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


Friday, 12 October 2012

12 Oct 2012 – “ Sleepy Time Time ” (Cream, 1966)

12 Oct 2012 – “ Sleepy Time Time ” (Cream, 1966)

Ah. Rinse, repeat. US equity pretty much a Ctrl- C / Ctrl-V of the prior day, chart-wise. Only difference was that Wednesday started on the prior day’s close and yesterday started with an upswing after the US data, just to fade away gradually over the session and to close about flat. Once more a nice US bond session with dealers stepping back from the to-be-auctioned 30 YRS (widening from 2.88% to 2.92%, auctioned at 2.904%, in slightly lower B/C, to close at 2.85%) in order to get back on board after the sales. Apple bellwether still see-sawing, but with a negative bias. Asian session by and large flat, taking a lead from the US and ignoring yesterday’s 1%-plus move in Europe before entering the weekend. No overnight shocker today.

European open once more rather tame, in the lately acquired relaxed manner. Futures had already trailed lower by 0.5% in after session yesterday and the open was rather un-stressed, if not upbeat.
Equities in line with closing levels, Credit even a tick tighter. EGBs firmer by 1-2bp, including Spain tighter by 4 in 10s. Unchanged swap curves. Commodities in line with the European closing levels. EUR actually slightly firmer.
Cruising mode.

Light data supply. Italian CPI confirmed at 3.4%. EZ Industrial Production for Aug beating estimates with +0.6% MoM sa (fcst -0.4% after +0.6%), however YoY data for Jul revised lower (Aug -2.9% vs. -4.1% fcst after -2.3% revised to -2.8%). Balanced out data, which would tend to show some bottoming out during the summer, although PMI would tend to show that the year-end will be tougher.

No auction supply. No real New Issues supply, either, bare a EUR 250m 10 YRS FRN increase by the EIB at 3mE +37.

No real ticker entertainment. Yesterday’s Merkel announcement about possible tax cuts in Germany, given deficit within the 3% range, shouldn’t be over-estimated. Looks more like a hint to everyone else to do the same. Front-load austerity (for some 10 years or so) and then reap the benefits. Lagarde seemingly at odds with the IMF and certainly with the Germanic approach to things. Coca-Cola’s Greek bottling operations (CC Hellenic) announcement to move HQ to Switzerland obviously a sign not everyone thinks that the Greek crisis is over yet.
That the European Union gets the Peace Nobel price is sadly an indication that no one else stood out over the last 12 months… Then again, when seeing the tensions that have built up of late, and the utter lack of reactions to some of these crises, it’s probably better to celebrate the lack of massive civilian blood-letting in Europe over the last 67 years… Skip the part about financial blood letting, though.

Spain going strong again by mid-morning in the accustomed Viernes squeeze with the short end down over 10bp, with 3% in sight, and 10 YRS 8bp, through the 5.75%-level. Might become a day-trading strategy: If rather certain of no Zapato drop, buy some Spain on Friday and surf the “bail-out might actually be for this weekend” hope-rumour. As once traded, 10s move 25, then 50cts wise (3.5bp, then 7bp), things move fast. The only thing is to be able to get out quick enough, once the recurrent “We are thinking / sinking” pops up again.
In case of doubt, ECB’s Coeuré explained the ECB could start buying, as soon as an MOU was signed (and without the ESM), but that IFM monitoring was a must. And, as we’re on it: No, the ECB won’t bridge Greece. Any solution would be nice, but without the ECB.

Hmm… Quiet day. Equities recovered from their initial shock about the lack of US follow-through. EGBs trading sideways, keeping this morning’s 1-2 basis points. Not much to mention. Spain doing fine. Yesterday’s Italian auction issues, which seemed a little stuck on their sales levels and closed about flat to the auction seem to have been absorbed by now and in line with the curve.
Bunds 1,49% (-2), OBLs 0,52% (-2), BKOs 0,047% (-0,3). UST 1,69% (-2).
Spanish 2s 3,07% (-12), 10s 5,66% (-9). Spanish 2-10s 260bp (+4).
Italian 2s 2,14% (-10), 10s 4,97% (-4). Italian 2-10s 282bp (+4)
Commodities a touch weaker, but nothing major. Copper down 1%. Gold stable. EUR stuck at 1.297.

US figures with PPI on the rise +1.1% MoM (fcst +0.8% after 1.7%) / 2.1% YoY, but with PPI Ex flat MoM (fcst +0.2% after +0.2%) falling to 2.3% YoY (fcst +2.5% unchanged). PPI increase due to 4.7% increase in energy prices , with gasoline surging +9.8%. Things under control. Ex energy. No real impact.

Initially rather lacklustre US cash open of +0.25%, later enhanced by the University of Michigan Confidence numbers way over expectations at 83.1 (fcst 78 after 78.3). 5-year high. NFP spirit spreading? 
Helped dragging European equities back into unchanged territory.
Bonds all remaining very firmer across the board with Bunds back in line with strong USTs, despite the ROn spirit in the Periphery with Spain tighter by 15bp and Italy well through the 5%-mark at 4.94%. EUR trying a spike to the 1.30s, but petering out.
US stocks then steadily drifting lower, pushing Europe back in the red.

US equities seem utterly tired. Somehow the last months’ rally ahead of QE has tired everyone and since delivery every step seems sooooo heavy. Somehow like the iPhone 5 post-delivery depression. Good that there’s an iPad mini to keep up the spirit (23 Oct). Sleepy time time…

Listless and again rather depressed equity close (down over 2% on the week). Credit resilient, supported by a stronger end of week Periphery action. Steady EGB performance across the board, here despite the Periphery strength
Bunds closed at 1,45% (-6), OBLs at 0,50% (-4) and BKOs 0,039% (-1) with UST at 1,64% (-7)
Spanish 2s at 3,04% (-15), 10s at 5,60% (-15). Spanish 2-10s 256bp (unch).
Italian 2s at 2,13% (-11), 10s at 4,97% (-4). Italian 2-10s 284bp (+6).
Commodities a bit softer. EUR pretty much back to where it started.

Take-away of today: Stronger Periphery trapping European equities, with the latter dragged down by US apathy. Risk adverseness factors (equities – Periphery - EUR) decoupling.

I realized that a separate weekly review is probably more digest than putting it at the end of the Friday review.
Look forward to the Shuffle Rewind (like last week) over the weekend, which will recap this week.

