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


Tuesday, 13 March 2012

13 March 2012 – “I’m Sitting on the Top of the World” (Les Paul & Mary Ford, 1952)


Joyful European opening, tracking a better US close against the afternoon levels as well as a decent Asian session. Not much in terms of opening macro / micro news with the exception of Spain getting away with a 0.5% cut imposed by fellow Eurogroup members from its widened deficit targets (5.3% versus an attempted 5.8% renegotiation versus a previously agreed 4.4%). New tone is that things should be right by 2013. Ah…3%? Sure. Stress averted. But such revisions do have a déjà-vu taste and the late SPGB widening, especially against Italy, is a reminder that markets have become wary of post-election revelations.
Bundesbank risk provisions markedly up to EUR 7.7bn (from EUR 3.6bn last year) on counterparty risk (SMP& LTRO).
Mid-morning ZEW figures out of Germany showed a split picture with current situation assessment below consensus (37.6 vs. 41.5), but with forward-looking economic sentiment very strong at 22.3 against expected 10 (coming from .5.4 in Feb, -21.6 in Jan and -50s during Q4/2011). Current situation actually moving the other way round and at 37.6 back to Q4 levels. CPI figures for FR, IT & SP on consensus.
CAC and DAX trading new 2012 highs, Euro Stoxx 0.75% from it in the morning, then joining the new 2012 highs party. Back to Aug 2011 levels, which were post highs of the FED QE1 induced rally starting in Mar 2011. Italian stocks sideways, as for the rest of the year. Spain still off highs.
US figures by and large as expected or slightly better, with past retail sales revised upwards, leading to a positive US open and taking Europe along for the ride.

Greece to be funded through 2015 after the bailout, as stated by the Greek FinMin. Greek new benchmark 2023 and 2042 bonds trading lower to hit yields of 19%, respectively 14%. That compares to Portugal trading 13.5% and 10.5% on similar maturities. 2 YRS Portugal 15%.
SovX credit index getting a huge boost from the exclusion of Greek CDS from the index, hence the jump.

The Netherlands sold EUR 2.8bn 3 YRS at 0.62% vs. 085% mid Jan), hitting 38% of the targeted 2012 refinancing. Italy sold EUR 12bn 3 and 12m bills without problems at 0.49% (vs. 1.55% mid Feb) and 1.40% (vs. 2.23%), B/C ok, if not great. Belgium sold EUR 3.25bn on the same maturities at 0.19% (vs. 29%) and 0.59% (vs. 0.89%, mid Feb). BC likewise ok. Record low for Belgian 12m bills. All is well in the EZ…

New Issues showing again a mixed bag of goodies, ranging from KfW’s EUR 4bn 7 YRS deal at MS+ 3 and a new ICO EUR 1.5bn 4 YRS for a periphery agency, to covered bonds (this time Nordics) via DNB’s EUR 2bn 10 YRS EUR and financials (this time Spanish with Santander)(a reversal of yesterday’s supply).  Good flow of German sub-sovereign / agency FRNs in EUR and GBP. Not much corporate action.
New Issue Premiums have strikingly come down throughout asset classes. All pricings look fair, but none generous. Certainly a sign that spare cash is shoving through the streets.

ECB deposits down to EUR 795bn from EUR 798bn.
VIX still crashing to 14.7 at EU COB, 15.5. Now nearing April 2011 14.6 lowest point since Jan 2008. Average below 13 between 2005 and Summer 2007. All good here. Tail risk? Uh?
Oil correcting yesterday’s patch of softness with WTI & Brent trading 107.20 / 126.50 (+0.8-0.9%). Gold unchanged 1698.
Baltic Dry again up with 844 from 837.

10 YRS spreads: Swaps +46 (+2), Finland +44 (unch), Luxembourg +49 (unch), Netherlands +50 (-2), Austria +103 (-8), France +108 (-6), EFSF +130 (-3), Belgium +155 (-10), Italy +307 (-7), Spain+331 (+3).
Yield-wise: Germany 1.81% (+6 bp), Finland 2.25% (+6 bp), Swaps 2.27% (+4 bp), Luxemburg 2.31% (+5), Netherlands 2.32% (+5 bp), Austria 2.85% (-1 bp), France 2.89% (-1 bp), EFSF 3.11% (+2 bp), Belgium 3.36% (-4 bp), Italy 4.89% (unch), Spain 5.13% (+10bp)
Germany trading off on risk on, as was Core EZ+. Core EZ- and especially Belgium catching up. Spain still weakish.

Ain’t much to chew on these days. Countermovement to Monday and Friday’s slight weakness. Sitting on the top of the world and looking for direction, if not guidance.

Wednesday: Pretty much empty slate on the eco figures front. Will get EZ CPI expected +2.7 YoY (same as Jan) and IP expected at -0.8% (from -2%). In the US, mortgages and import price. Japanese IP, capacity and tool orders.
Will see what the FED has to say, but expectations of QE3 hints just seem too early at this stage.
Italian New 3 YRS auction (3.41% mid Feb, now trading 2.70%)

Click link on title or below for today’s musical support:

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