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, 3 April 2012

03 April 2012 – “Entre Dos Tierras” (Héroes de Silencio, 1990)

03 April 2012 – “Entre Dos Tierras” (Héroes de Silencio, 1990)

Asia again about unchanged overall, despite a rather healthy US close and the S&P trading out a new high that takes us back to a May 2008 rebound after the correction off the 2007 all-time high (1565 in Oct) had started, bottoming out then at 1275. Chinese PMI data confusion between official and private readings, knowing that seasonality adjustments to offset the Chinese New Year that started early this year add to the noise. Non-manufacturing PMI at 58 after a revised 57.3 (from 48.4). This is a bit of steamrolling adjustment. Anyhow, impact was pretty nil. China closed anyway.

EZ Feb PPI at 3.6% higher than 3.5% fcst, knowing that Jan data was revised to 3.8% (from 3.7%). Should make ECB hawks cringe again. Spanish unemployment still on the rise, although numbers were less bleak that expected. Still, the annual increase is still on the rise at over 9.6%.
Talking of Spain: 2012 budget presentation sees the debt/GDP ratio set to rise to 79.8% from 68.5%. Spain will try to extend its debt maturity this year and use less bill (Not sure they were on the right path on that for the moment, at least on the bond side, which saw tons of LTRO matching 3 YRS and lower). Targeting 6.2-6.4 average life. Which seems unchanged to me when compiling figures (BONO EUR 523bn outstanding WAL 7.3 years, Letras EUR 81bn WAL 0.5 year and international bonds EUR 5bn WAL 3.1 years). Having mostly issued on the shorter end, long end supply will thus need to be increased at some time.

Had Spain 10 YRS duly widen by 5 bp in an otherwise mainly unchanged market, then widening out when it was said that debt figures were calculated on current levels (i.e. definitively lower than Q4/2011 levels: 2 YRS 2.50% versus 6%+ high, 5 YRS 4.25% against 6.25% and 10 YRS 5.40% against 6.5%+. March 2010 lows were 1.45%, 2.65% and 3.85%, respectively). Weakening further into the close (and ahead of tomorrow’s auction).

Belgium issued EUR 1.4bn 3m at 0.19% (unch from Feb) and EUR 1.7bn 6m at 0.21% (down from 0.26%, but with much lower bid to cover). EFSF EUR 2bn 3m at 0.11% (after 0.05%). Hey, jumpy…

Markets sideways to slightly weaker on waning periphery until noon. Commodities for choice a tick firmer on energy / oil. Credit also outperforming equities with financials recovering a little. US Feb factory orders at +1.3% below +1.5% fcst, but some prior data revised both ways. Ambiguous read. In the meantime, trailing Europe a little lower, but just so. Could jump back, as soon as Europe closes. European equities correcting their solo rebound of yesterday and accelerating losses into the close. Back to Friday levels.

European new issues restricted to pre-announced AXA Bank Europe (Belgium) EUR 1bn 5 YRS covered bonds MS +70 and CADES USD 2bn 5 YRS MS +95.
Had as well low IG French GECINA raising EUR 650m 7 YRS at MS +290 and non-IG Peugeot for EUR 600m 5 YRS at MS +412bp.

ECB deposits up EUR 4bn to EUR 783bn. Volatility of deposits seems to diminish (on high levels).
VIX trading over 16 (!) at the open after 15.5 close on Friday. Back to 15.5 at COB EU.
Oil 104.6 / 125.2 (again +0.6% / +0.8% from 104.0 / 124.2 WTI / Brent). Gold touch weaker 1672 from 1682 (-0.6%). CRB sideways plus at 311.5 from 311.0 (+0.5%). Copper still pushy more at 392 from 390, China follower.
After a first unchanged Baltic Dry at 934 yesterday for a continuous rise since 22 Feb, the index shed 3 points today. End of a nice rally, though. Need to check further developments, as this index is good (physical) world trade coalmine canary.

10 YRS Yields: Germany 1,8% (unch); Swaps 2,29% (+1); Luxembourg 2,29% (+1); Finland 2,29% (unch); Netherlands 2,32% (+2); Austria 2,83% (+1); France 2,91% (+2); EFSF 2,91% (-2); Belgium 3,35% (-2); Italy 5,13% (+4); Spain 5,42% (+10).

10 YRS Spreads: Swaps 47bp (+1); Luxembourg 49bp (+1); Finland 49bp (-1); Netherlands 52bp (+1); Austria 103bp (+1); France 110bp (+2); EFSF 111bp (-3); Belgium 154bp (-2); Italy 333bp (+4); Spain 362bp (+9).

EUR swap curve 2-5 YRS 48,9bp (-0,7); 5-10 YRS 72,4bp (+1,0) 10-30 YRS 28,1bp (+1,9).
Main 124 (from 124) ; Financials at 217 (from 220); Sovereigns 265 (from 266)
All levels European COB 17:30 CET.

Again, not much to chew on today. General European softness. Spain probably back, as the wildcard to potentially rock markets. Somehow obliged to navigate between growth killing austerity (unsustainable) and deficit spending limitations (unsustainable). Entre dos tierras… Need to check tomorrow’s auction (might have added to today’s weakness).
Need to check ECB press conference for crispy food for thought.

Tomorrow:
EZ retail sales -1.1% YoY fcst (after zero). German factory orders -5.5% YoY fcst (after -4.9%). German EUR 4bn 5 YRS auction. Spanish 2015, 2016 & 2020 auction. Portugal testing waters with EUR 1.25 to 1.5bn 6 and 18m bills. European Mar PMI figure confirmation. Italian Q4 debt/GDP figures.
ECB press conference.

Click link on title or below for today’s musical support:
http://www.youtube.com/watch?v=oq0RGzn6Wnw&feature=youtube_gdata_player

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