Closing levels:
10 YRS Yields: Germany 1,45% (-6); Luxembourg 1,57% (-2); Netherlands 1,70% (-3); Swaps 1,74% (-3); Finland 1,71% (-5); EU 1,87% (-4), Austria 1,95% (-3); EIB 2,11% (-6); France 2,15% (-4); EFSF 2,26% (-5); Belgium 2,37% (-3); Italy 4,97% (-4); Spain 5,60% (-15).

10 YRS Spreads: Luxembourg 12bp (+4); Netherlands 25bp (+3); Swaps 29bp (+3); Finland 26bp (+1); EU 42bp (+2); Austria 50bp (+3); EIB 66bp (unch); France 70bp (+2); EFSF 81bp (+1); Belgium 92bp (+3); Italy 352bp (+2); Spain 415bp (-9).

EUR swap curve 2-5 YRS 46bp (-1,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed 0,039% (-1) and 5 YRS OBLs 0,50% (-4).

Main at 127 from 129 (1,6% tighter); Financials at 178 after 180 (1,1% tighter). SovX at 135 (-3). Cross at 540 (-4).
Stoxx Futures at 2465 / -0,7% (from 2482) with S&P minis at 1426 (-0,6% from 1435, at European close).
VIX index at 15,6 after 15,5 yesterday same time.

Oil 91,9/114,3 (WTI/Brent) from 92,5/115,6 (-0,6%/-1,1%). Gold at 1762 after 1770 (-0,5%). Copper at 371 from 376 (-1,3%). CRB at EU COB 309,0 from 307,0 (+0,7%).
BDY up another 2.5% to 926 from 903. Good drive. Weekly gain of 51 ticks (5.8%)

EUR 1,294 from 1,293

Greek bonds guesstimates: Having traded mostly stable throughout the week, Greek bonds close on some good Friday performance with 2023s at 17.75% (-25) and 2042s even at 15.5% (-100). SOMEHOW. GREECE. WILL.BE.SAVED. Somehow…

All levels COB 17:30 CET

Next Week Macro Data:
Looking forward to next week doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.
Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Tue EZ CPI Final +2.7%; Wed Construction Output
GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)
FR: Pffff… Rien
Italy: Fri 19 Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Mon 15 Empire Manu, Retail Sales, Biz Inventories, Tue CPI, IP, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales
China : Sat 13 Trade (fcst Exports +5.6% after 2.7%, Imports +2.4% after -2.6% YoY); Mon CPI fcst +1.9% after +2%; Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Sleepy and tired... Have a nice weekend...


Thursday, 11 October 2012

11 Oct 2012 – “ Jump ” (Van Halen, 1983)

11 Oct 2012 – “ Jump ” (Van Halen, 1983)

Well, if yesterday was boring, the after-session had plenty of thrilling material: US equities once more traded off with the S&P (-0.6%) now nearing its 50d average at 1426). The 10 YRS UST auction was a blast and one has to go “hats off” to the US primary dealers, who managed to shift Ts out to nearly 1.75% (the highest since 25 Sep) ahead of the auction and Beige Book release, just to close the auction at 1.70% with a higher than average bid to cover (3.26 after 2.85). Strong indirect bidding, too. Closing at 1.67% thereafter. The Beige Book was nowhere full of ex-ante NFP supportive data and described economic conditions as being “modest” (down from earlier “moderate”). In FED speak hence rather beurgh… Finally after the close, S&P got medieval on Spain, taking its rating down 2 notches to BBB- and slapping a negative outlook on it, to round up things, citing recession, social discontent, regional differences and, a slap in the ECOFIN’s face, “doubts over some eurozone governments' commitment to mutualizing the costs of Spain's bank recapitalization”. Wolfgang, did you HEAR that???
Whatever, rating now in line with the buddies at Moody’s (i.e. 1 notch over Junk) and anyhow, it’s no real surprise for most. A real impact would now come from any DBRS move, harking back to my comments from 14 Jun (link to original post ) that the fate of Spanish bonds’ ECB haircut levels once and for all now depends on DBRS not lowering its assessment (AL neg, since 08 Aug) as this would send Spain into the Category III bucket and seriously increase margins.

European open nevertheless rather tame, as so often lately. Had EStoxx futures trading off 0.75% in early trade, but effective opening levels around -0.50%. Of course, the EGB credit torsion is of no surprise with Bunds down 3bp (underperforming UST) to 1.46% and Spain out by 10bp across the curve at 3.32% in 2s and 5.88% in 10s. The latter bring the 6%-mark back in sight. Pivot is the unchanged Soft Core bracket. Credit sluggishly resilient, out 1-3 bp (1-1.5%). WTI down nearly 2% overnight with the EUR eventually rather steady at 1.286, having traded down to 1.282 in Asia. Italy holding comparatively ok , head of its auction with bonds out by 5-3bp.

Getting excited about Spain is seemingly so passé, although I’d be careful about the impact on Spanish debt of any hint the DBRS analyst was to wake up from his latest pleasant Riveria holiday memories.
That the ECB hair cuts depend on rating agency assessments is of course an irony when considering the efforts via LTROs and possible OMT to support the Periphery bonds. But then again, it is an administration and has rules and objectively no one can pretend that there is no credit difference between German, France or let’s say Spain or Portugal. It remains that an increase of 5% in haircuts means billions of EUR of liquidity fading (“I felt a great disturbance in Target2, as if millions of SPGBs suddenly cried out in terror and were suddenly silenced.”)

Final CPI in Europe as one of the few things to cling to with (EU harmonized) Germany confirmed at +2.1%, France surprisingly lower with a final read at +2.2% (from initial +2.4%), Spain confirmed at +3.5%.

Italian auction with EUR 3.75bn on-the-run 3 YRS 4.500% Jul 2015 sold at 2.86%, which is a HUGE premium to yesterday’s close (COB 2.98%, 2.75% at mid-Sep auction), next to EUR 2.25bn off-the-runs split into EUR 0.85bn Sep 2016 3.42% (COB 3.50%), EUR 0.7bn Aug 2018 4.06% (COB 4.11%) and EUR 0.7bn some longer Mar 2025 at 5.24% (COB 5.230%).
Puzzled by the dynamic of overpaying these bonds well beyond the moderate softening we had over the last days… Like pointed out yesterday, this IS a disciplined PD group in Italy.
Whatever, results were good for some relief with the BTP curve tightening back 2-3bp to around closing levels. Spain tagging along.
Spanish “private” placement of EUR 4.86bn of 3% Apr 2015, 3.25% Apr 2016 and 3.80% Jan 2017 (all existing bonds) ongoing. Why the hell doing a private placement on publicly traded bonds????

