EUR 500m 7 YRS at MS +160.

Closing levels:
10 YRS Yields: Germany 1,46% (unch); Luxembourg 1,59% (unch); Netherlands 1,74% (+1); Finland 1,75% (+1); Swaps 1,76% (-1); EU 1,91% (unch), Austria 2,03% (unch); France 2,19% (unch); EIB 2,20% (unch); EFSF 2,37% (+1); Belgium 2,54% (unch); Italy 5,08% (-5); Spain 5,72% (-12).

10 YRS Spreads: Luxembourg 13bp (unch); Netherlands 28bp (+1); Finland 29bp (+1); Swaps 30bp (-1); EU 45bp (unch); Austria 57bp (unch); France 73bp (unch); EIB 74bp (unch); EFSF 91bp (+1); Belgium 108bp (unch); Italy 362bp (-5); Spain 426bp (-12).

EUR swap curve 2-5 YRS 48bp (unch); 5-10 YRS 80bp (unch) 10-30 YRS 60bp (+1,0).
2 YRS German BKOs closed 0,041% (-1) and 5 YRS OBLs 0,54% (-1).

Main at 132 from 133 (0,8% tighter); Financials at 195 after 200 (2,5% tighter). SovX unch at 145. Cross at 556 from 558.
Stoxx Futures at 2490 / -0,2% (from 2496) with S&P minis at 1439 (-0,7% from 1449, at European close).
VIX index at 16,1 after 15,6 yesterday same time.

Oil 92,4/112,0 (WTI/Brent) from 92,7/112,3 (-0,4%/-0,3%). Gold at 1780 after 1778 (+0,1%). Copper at 380 from 378 (+0,5%). CRB at EU COB 311,0 from 309,0 (+0,6%).
Baltic Dry up 1 tick to 778.

EUR 1,295 from 1,291

Greek bonds guesstimates: Greece stable near late tightest levels with 2023s at unchanged 19% and 2042s at 17.75%. Same comment: Troika haggling – or not, the market seems to price that the Greeks will be left off the hook.

All levels COB 17:30 CET

This week:
Hard data lacking in Europe to get things anywhere. Further Final PMI data on Wed. German Factory orders at the end of the week. Unemployment figures across Europe. Of course, US NFP on Friday.
ECB on Thursday won’t do much on rates. Difficult to see the input here, unless Mario was to pull yet another rabbit out of his hat, but the mandate is quite stretched by now.
Should remain rather technical, subject to Periphery rumours and jitters. Spanish auction on Thu, as well as a new French 10 YRS.

EZ: Wed Final Comp and Serv PMI 45.9 & 46, Retail Sales (last -1.7% YoY); Thu ECB (unchanged)
GE: Wed Final Serv PMI 50.6; Fri Fact Orders fcst 0% after 0.5%
FR: Wed Final Serv PMI 46.1
Italy: Wed Final Serv PMI
Spain: Wed Serv PMI; Fri Indu Output (last -5.4%)
US: Wed ADP fcst 140k after 201k, Non-MfG ISM 53.4 after 53.7 ; Thu Claims fcst 370k after 359k, Aug Fact Orders fcst -5.9% after +2.8%, FED minutes; Fri NFP fcst 115k after 96k, Rate 8.2% after 8.1%
China closed for the whole week.

Click link on title or below for today’s musical support:
Baby, baby, it looks like it’s gonna hail…
Baby, baby, it looks like it’s gonna hail…

Original by Louis Prima (1956)