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, 18 May 2012

18 May 2012 – "Last Dance " (Donna Summer, RIP, 1978)

18 May 2012 – "Last Dance " (Donna Summer, RIP, 1978)
http://youtu.be/7cPIT_T3mYU

Very weak US close, equally weak Asia on eurodepression (Grexit, Spain) and hence an equally weak open in Europe, although the panic is running out of fodder. Still, markets were good for a -1.5% test of the downside in early morning future trade before steadily crawling back up on absence of further concrete negative news.
Eventually, yesterday evening’s Moody downgrade of Spanish banks had been widely anticipated by then, although the harshness of the exercise maybe not. Fitch Greece downgrade not exactly exciting in “Ah?! So what? We all know the situation is what it is...”
Oh, we did trade a new all-time low in Bunds around 1.39% to kick off proceeding, while Spain spiked out to around 6.35% and Italy to 5.95%.

No major data flow to speak of. China home prices still pointing downwards, this, to the best of my knowledge, fits the goverment. German PPI surprising slightly on the downside at +2.4% YoY (fcst 2.5% after 3.3%). Italian Industrial order rebound at +3.5% (fcst 1%) probably helping stabilize things. Spanish bad loans unsurprisingly increasing.

Neither government supply nor new issues to close the week.

Whatever, by noon, the doom had petered out. Equities moved to slightly positive. Periphery bonds had made back some serious ground (tighter by 10 bp), while the Core (which had traded its umpteenth historic yield low) remained about unchanged. Funny to see all other indicators totally unchanged.
No real trigger for the turnaround. Bottom-fishing. Hopes the G8 would change something. Rumours that Greek voters would eventually stick to a pro-bail coalition. On my musing about contingent funding risks for Spain, ICO confirmed that, as a bank, it was able to fund via the ECB. Hmm, one problem partially solved. Won’t help people mulling about Target 2 and who’s funding who.

Anyhow, seeing low mail / update / news flow, lots of market players seem to have taken the decision to bridge Ascension Day into the weekend. Can as well be deducted from the Bund future volumes (666k on Monday, up to 879k on Tue, then a top at 1029k on Wed, still a hefty 682k yesterday and 525k today).
In absence of US figures, the market trailed sideways, awaiting American input – or not, and hoping for the weekend. End of day taking most assets to yesterday’s levels. Spain and Italian bonds giving back some / most of their gains, but closing a little tighter.

Is Facebook really worth EUR 104bn??? Hmmm. But, hey, MZ is a cool guy nonetheless. First quotes at $42.05 (from $38 issue level) but with some NASDAQ tech glitch (Bad omen?) delaying the party. Read it traded $70 in Europe. Odd. Utter flight to cyberspace?
Will wear a hoodie this weekend, if the FB close is reaaaally positive. Flip-flops, despite the cold, if the gain is more than 20% at COB...

Not exactly an inspiring day for mercantile scribes (link, sorry only in French)...

Greek bonds guestimates: 2023s probably unchanged at 29.50% and 2042s 22.25%. Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,42% (unch); Luxembourg 1,90% (-1); Finland 1,86% (-1); Swaps 1,95% (-2); Netherlands 1,91% (-2); Austria 2,58% (0); EIB 2,64% (-1); France 2,84% (-2); EFSF 2,81% (-1); Belgium 3,31% (+1); Italy 5,77% (-3); Spain 6,23% (-6).

10 YRS Spreads: Luxembourg 47bp (-1); Finland 44bp (-1); Swaps 54bp (-1); Netherlands 48bp (-1); Austria 116bp (unch); EIB 121bp (-1); France 142bp (-2); EFSF 139bp (-1); Belgium 189bp (+1); Italy 435bp (-3); Spain 481bp (-6).

EUR swap curve 2-5 YRS 36,7bp (-0,6); 5-10 YRS 60,2bp (-0,8) 10-30 YRS 21,7bp (-1,7).
2 YRS German BKOs closed 0,05% (+1) and 5 YRS OBLs 0,49% (+1).