Had Spanish Deputy EM re-heating bond buying hopes by stating given where spreads are, the ECB readiness and the IMF view secondary buying should start soon, while repeating Spain was still deepening reflection on whether or not to ask for assistance. That seems totally delusional… but in the meantime, the pitch seems to work.
Of course, Spanish officials see the S&P conclusions as being wrong, as they viewed the IMF outlook as too harsh.

Greek unemployment now at 25.1% with Youth unemployment at 54.2%. Greek deficit numbers astoundingly “positive”, but past experience would push for some pinches of salt. Budget gap for Jan-Sep (ex Social Security and local authorities) seen at EUR 12.6bn (after over EUR 20bn same period last year). Revenues about flat at EUR 36.7bn, below Troika-approved target of EUR 38bn, though. Hence the improvement stems from drastically reduced spending (EUR 46.6 vs. EUR 53.4bn) and probably non-payment of bills.  Public Investment revenues (still +36%) under target, while expenditure reduction over target. Seems to be the primary adjustment variable. Primary deficit at EUR 2bn (compared to EUR 6bn same period last year).
Lagarde actually pitching now for time-extension (as for Portugal and Spain already), but without the IMF lending more money either. Knowing that the ECB is adamant on non-OSI, too. So eventually the Troika remains haggling out things in Athens.

Nice bounce off the 06 Sep morning levels (the day after the OMT announcement) in EStoxx, trying to re-attack the 50d average at 2473 and Fibo retracement at 2458. Some Risk feeling developing, with no particular trigger seen. Had some rather mainstream and useless pep talk by Barroso and HvR.
Mixed mid-day picture with EStoxx up 0.4% from close (after ticking down 0.75% in early future trading). Credit a tick tighter. EUR taken over the 1.29-mark on equity buoyancy. EGBs mostly firmer with Spain just a little softer, but having recovered from the overnight S&P surprise with some support from the Italian auction.
Bunds 1,47% (-2), OBLs 0,51% (-2), BKOs 0,042% (-0,3). UST at 1,69% (-5), off morning lows.
Spanish 2s 3,25% (+2), 10s 5,80% (+2). Spanish 2-10s 255bp (-1). 
Italian 2s 2,30% (-3), 10s 5,07% (-3). Italian 2-10s 277bp (unch).
Commodities about unchanged. Copper slightly firmer. WTI off lows. EUR up 100 pips from Asian lows.

Spanish Deputy PM on the tickers, in usual need to know extent and overall agreement of any support. Ok. Nothing new. Cooling off this morning imminent support pitch.
Yeah, bueno, we know the drill: Spanish bonds immediately marked down 6-8 bp, back to opening levels. After the bickering about the 10 YRS reference in Spain, the Tesoro marked its stance by announcing it would be among the lines auctioned off next week (next to 3 and 4 years).

US figures to start the afternoon with Import Prices at +2.1% MoM (fcst +0.7% unchanged), Trade Balance at USD -44.2bn (fcst -44bn after -42, revised -42.5bn) and especially Claims at 339k (fcst 370k after 367k, revised 369k) and Continuous Claims at 3273k (fcst 3275k after 3281k, revised 3288k). Claims print the lowest since mid Feb 2008 (339k). Doesn’t look like a thrilling data set after last week’s NFP, but well enough for equities to squeeze out a further 0.2% and Bunds futures ticking lower with EUR ticking up to 1.293. Hum. Ok.

Positive US cash open supportive for the Risk On attitude, boosting European equities another 0.2% or so, step by step, although the initial +0.4-0.6% American spike kind of petered out rapidly. US Treasuries off tightest lows, too, ahead this time of the 30 YRS auction. Worth a try to see if the move on the 10s can be repeated (30 YRS 2.94% at European close, 288% at US close after the 10 YRS auction, US open in around 2.92%).

Not much else bail-outee #4 Cyprus getting the lead from its future peers by refusing Troika conditions of selling state-assets right away. Why bother complying with things one can refuse right away…

Happy closing. Italy trying to tackle the 5%-mark, Spain managing to tighten in despite the S&P downgrade. EGBs by and large about flat. Equities up 1% plus, Credit tighter by 2.5-3%. Relief rally, as the market feels all shoes may have dropped. Odd outperformance to US equities, stuck at yesterday’s levels.
Safe-haven BUNDs pressured by UST, pressured by supply. Core and Soft EGBs mostly unchanged.
Bunds closed at 1,51% (+2), OBLs at 0,54% (+1) and BKOs 0,050% (+0,5) with UST at 1,71% (-3).
Spanish 2s at 3,19% (-4), 10s at 5,75% (-3). Spanish 2-10s 256bp (unch).
Italian 2s at 2,24% (-9), 10s at 5,01% (-9). Italian 2-10s 278bp (+1)
Commodities firmer overall. Oil mixed. EUR 1.293

Italian auction paper closes 3 YRS 2.86% (auction level an overbid 2.86%), 2016 3.42% (auction 3.42%), 2018 4.05% (auction 4.06%) and 2025 5.22% (auction 5.24%). Well inside yesterday’s closing levels, but barely off auction levels. Seems to have been some sponsoring hands in the 3 YRS. No losses, though.

No real take-away today: Stronger Periphery close will be the usual opportunity for politicians to rant about the lack of clout of rating agencies. Good Jump in Risk appetite. Question is how far. Lack of absence of negative news, or better, markets simply ignoring the latter, doesn’t make for a convincing bullish rebound. I’d say: We won’t get fooled again! European Bull trap.

New Issue traffic somewhat reduced to Credit Agricole senior for EUR 1.25bn 5 YRS at MS +105, Land NRW printing EUR 750m Apr 2016 at MS -6 and fellow Land Baden-Württemberg EUR 500m 8 YRS FRN at 3mE -6.
Sweetie of the day was Nestle who melted prices for EUR 500m 4 YRS to MS +5, a mere 0.75% in yield, its tightest and absolute lowest ever print. Probably one of the lowest corporate issues in EUR ever.

Closing levels:
10 YRS Yields: Germany 1,51% (+2); Luxembourg 1,59% (unch); Netherlands 1,73% (unch); Swaps 1,77% (+1); Finland 1,76% (unch); EU 1,91% (+1), Austria 1,98% (-1); EIB 2,17% (+1); France 2,19% (unch); EFSF 2,31% (-1); Belgium 2,40% (-1); Italy 5,01% (-9); Spain 5,75% (-3).

10 YRS Spreads: Luxembourg 8bp (-2); Netherlands 22bp (-2); Swaps 26bp (-1); Finland 25bp (-2); EU 40bp (-1); Austria 47bp (-3); EIB 66bp (-1); France 68bp (-2); EFSF 80bp (-3); Belgium 89bp (-3); Italy 350bp (-11); Spain 424bp (-5).

