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 19 April 2012

19 April 2012 – "Mmm Mmm Mmm Mmm" (Crash Test Dummies, 1993)

Puzzled we were, puzzled we remain. Upbeat European open, notwithstanding a US close on European closing levels and an overtly slightly negative to flat at best Asian close. Maybe it was the sun shinning (at least in Paris) in the morning that propelled equities up to 1% higher by mid-morning…
No major eco data to lean on. POBC is hinting that it might work on RRR at some time, but definitively in targeted manner. Obviously, should there be a need for some measures to prop up the economy; it won’t be a liquidity deluge. No free for all, and a tight fist on housing.

French and Spanish auctions out of the way. France uneventful with next to EUR 8bn raised in 2, 3 and 5s in strong bid to covers (2.3 to 3), albeit at wider levels than last month (1.06% after 0.89% and 1.83% after 1.78%, for 2s and 5s), showing the grind on the French debt over the last weeks and ahead of the presidential elections. Compare this with yesterday’s 2 YRS sold at 0.14% in GermanySpain duly reached the targeted EUR 2.5bn with EUR 1.1bn 2s at 3.46% and EUR 1.4bn 10s at 5.74%. Last 10 YRS auction was in Jan at 5.40%. 3 YRS (as comparison) were sold 2.89% 2 weeks ago. Why the 10 YRS were paid that price, although quoted at 5.79% just before, and yesterday’s close, and 5.82% after the auction is a bit of a mystery... Some generous donors?

Anyhow, the European “test” of auctions thus passed, markets went off the euphoria and hovered just above yesterday’s closing levels throughout ALL asset classes for a while, for once an easy read, before reconsidering things and testing the upside again heading into the lunch.
Very disciplined markets – for a while. Maybe Italy was a bit on the weak side (+5 by late morning), then correcting back. In a nutshell, by noon, things were just fine, thank you.
However nervousness is out there and unwarranted downgrade rumours of France put markets in risk off mode. Negative sentiment took finally over as US figures all came out lower then expected (jobless 386k versus 370 fcst; Philly Fed and homesales, too). Enough to tip everything in the worst of mood...

New issue activity was on the quieter side, despite a better start into the day. French UNEDIC managed to print EUR 1bn 5 YRS at MS +76, before things turned too bleak.

Aïe! France starts to trade in line with Italy and Spain... Won’t get any better in the coming days. Spread to Germany already out by 17 bp since last Friday.
Really bad close.

10 YRS Yields: Germany 1,69% (-2); Luxembourg 2,17% (-1); Swaps 2,21% (+2); Finland 2,22% (+1); Netherlands 2,28% (+4); Austria 2,93% (+4); EFSF 2,94% (+2); France 3,09% (+9); Belgium 3,43% (+5); Italy 5,59% (+12); Spain 5,89% (+10).

10 YRS Spreads: Luxembourg 48bp (+1); Swaps 52bp (+3); Finland 53bp (+3); Netherlands 59bp (+6); Austria 124bp (+6); EFSF 125bp (+4); France 139bp (+11); Belgium 173bp (+7); Italy 390bp (+14); Spain 420bp (+12).

EUR swap curve 2-5 YRS 46,6bp (+0,4); 5-10 YRS 71,3bp (-0,4) 10-30 YRS 26,8bp (-0,4).
2 YRS German BKOs closed 0,13% (-1) and 5 YRS OBLs 0,65% (-1).

Main at 145 from 142 (2,0%); Financials at 255 after 249 (2,3%). SovX at 282 from 279. Cross at 684 from 673.

Stoxx Futures at 2223 / -1,9% (from 2267) with the S&P at 1384 (from 1385, at European close).     
VIX index at 18,7 after 18,6 yesterday same time.                                                                               

EUR 1,313 after 1,312
ECB deposits stable at EUR 757bn
Oil 102,4/118,7 (WTI/Brent) from 103,7/117,8 (-1,2%/+0,8%). Gold at 1649 after 1639 (+0,6%). Copper at 362 from 363 (-0,2%). CRB closes 300,0 from 301,2 (-0,4%).
Baltic Dry finally 1028 (+2.2%)
All levels European COB 17:30 CET

Just German IFO expected at 109.5 after 109.8

Germany: IFO on Fri
France: Running up to first round of presidential elections.
US Nothing on Friday
Asia: Nothing really on the plate in China, likewise for Japan.

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

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