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

Monday 28 May 2012

28 May 2012 – " Foc " (Rodrigo y Gabriela, 2001)

28 May 2012 – " Foc " (Rodrigo y Gabriela, 2001)

Holiday-induced reduced update

Positive start into the week with Asia mostly shrugging off European woes on Friday and the US closing near their lows to close mostly positive. Better Asian close even for those closing later and catching a mostly upbeat European open in risk. Major trigger of positive mood were Greek polls showing pro-bail outs getting the lead.

Only had Italian business confidence sinking below consensus, as data: 86.2 after 89.5 revised to 89.1 with forecast that was 88.6. Note that anecdotically Finnish biz took a below-consensus bath as well at -12, taking us back to Q4/2009 outlook. Forecast had been for -5 after -2. Contagion starts to spread.

Major brake on today’s US-free session is the ongoing woes of Spain’s contingent liabilities in banking and regional finances. BONOs taking a dive ride away and hitting 6.45% in the morning. Spread to Bunds, given the late movements, unsurprisingly hitting new records past +505.
Italy weak in sympathy and hitting 5.75%. Had the Italian curve flatten out (unlike Spain), which is bad, with 2-3 YRS adding 15 basis points. Italy now past 4% in 2s and about 5.20% in 5s. Spain past 4.5% in 2s and past 6% in July 2017.
Explain recurrent and increasingly shrieking Spanish calls for ECB support (falling on deaf ears for the moment) to improve “debt sustainability”. Spanish Tesoro’s 2012 gross issuance covered at 56% by now. Remains the question about the contingent funding needs.
Cyprus bail-out discussions seem to do rounds, too. Not huge, but not good to have the list lengthen.

Despite this, a split markets with equities and especially risk enjoying a leg up and the periphery trading like a hot potato.

Italy getting EUR 4.5bn done with EUR 3.5bn 2-year zeros (real zero bonds, not the German 0% coupon ones) at 4.04% (after previously 3.36% in April). Add EUR750m of 4 and 5-year linkers. As lately standard, auction done, but price tag increased.
Will sell EUR 8.5bn of 6m bills tomorrow (Last sold at 1.77% a month ago. Ready for increase here as well).
France to sell as well a total of EUR 8bn bills tomorrow to round off this week’s government supply. Indeed a small week in this respect.

EUR mostly trading in a 1.255 1.26 range. Attempt to break out at European open was dampened by eurodepression.

No new issue supply.

Greek bonds guestimates: reacting positively to weekend polls and yields down with 2023s at 29% from 30.0% and 2042s at 23.50% from 24.0%. Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,36% (-1); Finland 1,75% (-1); Luxembourg 1,79% (-2); Swaps 1,79% (-1); Netherlands 1,87% (+0); Austria 2,35% (+2); France 2,53% (+2); EIB 2,51% (-3); EFSF 2,67% (-3); Belgium 3,08% (+3); Italy 5,73% (+8); Spain 6,44% (+14).

10 YRS Spreads: Finland 39bp (+0); Luxembourg 43bp (-1); Swaps 43bp (+0); Netherlands 47bp (-2); Austria 99bp (+3); France 117bp (+3); EIB 115bp (-2); EFSF 131bp (-1); Belgium 172bp (+4); Italy 437bp (+9); Spain 508bp (+15).

EUR swap curve 2-5 YRS 37,1bp (+0,0); 5-10 YRS 59,9bp (+0,0) 10-30 YRS 19,1bp (+0,0).
2 YRS German BKOs closed 0,03% (-2) and 5 YRS OBLs 0,43% (-3).

Main at 170 from 174 (-2,7%); Financials at 294 after 297 (-0,9%). SovX at 317 from 316. Cross at 699 from 717.

Stoxx Futures at 2146 / -0,4% (from 2154) with S&P minis at 1320 (+0,0% from 1320, at European close).
VIX index at 22,1 after 22,1 yesterday same time
Oil 91,5/107,6 (WTI/Brent) from 91,0/106,8 (+0,5%/+0,7%). Gold at 1576 after 1567 (+0,6%). Copper at 347 from 345 (+0,6%). CRB closes 282,1 from 282,1 (+0,0%).
Baltic Dry down to 1012 from 1034.

EUR 1,254 from 1,253
ECB deposits at EUR 760bn after EUR 761bn
All levels European COB 17:00 CET

Rest of week:
Long weekend with Monday off in some of Continental Europe & Memorial Day in the US. Running out of hard data. Market subject to latest rumour in one way or another. EZ hard data starting mid week. Big Friday US data dump!

Germany: Tue CPI fcst 2.2% unch YoY, Thu Retails Sales fcst +0.2% after 0.8% MoM & Unemployment fcst 6.8% unch
France:  Wed Apr jobseekers fcst 2904k after 2884k, Thu Cons spending fcst +0.3% Mom after -2.9%
EZ: Wed M3 fcst 3.4% after 3.2%. EZ confidence, Wed EZ CPI fcst 2.5% after 2.6%. Fri Unemployment and PMI confirmation
Periphery: IT Thu CPI fcst 3.6% YoY after 3.7%, Fri unemployment & Budget SP Tue Retails sales, Wed CPI fcst 2.0%, Thu Housing permits. GR Retail sales Thu. PMI Fri
US: Tue Case Shiller housing, Cons conf fcst 69.5 after 69.2, Wed MBA mortgages & Home Sales, Thu Claims, Chicago Purchasing. Fri non-farm payrolls, personal income, ISM, Constr Spending

Click link on title or below for today’s musical support:
(Absolutely amazing guitar work!Probably the best guitar-duo I know.  I’d love to be only at 5% of their feats and I’d hate to be slapped like Gabriela’s guitar...)

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