EUR swap curve 2-5 YRS 47bp (unch); 5-10 YRS 83bp (-1,0) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed 0,050% (+0,5) and 5 YRS OBLs 0,54% (+1).

Main at 129 from 133 (3,0% tighter); Financials at 180 after 185 (2,7% tighter). SovX at 138 (-2). Cross at 544 (-11).
Stoxx Futures at 2482 / +1,2% (from 2453) with S&P minis at 1435 (+0,1% from 1434, at European close).
VIX index at 15,5 after 16,3 yesterday same time.

Oil 92,5/115,6 (WTI/Brent) from 93,3/115,2 (-0,8%/+0,4%). Gold at 1770 after 1763 (+0,4%). Copper at 376 from 372 (+1,1%). CRB at EU COB 307,0 from 309,0 (-0,6%).
After fixing unchanged yesterday at 875, BDY up 3.2% to 903.

EUR 1,293 from 1,290

Greek bonds guesstimates: Greek bonds frozen with 2023s at 18% and 2042s at 16.5%.

All levels COB 17:30 CET

Tomorrow and Next Week Macro Data:
Looking forward to next week doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.
Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Fri 12 EZ IP fcst -0.4% (last +0.5% MoM); Tue EZ CPI Final +2.7%; Wed Construction Output
GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)
FR: Pffff… Rien
Italy: Fri Final CPI 3.4%; Fri 19 Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Fri PPI fcst +0.8% after 1.7% PPI Ex fcst +2.5% unchanged YoY, U Michigan Confidence fcst 78 after 78.3 Mon 15 Emire Manu, Retail Sales, Biz Inventories, Tue CPI, IP, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales
China : Sat 13 Trade (fcst Exports +5.6% after 2.7%, Imports +2.4% after -2.6% YoY); Mon CPI fcst +1.9% after +2%; Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Had to place that one somewhere sometime. Bear with me – and hop around, while doing some Air Guitar chops.And Eddie Van Halen just got voted yesterday Greatest Guitarist of All Time by Guitar World (A view I personally don't share, but so be it...)


Screen Crash Flash: Spanish bonds' ECB haircut now hinges once and for all on DBRS

DBRS Spain rating AL neg since 08 Aug 2012

From 14 June 2012:
http://www.aviewfrommyscreens.com/2012/06/14-jun-2012-in-broken-dream-edwin.html

The guys at Moody’s were behind their peers’ curve anyway (see 11 Jun post “Unfinished Sympathy”), but have now taken the lead by putting the Kingdom right away on junk outlook. ECB Haircut increase from 4 to 9 % in 10 YRS and probably worse from 1.5 to 6.5% in LTRO-laden 3 YRS paper (ECB link p.73) is thus now hinging on DBRS’ views (Eurosystem credit assessment framework ECAF link).

Haircut table

Wednesday, 10 October 2012

10 Oct 2012 – “ She Went Quietly ” (Charlie Winston, 2011)

10 Oct 2012 – “ She Went Quietly ” (Charlie Winston, 2011)

Having lately downgraded the format from Apple Lossless to a meeker version, US equities once more had a more struggling session (5 YRS on the day after the S&P historic high of 1565). So plagued by depression, we closed down a good 1% on average – with the seedless INDU holding just a little better. The umpteenth algo gone wild story doesn’t even need to be mentioned, as this has become common place nowadays. Nearing 50d average on the S&P at 1425 (1.1% away).
Asia likewise weak with yesterday’s Japanese exuberance cut short and reversed today (-2%) and solely China managing to remain just a wee bit in the green. Un-fooled, waking up from denial…

European open nevertheless rather tame, after some pre-open future jitters. Equities by and large on yesterday’s closing levels. EGBs flat to a bit wider, with USTs unable to gain from yesterday’s equity correction. Soft Core sticking out with a 2- basis point tightening, taking Austria below the 2%-mark in 10s.
Periphery, mainly Spain, drifting wider again at open with 2s and 5s some 5bp wider and 10s now at mid 5.80s. Credit a tick wider. Oil still up, given the latest MENA jitters. EUR about unchanged at 1.287.

French Industrial Production surprisingly resilient at +1.5% MoM (fcst -0.3% after +0.2%, revised stronger to +0.6%). Manufacturing up 1.8% (fcst -0.7% after revised +1%). Likewise for Italy with sa Aug IP up 1.7% (fcst -0.5% after revised -0.1%). Still, shouldn’t hide that Italian IP remains down 5.1% YoY (after -4.3%). Summer home works, everyone? Better than the PMI rounds might have shown. Surprising.

Government supply from Germany with EUR 4bn 5 YRS at 0.53% (unchanged from COB 0.53%), was 0.61% in Sep. BuBa retaining a short EUR 900m for market interventions. Healthy 2.2 bid to cover. (Forgot to mention yesterday. Sorry.).

Italian bills on the chop ahead of tomorrow’s BTP auction with EUR 3bn 3m at 0.765% (up from 0.70%) and EUR 8bn 12m at 1.941% (after 1.692%). Ok bid to covers at wider prices. Draghi put fading.
Need to check tomorrow’s probably most exciting auction of the week with up to EUR 3.75bn on-the-run 3 YRS 4.500% Jul 2015 (COB 2.98%, 2.75% at mid-Sep auction), next to EUR 2.25bn off-the-runs Sep 2016 (COB 3.50%), Aug 2018 (COB 4.11%) and some longer Mar 2025 (COB 5.230%).

Eerily quiet after yesterday’s post-ECOFIN cacophony…

Overall hazy mid-day picture: Core EGBs a touch softer, Soft Core firmer as was the Periphery after a change of heart and tightening back. Belgium hitting a 2.39% historic low in 10s.
Bunds 1,49% (+2), OBLs 0,53% (unch), BKOs 0,042% (+0,5) with UST at 1,73% (4)
Spanish 2s 3,18% (-2), 10s 5,74% (-6). Spanish 2-10s 257bp (-3).
Italian 2s 2,31% (-2), 10s 5,07% (-3). Italian 2-10s 276bp (-1).
Equities still hovering near day’s lows (-0.2%), but in reduced volatility. Credit a tick or two wider.
Oil still up a good 1%. EUR sideways on morning levels at 1.286.

Wholesale Inventories at +0.5% (fcst +0.4% after +0.7%, revised +0.6%). Somehow neutral. Beige Book later. Shouldn’t spark unless someone would have spotted massive job increases that would vindicate last week’s NFP.
US cash open slightly negative, but within reasonable means, balancing out rapidly around -0.20%. There’s just not much out there to steer the markets. European main indices high-low prints within a quarter of a percentage point around closing levels. Thanks Jobs, AAPL on the rise today, giving some support to S&P and NASDAQ.
Noon stamina in Periphery bonds unsustainable.