Main at 181 from 181 (unch); Financials at 306 after 303 (1,1%). SovX at 311 from 308. Cross at 750 from 751.

Stoxx Futures at 2124 / -0,2% (from 2129) with the S&P at 1302 (-1,7% from 1325, at European close).
VIX index at 22,3 after 22,3 yesterday same time.

Oil 92,3/107,3 (WTI/Brent) from 93,1/109,5 (-0,9%/-2,0%). Gold at 1596 after 1550 (+3,0%). Copper at 350 from 352 (-0,4%). CRB closes 289,4 from 289,4 (+0,0%).
EUR 1,273 after 1,270, after a 1.265 low print this morning.

ECB deposits down to EUR762bn from EUR 785bn.
All levels European COB 17:30 CET

On the week (compared to Fri 11 Mai close):
What a weak week for RISK! Monday’s Holy Diver, following last week’s Moby Dick, was followed by a Greased Lightnin’, superseded by a Spell put upon the markets that didn’t change the fact that the whole boat went rockin’...

10 YRS Yields: Germany 1,42% (-9); Luxembourg 1,90% (-8); Finland 1,86% (-11); Swaps 1,95% (-6); Netherlands 1,91% (-12); Austria 2,58% (-1);EIB 2,64% (-3); France 2,84% (+5); EFSF 2,81% (-4); Belgium 3,31% (+16); Italy 5,77% (+27); Spain 6,23% (+24).

10 YRS Spreads: Luxembourg 47bp (+1); Finland 44bp (-1); Swaps 54bp (+2); Netherlands 48bp (-3); Austria 116bp (+8); EFSF 139bp (+5); France 142bp (+14); Belgium 189bp (+25); Italy 435bp (+36); Spain 481bp (+33).

Did we mention the recurrent new lows in Bunds and the EZ Hard Core? Ah, yes, repeatedly, so we won’t do again. So what’s the story of the week. Periphery out by up to 35bp before paring some of the losses, but still out by next to 20bp. Spain did hit 500 to Bunds. France holding about stable this week with the new government now in place. Spread to Germany certainly wider, as Austria / France / EFSF / EIB are running some Sot Core pivot function here.

EUR swap curve 2-5 YRS 36,7bp (-2,1); 5-10 YRS 60,4bp (-4,6) 10-30 YRS 22,2bp (-1,9). Hail 5s, as 2s are so passés these days.
2 YRS German BKOs closed 0,05% (-3) and 5 YRS OBLs 0,49% (-6), on the week. How low can you go? Same as for swaps. High 5 the 5s.

Main at 181 from 158 (14,4%); Financials at 306 after 265 (15,7%). SovX at 311 from 285. Cross at 750 from 687.
Persistently, be it because of Cetacean knock-offs or because of general distrust, Credit traded heavier than equities.

Stoxx Futures at 2124 / -4,8% from 2232 with the S&P at 1302 / -4,4% from 1362, at European COB last week.
VIX index at 22,3 after 18,9 last week.

Oil 92,3/107,3 (WTI/Brent) from 96,7/112,5 (-4,6%/-4,6%). Gold at 1596 after 1589 (+0,4%). Copper at 350 from 366 (-4,4%) . CRB closes 289,4 from 293,1 (-1,3%). Massive risk off mood reflected in commodity prices, as was the decline in EUR.
Baltic Dry was a little wobbly, but closed at 1141 from 1138.
EUR 1,273 after 1,294 last Friday, with a 1.265 low print this morning.

Next week:
Lighter in terms of periphery supply, so less stress. Belgian auction on Mon (5, 10 & 15 YRS), explain the relative heaviness seen since yesterday. Otherwise, bills in GE, FR and NE on Monday.
Don’t see much else or big data slated for Monday (US Chicago Fed).
Full-run down next week.

Click link on title or below for today’s musical support:
http://youtu.be/7cPIT_T3mYU
(Not that Disco is my favourite music, but there were some greats then and she was certainly among them! RIP)

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