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

Thursday 12 April 2012

12 April 2012 – "Over Under Sideways Down" (The Yardbirds, 1966)

12 April 2012 – "Over Under Sideways Down" (The Yardbirds, 1966)

Quite some stability in overnight action with the US closing sideways, where they started and stable Asian session. China stood out with a 2% rise in its afternoon session.
FED Beige Book and ECB monthly report didn’t reveal anything new. European figures showed French CPI higher than expected at 2.6% YoY (after prior 2.5% and expected 2.3%), European Feb Industrial production fell YoY 1.8%, as expected, with Jan revised to -1.7% (after -1.2%), which brings us back to Dec 2009 levels. Greek unemployment rising to 21.8%.
European equities initially opening up 0.5% before reverting to unchanged and sinking ahead of the Italian auction results, especially as the later came out delayed (fro technical reasons). Results neither bad enough to trade lower nor encouraging enough for a strong rebound either. Slightly negative bias into the lunch break.

Environment by and large stable by noon. Italy tightening back 10bp, taking Spain along for the ride, in an otherwise unchanged spread universe.
US jobless claims at 380k far over 355k consensus and prior week revised higher, too. Ex energy & food PPI at +2.9%.
Europe following US lead higher on unascertained rumours of better Chinese Q1/GDP (in the middle of the Asian night???), QE3 after dovish Yellen comments, S&P back over 50dMA. Whatever…
On second guessing central bankers, a very interesting piece by PIMCO’s El-Erian on “Unusual Central Bank Policy Activism” (link). There’s just so much that can be done…

As already in yesterday’s bills sale, today’s BTP sale came on the expensive side with EUR 2.9bn on-the-run 3 YRS at 3.89% (up from 2.76% mid Mar and 3.40% mid Feb) and additional EUR 0.4bn 3s at 3.92%, 0.7bn 2020s at 5.04% and 0.9bn 2023s at 5.57%. Italy had targeted up to EUR 5bn in total, although the B/C ratios were on the light side. 2 weeks ago 10 YRS were sold at 5.24%.
As for Spain, the LTRO-shine is fading…
Have had Rajoy on screens non-stop for the last couple of days. Maybe too often, as in need to defend his pitch. Might need to calm on statements like “Spain won’t be rescued. It’s not possible to rescue Spain”. Then again, the strategy to put everything on the table, unlike Italy, which seems to have gone into stealth mode, has probably pros and cons.
Spain’s and its (difficult to control) regions’ situation is an interesting echo to the overall Euro-zone and constituents’ situation.

No real new issues supply outside another stealth block trade, today a EUR 300m increase of an outstanding Vivendi 9 YRS deal at MS +190.

Hmmm… Not easy to get those Bund yields off the floor. All that “rebound” remains tepid and it’s not like Risk On is roaring yet.

10 YRS Yields: Germany 1,79% (+1); Swaps 2,24% (unch); Luxembourg 2,23% (+1); Finland 2,24% (unch); Netherlands 2,25% (unch); Austria 2,88% (-4); EFSF 2,88% (+2); France 2,88% (-6); Belgium 3,35% (-7); Italy 5,38% (-14); Spain 5,79% (-6).

10 YRS Spreads: Swaps 47bp (unch); Luxembourg 44bp (+1); Finland 45bp (unch); Netherlands 46bp (-1); Austria 109bp (-4); EFSF 109bp (+1); France 109bp (-7); Belgium 156bp (-8); Italy 359bp (-15); Spain 400bp (-7).
[Spreads calculated on new DBR 1.75% Jul 2022]

EUR swap curve 2-5 YRS 46,7bp (unch); 5-10 YRS 72,4bp (unch) 10-30 YRS 28,8bp (unch). Totally unchanged.
German 2 YRS BKOs close at 0.14% (from 0.13%) and 5 YRS OBLs at 0.70% (from 0.69%). Up 1bp…

Main 134 (from 142 y’day, 132 Thu); Financials at 236 (from 246 y’day, 234 Thu); Sovereigns 274 (from 274 y’day, 272 Thu).
Credit bouncing stronger than equities

Stoxx Futures 2282 / +0.5% (from 2270) with the S&P at 1382 (+0.8%, from 1371 at European close).
VIX index sent packing to 18.4 from 19.3, (21 high traded Tuesday).

EUR 1.317 from 1.308.
ECB deposits down to EUR 653bn from EUR 788bn. Start of new reserve maintenance period. Had a similar declines of around EUR 130bn in Mar (EUR 816bn to 686bn), Feb (EUR 524bn to 391bn), Jan (EUR 528 to 395bn).
Oil 104.0 / 120.8 from 101.9 / 119.6 (+2.0%/+1.0%). Gold up 0.8% to 1673 from 1659. Copper rather strong at 371 from 365 (+1.6%)
CRB up as well 1.3% to 305.6 from 301.6. All classes in sync.
Baltic Dry up again 1.7% to 960 from 944, highest since recovery began from the through early Feb. Another 4% and the 1000-handle will symbolically be broken again.
All levels European COB 17:30 CET

Friday: CPI day… Even if both the FED and the ECB feel that things are under control on that front…
German CPI fcst at 2.3% YoY, unchanged from prior. Italian CPI fcst at 3.8% YoY, unchanged from prior. .Spanish CPI fcst at 1.8% YoY, unchanged from prior. Italian Ind Prod fcst -5.1% YoY after -5%.
US CPI (ex, YoY) fcst 2.2% after prior 2.2%. Michigan confidence expected unchanged at 76.2.

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

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