Not much to share. French-Spanish meeting calling for Bank Union asap. Germany opines – alap. Knowing that by and large the ECB is massaging the message that a seriously functioning SSM / Bank Union won’t happen before a while. Haven’t seen yet the daily Spanish “We’re thinking about it”-message (Classical Berlitz link, revisited, a must). Still some seriously ruffled feathers between Catalonia and the central government, the latter insisting the first should start cooperating instead of mulling session thoughts.

Trichet on Spain not being Greece (video link). Oh, and governments ought to get to work…

Uneventful close. Risk softer, as throughout the day, but no softer than that either. Bunds suffering from UST drift wider.
About even closed for Hard Core EGBs. Tick tighter for the Periphery. Soft Core holding well.
Bunds closed at 1,49% (+2), OBLs at 0,53% (unch) and BKOs 0,045% (+0,8) with UST at 1,74% (+5)
Spanish 2s at 3,23% (+3), 10s at 5,78% (-2). Spanish 2-10s 256bp (-4).
Italian 2s at 2,33% (unch), 10s at 5,10% (unch). Italian 2-10s 277bp (unch).
Oil most exciting asset of the day. Gold flat. EUR a bit better. Uneventful.

No real take-away today: sometimes you need a breather and everyone agrees. Need to check that Italian auction, knowing that Italy has a rather well-disciplined primary dealership. Surprises hence rather unforeseen. Will check price development since the auction at 2.75% on 13 Sep.

Again a mixed bag of New Issues spread between mighty safe-haven KfW with EUR 5bn 7 YRS at MS +5 and then split into more adventurous Portugal Telecom EUR 750m April 2018 at 6% / MS +498 (Compare to Jun 18 PGB around 7.15%), unrated German pharma Celesio with EUR 350m 4 YRS priced at 4% / MS +328 and Spanish Enagas for a EUR 250m increase of its Oct 2017 deal at MS +270 (launched end of Sep +335).
Periphery infrastructure and telecom issuers always a happy feast these days…

Closing levels:
10 YRS Yields: Germany 1,49% (+2); Luxembourg 1,59% (+1); Netherlands 1,73% (-1); Swaps 1,76% (+1); Finland 1,76% (unch); EU 1,90% (unch), Austria 1,99% (-1); EIB 2,16% (-2); France 2,19% (-4); EFSF 2,32% (-1); Belgium 2,41% (-1); Italy 5,10% (unch); Spain 5,78% (-2).

10 YRS Spreads: Luxembourg 10bp (-1); Netherlands 24bp (-3); Swaps 27bp (-1); Finland 27bp (-2); EU 41bp (-2); Austria 50bp (-3); EIB 67bp (-4); France 70bp (-6); EFSF 83bp (-3); Belgium 92bp (-3); Italy 361bp (-2); Spain 429bp (-4).

EUR swap curve 2-5 YRS 47bp (unch); 5-10 YRS 84bp (+2,0) 10-30 YRS 60bp (unch).
2 YRS German BKOs closed 0,045% (+0,8) and 5 YRS OBLs 0,53% (unch).

Main at 133 from 131 (1,5% wider); Financials unchanged at 185. SovX at 140 (+5). Cross at 553 (+5).
Stoxx Futures at 2453 / -0,4% (from 2462) with S&P minis at 1434 (-0,3% from 1439, at European close).
VIX index at 16,3 after 16,1 yesterday same time.

Oil 93,3/115,2 (WTI/Brent) from 90,7/113,1 (+2,8%/+1,9%). Gold at 1763 after 1763 (0,0%). Copper at 372 from 371 (+0,3%). CRB at EU COB 309,0 from 306,0 (+1,0%).
A rare feat: Baltic Dry fixed unchanged at 875.

EUR 1,290 from 1,288

Greek bonds guesstimates: Greek bonds frozen with 2023s at 18% and 2042s at 16.5%.

All levels COB 17:30 CET

Rest of Week:
This week will be once more appallingly empty on hard data. Minor US data, too.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Thu Final CPI 2.1%
FR: Fri Final CPI 2.4%
Italy: Fri Final CPI 3.4%
Spain: Fri Final CPI 3.5%
US: Thu Import Prices fcst +0.7% unchanged, Claims fcst +370k after 367k, Continuous fcst 3275k after 3281k; Fri PPI fcst +0.8% after 1.7% PPI Ex fcst +2.5% unchanged YoY, U Michigan Confidence fcst 78 after 78.3
China : Mon Serv PMI (last 52)

Click link under title or below for today’s musical support:
Quiet, quiet, quiet…


Tuesday, 9 October 2012

09 Oct 2012 – “ Wall Of Denial ” (Stevie Ray Vaughan, 1989)

09 Oct 2012 – “ Wall Of Denial ” (Stevie Ray Vaughan, 1989)

And no, US equities never managed to see the light yesterday… Didn't get fooled again. While closing 0.10-0.20% off lows, the end of the session remained very much below the day’s highs and furthermore below Friday’s sluggish close. Asia mixed with China eventually catching up last week’s move (+2%), supported by merger law reform hopes. Japan loosing 1% (closed yesterday).
Overnight release of the updated IMF WEO quite chilling with downwards revisions for everyone (2012 global growth expected at 3.3% after 3.5%, 2013 at 3.6% after 3.9%) and his dog. 250 pages that don't really qualify for relaxing bed time reading link, but rather paints a picture that could have been a four-handed work by Hieronymus Bosch and Nouriel Roubini.
Moody’s spoiling the ESM launch party with a Aaa rating slapped right away with a negative outlook (Fitch AAA). Cyprus shot down to B3 neg from Ba3 by Moody’s, too. As not yet easy to find: ESM website http://www.esm.europa.eu/ and investor presentation.
Recurrent leaks of “strategy” Spain’s bail-out ought to be combined with Cyprus (and Slovenia?) (next to some Greek concessions?) in November, after Spanish regional elections, in order to pass German Parliament as some kind of block-trade.
Somehow reminiscent of Monti explaining that unelected technocrats governments should sometimes by-pass explain things better to Parliaments to speed up things.

Initial pre-opening quotes nevertheless rather biased for a slight rebound, but eventually as markets started to kick in the real opening picture was rather lacklustre and directionless, let’s call it “flattish soft”. Bunds ticking initially a little lower with 10s widening to just below 1.50%. Other EGBs, including the periphery about flat. Equities flattish minus after trying to play the Chinese rebound (, as a reminder closed last week and subject to belated ups & downs). Credit neutral. Commodities slightly in the plus.
Too many risk adverse news: The above-mentioned IMF forecasts. EcoM De Guindos quoting an agreement discussed last night that Spain’s fiscal consolidation should depend on its growth. While certainly a fundamentally sane approach, it shouts out “Back Pedalling!” to all sceptics. Still a merry-go-round on the SSM (single supervisor mechanism) everyone feels great about, but with a deep split running on the timing. Draghi at the EU Parliament.
Half an hour later, Europe back into Risk Off with equities down over half a percentage point, Bunds back to flat and the Periphery out by 3-5 bp. EUR down 60 pips in straight manner. UST tighter by 6bp to 1.68% (closed yesterday), in line with Bunds.

Long 5 YRS Dutch on tap quickly raising EUR 2.25bn at 0.861% (close 0.87%). Initially issued on 03 Jul at 1.305%. Absolute low at 0.73% hit early Aug. Late high was 1.03% early Sep). EUR 1bn 6m Greek bills (+EUR 300m in non-competitive bids) sold at 4.46% (last 4.54% in Oct).

Had a micro drama unfolding in the morning, as Bloomberg switched the Spanish 10 YRS reference in cross-market matrices from the 5.850% Jan 2022 (considered too short at 9.3 years) to the 4.800% Jan 2024 (11.3 years), which trades 32bp wider. Even had the Tesoro stating on screens that the 10 YRS was still the former one. Silly. Still, had people react to the sharp widening as a sign of major Risk Off in the morning with the headline yield above 6%.
It remains that should Spain keep on not issuing a more on-the–run 10 YRS, people will eventually make up their own reference, as I did for Finland for a while. Linear interpolation would give a 11bp pick-up by late morning (5.85% vs. 5.74% and 6.06%. 437 to Bunds) for those interested.

Not much else happening. Draghi going on and on and on at the EU Parliament hearing, but with not much in terms of news. OMT conditionality repeated. OMT to buy from the market, not from the states (Ah…). ECB is NOT a printing machine. Strong support for Banking Union, but expects at least a year for the ECB to assume the supervision role. Won’t replace national supervisors. Shared deposit insurance a finality, not a starting point. Inflation (Arghhhhhhhh!) increased the new ECB headquarter costs by EUR 300m (…). Seems like a catalogue of recent themes with some give-and-take for everyone. Everyone’s a winner!
No special mention of the announcement / confirmation of yesterday evening that the ECB was shelving its covered bond buying programme, as planned, starting November, one year after inception (CBPP 2 is at EUR 16.334m, out of possible EUR 40bn, as of settlement yesterday. CBPP 1 closed at EUR 54bn). The CB market has yielded to the long LTROs anyway.
Mario IS a smooth operator. Once his ECB mandate over, he should be a good candidate to replace Barroso and HVR in one shot. Would keep EU budget lower, too.

Mid-day bottoming out levels, once more: EGB curve wobbly from Hard to Soft, about +/-1 from COB. Spanish 10s (the real one, as stated by the Tesoro) 4 wider. Credit a tick wider. Equities down about 0.50%.
Bunds 1,49% (+2), OBLs 0,54% (+1), BKOs 0,044% (+0,5). UST at 1,70% (-4, from Friday)
Spanish 2s 3,19% (+7), 10s 5,74% (+4). Spanish 2-10s 254bp (-4).
Italian 2s 2,27% (+4), 10s 5,07% (+1). Italian 2-10s 280bp (-3).
Commodities about flat. EUR 1.293, having bounced back from 1.291, but unable to keep the ball rolling.

First reactions to Merkel arriving in Greece were to point out her jacket was the one she wore when Germany beat Greece on the soccer field. This will be a constructive visit. Eventually more case of diplomacy and courtesy, as no freebies outside compassionate words. The road is long, the mountain steep, austerity bites…

No direct reaction to the Italian treasury’s plan to increase 2012 funding goals by EUR 20bn to EUR 460-465bn.

Minor US pre-open data with Small Biz Optimism down to 92.8 (fcst 93.5 after 92.9). Bit of an upwind in Risk Sentiment with equities ticking up 0.25%-0.30% over lunch, up 0.75% from the morning lows to kick-start the US session pretty much on unchanged levels to yesterday’s close. Oil getting some traction too.
Tons of political post-ECOFIN speeches criss-crossing. Difficult to filter out. Everyone’s, of course, very upbeat. And the Greeks are expected to do their bit by 18 Oct… Slovenia and Spain do NOT need bail-outs. Legacy assets are NOT covered by the ESM, dixit Schaueble. All is good. And Geithner feels the US are growing close to potential (…) and there’s NO fiscal cliff.
Hmmm… Denial day, after the overnight attempt by the IMF wanted to stage a day of reckoning.

Once more slightly negative US cash open and the EUR trailing European equities retracing the post-lunch rebound, or vice-versa, darkening the mood again Especially with Spain starting to slip for good this time, out by over 10. All so correlated than distinguishing chicken from egg becomes difficult. Just one single huge omelette…

French Assembly passing EU Fiscal Treaty by a large majority.
Apple victim of gravity, US stocks victims of Apple, seemingly US stocks victims of another algo gone wild, too…
Alcoa opening Q3 earnings ball tonight.

Risk Off close, especially in equities. Last week’s equity move now fully erased. Credit rather muted, at this stage.
Soft Core France and Austria actually outperforming with Austria on the symbolic 2%-mark in 10s.
Bunds closed at 1,47% (unch), OBLs at 0,53% (unch) and BKOs 0,037% (-0,3) with UST at 1,69% (-5)
Spanish 2s at 3,20% (+8), 10s at 5,80% (+10). Spanish 2-10s 260bp (+2).
Italian 2s at 2,33% (+10), 10s at 5,10% (+4). Italian 2-10s 277bp (-6).
Oil still up over 1%. Other commodities drifting lower. EUR back through 1.29.

Eventually the key take-aways from today were: The IMF is gloomy, so is Draghi. Banking Union is months away from being done. ESM and OMT are ready to go, but no one wants that first dance. Spain is analyzing. Oh, and an iPhone is just that. A phone.  Nothing new, nowhere.

Diversified New Issue supply: Allianz hitting big with EUR 1.5bn sub debt 30YRSnc10 at MS +400. Periphery infra supply from Italian Terna with EUR 750m Feb 2018 at MS +193 (That’s Italy minus 100!) and Gas Natural for EUR 500m Apr 2017 at MS +335 (about Spain minus 30). Corporates rounded-up by French real estate Foncière des Régions with EUR 500m Jan 2018 at MS +295.
German SSA KfW on track for a new 7 YRS global EUR deal tomorrow.
Eventually yesterday’s UniCredit Austria 5 YRS and Banco Popolare 4.5 YRS were pulled / shelved / put back on the drawing board.

Closing levels:
10 YRS Yields: Germany 1,47% (unch); Luxembourg 1,58% (unch); Netherlands 1,74% (unch ); Swaps 1,75% (unch); Finland 1,76% (unch); EU 1,90% (unch), Austria 2,00% (-3); EIB 2,18% (unch); France 2,23% (-4); EFSF 2,33% (-1); Belgium 2,42% (-3); Italy 5,10% (+4); Spain 5,80% (+10).

10 YRS Spreads: Luxembourg 11bp (unch); Netherlands 27bp (unch); Swaps 28bp (unch); Finland 29bp (unch); EU 43bp (unch); Austria 53bp (-3); EIB 71bp (unch); France 76bp (-4); EFSF 86bp (-1); Belgium 95bp (-3); Italy 363bp (+4); Spain 433bp (+10).

EUR swap curve 2-5 YRS 47bp (-1,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 60bp (+1,0).
2 YRS German BKOs closed 0,037% (-0,3) and 5 YRS OBLs 0,53% (unch).

Main at 131 from 129 (1,6% wider); Financials at 185 after 182 (1,6% wider). SovX at 135 (-1). Cross at 548 (+8).
Stoxx Futures at 2462 / -1,5% (from 2499) with S&P minis at 1439 (-0,8% from 1451, at European close).
VIX index at 16,1 after 15,1 yesterday same time.

Oil 90,7/113,1 (WTI/Brent) from 89,6/111,9 (+1,2%/+1,0%). Gold at 1763 after 1777 (-0,8%). Copper at 371 from 372 (-0,3%). CRB at EU COB 306,0 from 308,0 (-0,6%).
Baltic Dry down to 875 from 883, the same 8 ticks gained yesterday.

EUR 1,288 from 1,297

Greek bonds guesstimates: Greece 2023s static at 18%, same for 2042s at 16.5%.

All levels COB 17:30 CET

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

EZ: Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Thu Final CPI 2.1%
FR: Wed IP fcst -0.3% (last +0.2% MoM), MfG fcst -0.7% (after +0.9%); Fri CPI 2.4%
Italy: Wed IP fcst -0.5% (last -0.2%); Fri Final CPI 3.4%
Spain: Fri Final CPI 3.5%
US: 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:
Didn't get fooled again yesterday, but still facing denial today...

And because SRV rules: " Tin Pan Alley / Dirty Pool ", which will be difficult to squeeze into any market report…

Monday, 8 October 2012

08 Oct 2012 – “ Won't Get Fooled Again ” (The Who, 1971)

08 Oct 2012 – “ Won't Get Fooled Again ” (The Who, 1971)

Eventually the US markets closed on a softer note on Friday evening, following the surprisingly high NFP report, judging in line with our view that, while jobs were obviously created, their quality and lasting effect were probably overstated. INDU just about positive, S&P just about negative and NASDAQ down. Columbus Day today will have the bond market closed, knowing that USTs didn’t take any solace of the equity slide and closed at the 1.74% high of the day; end of Sep levels. Highest lately had been brushes with 1.88% mid Sep, following QE3 release.
Japan closed. China reopening on a weak note after its week-long holiday, skipping out on last week’s 3% European and 2% US rise (at European close on Friday), despite a Services PMI reading rising to 54.3 after 52. The IMF is set to reduce 2012 growth forecast for China to 7.7% from 8.2%. Asian growth (ex Japan & India) to fall to 7.2% this year from 8.3% in 2011.

Weekend news snippets had ECB’s Asmussen repeating opposition to Greek OSI and stressing conditionality of OMT. Had some Greek 2020 forecasts of debt/GDP hitting 140% in the German press, far from the Troika-targeted 120%. Moody doubts Portugal’s 2013 capital markets access, despite last week’s exchange exercise. One of the bits of the ECB press conference that went slightly under was Draghi’s comments that the OMT would only work for “new” cases of support-needs, hence excluding Portugal and Ireland, who would have to submit new demands and work under a new MOU, should they wish to profit from the ECB’s largesse. The Canary Islands will become the 6th region to ask for assistance under Spain’s regional programme with EUR 757m (Count so far: Catalonia EUR 5.023m, Andalucía EUR 4.900m, Valencia EUR 4.500m, Castilla-La Mancha EUR 800m and Murcia EUR 527m, add the Canaries and we’re past the EUR 16.5bn mark, out of planned EUR 18bn). It remains that in official communication, Andalucia is skipped (for the moment). Details on the loans emerge as being 10 YRS, with a 2-year grace period, at Tesoro costs +30.

Classical Risk Off European open, EGB credit torsion and weaker equities.
BUNDs down 4bp to 1.48%, back through 1.50%, taking the Hard Core gang lower, too. Soft Core a little firmer. Periphery 3-5 wider depending on curve point, hence Italy once more stuck above the 5%-mark at 5.07% and Spain back to 5.70% (after Friday’s pretty much trigger-less 20bp-plus rally.
(Closed) UST stuck at NY closing level of 1.74% (hence a 7 bp underperformance to BUNDs).
European equities down 1% (that one percentage point gained between morning quotes on Friday and the afternoon squeeze). Credit wider by 2-4 points, about 2%. Commodities on the weaker side with Oil down 1% on average, Copper down 1.5% and Gold below 1770 (-0.75%). EUR back through 1.30.

Data front will remain light for the week, so there will be a need to watch out ECOFIN statements, ahead of next week’s wider European Council meeting (18-19 Oct), as well as G7/20 meeting in Tokyo, and all other possible political / regional news.
German trade better than expected with Aug Exports up 2.4% (fcst -0.6% after revised +0.4%) and Imports up 0.3% (fcst +0.2% after +0.3%, revised sharply lower from +0.9%). French business sentiment a tick better than forecast, but down to 92 (fcst 91 after 93), which is surprising given the late repeated rounds of business bashing and tax increases by the French government. Seems over-optimistic. Then again this cycle’s low was at 90 in July. Sentix EZ sentiment indicator at -22.2 missing expectations of a rebound to -20.9 after -23.2.  German IP about in line with -0.5% MoM for Aug (fcst -0.6% after +1.3%, revised +1.2%) sa. YoY nsa -1.4% after -1.3%.

Never mind the mood. Periphery recovering some steam by mid-morning with Spanish 10s erasing losses and tightening. Short end still a little wobbly, though. Italy eventually unchanged. Bunds backing up 20 cts from their highs.

Auction supply limited to German and French bills. Germany issued EUR 4bn 6m bills at -0.022% (after -0.015% in Sep). Good B/C at 2.3. Weekly French auction for a total of EUR 8bn with EUR 3.8bn 3m at -0.018% (after -0.017%), EUR 1.6bn 6m at -0.010% (after -0.009%) and EUR 1.6bn 12m at +0.018% (after +0.025%). Tick better. Eventless. As usual.

Will see EUR 1bn 6m Greek bills tomorrow (last 4.54% in Oct) as well as up to EUR 2.5bn 2018 out of the Netherlands (COB 0.87%. Issued 03 Jul at 1.305%. Absolute low at 0.73% hit early Aug. Late high was 1.03% early Sep).

Mid-day bottoming out levels, ahead of mixed US session (equities open, bonds closed). Weaker Italian. Uneven Spain.
Bunds 1,49% (-3), OBLs 0,55% (-2), BKOs 0,047% (-0,8)
Spanish 2s 3,04% (-1), 10s 5,63% (-4). Spanish 2-10s 258bp (-3). 
Italian 2s 2,21% (+5), 10s 5,05% (+1). Italian 2-10s 283bp (-5).
Equities bottoming at -1%. Credit unchanged from opening quotes, hence a tick or two softer. EUR 1.295

No further support from US cash equities opening plainly heavy and rapidly in negative territory (-0.4%). Some Apple fatigue with again Chinese strikes, succumbing to natural gravity laws, now nearly down 10% from the tree top.

Spain unable to manage to hold onto the noon performance in 10s with the short end drifting softer (+6) and 10s back to slightly wider levels than Friday close (+3).

Oh, and the ESM was officially declared as “in business,” as of this afternoon… with EUR a EUR 200bn capacity. Head of ESM Regling pitching further leverage capacity via First Loss guarantees.
No really crispy news coming out of the ECOFIN: Schaueble saying Spain doesn’t need support; Italy that it has no “current” plan to ask for aid; Luxembourg that one should go easy on Greece (if doing so doesn’t require a big effort); while the Dutch don’t see this that way. Yada yada yada. On bank recaps, Schaueble asks for bank oversight first, which Germany kinda blocks… Oh, and tomorrow’s Greece visit of Merkel is, of course, not to be confused with a Troika stint…

Not much else. Some correction of Friday’s Bull trap. Bunds gaining part of Friday’s losses. Spain shedding just a bit of Friday’s squeeze.
Bunds closed at 1,47% (-5), OBLs at 0,53% (-3) and BKOs 0,039% (-1,6). UST closed (Fri 1.74% level).
Spanish 2s at 3,12% (+7), 10s at 5,70% (+3). Spanish 2-10s 258bp (-3).
Italian 2s at 2,23% (+7), 10s at 5,06% (+2). Italian 2-10s 283bp (-5).
Lacklustre commodities. Copper soft (-1.8). EUR off lows at 1.297.

Doubtful whether any fireworks will come out of the ECOFIN meeting. Seems to be more about maintaining the relative market quietness and status-quo. Tomorrow another low-key data day. 

Rather brisk start of the week in New Issues with plenty of Periphery and /or senior financial debt finding seemingly rapid cash: ENEL double-trancher with EUR 1bn Apr 2018 at MS +270 and EUR 1bn Apr 2023 at MS +320 (Both tranches priced slightly through BTPs), Intesa senior EUR 1.5bn 7 YRS at MS +315, Air Liquide (as SRI issued) with EUR 500m 9 YRS at MS +57, F Van Lanschot senior EUR 500 4 YRS at MS +225, Land Lower Saxony EUR 500m 3 YRS FRN at 3mE flat, Volvo EUR 200m 18m FRN 3mE +55.
UniCredit Austria senior 5 YRS announced around at MS +150, but so far failed to materialize / slightly postponed. Likewise, Banco Popolare (low BBB) senior Apr 2016 around MS +390 not closed at this stage and eventually pulled.

Closing levels:
10 YRS Yields: Germany 1,47% (-5); Luxembourg 1,58% (-6); Netherlands 1,74% (-4); Swaps 1,75% (-5); Finland 1,76% (-5); EU 1,90% (-6), Austria 2,03% (-1); EIB 2,18% (-6); France 2,27% (-1); EFSF 2,34% (-6); Belgium 2,45% (-1); Italy 5,06% (+2); Spain 5,70% (+3).

10 YRS Spreads: Luxembourg 11bp (-1); Netherlands 27bp (+1); Swaps 28bp (unch); Finland 29bp (unch); EU 43bp (-1); Austria 56bp (+4); EIB 71bp (-1); France 80bp (+4); EFSF 87bp (-1); Belgium 98bp (+4); Italy 359bp (+7); Spain 423bp (+8).

EUR swap curve 2-5 YRS 48bp (-2,0); 5-10 YRS 83bp (unch) 10-30 YRS 59bp (-1,0).
2 YRS German BKOs closed 0,039% (-1,6) and 5 YRS OBLs 0,53% (-3).

Main at 129 from 126 (2,4% wider); Financials at 182 after 178 (2,2% wider). SovX at 136 (-2). Cross at 540 (+9).
Stoxx Futures at 2499 / -1,0% (from 2525) with S&P minis at 1451 (-0,8% from 1463, at European close).
VIX index at 15,1 after 14,3 yesterday same time.

Oil 89,6/111,9 (WTI/Brent) from 90,2/111,8 (-0,6%/+0,1%). Gold at 1777 after 1782 (-0,3%). Copper at 372 from 379 (-1,8%). CRB at EU COB 308,0 from 310,0 (-0,6%).
Baltic Dry up 8 to 883 (+0.9%) 30 points to 875 (3.6%).

EUR 1,297 from 1,305

Greek bonds guesstimates: Greece 2023s stable at 18% and 2042s flat at 16.5%.

All levels COB 17:30 CET

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

EZ: Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Thu Final CPI 2.1%
FR: Wed IP fcst -0.3% (last +0.2% MoM), MfG fcst -0.7% (after +0.9%); Fri CPI 2.4%
Italy: Tue Q2 Deficit; Wed IP fcst -0.5% (last -0.2%); Fri Final CPI 3.4%
Spain: Tue House Transactions (last -2.5%); Fri Final CPI 3.5%
US: 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:
But the world looks just the same
And history ain't changed