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 12 June 2012

12 Jun 2012 – " November Rain " (Guns ‘N Roses feat. Elton John, 1991)

12 Jun 2012 – " November Rain " (Guns ‘N Roses feat. Elton John, 1991)

Rather tame open. Given the sell-off in the US on Spailout disappointment, Asia fared quite well and closed off lows, down 0.5 to 1% overall. Not much in overnight news. Seeing Yuan loans expanding at a much brisker pace than expected (CNY 793bn after 682, fcst 700) further adding to the mixed picture data out of China has sent lately. No real opening gaps, pre-market quotes pretty much where left at COB, with the exception of Oil that is lower. EUR had a rough night, trading to down 1.245 before opening shy of 25 in Europe.

Pretty much nothing in terms of European data flow. Soft start on the whole EGB curve with Italy and Spain wider within the hour, but without getting traction on the Core EZ (probably linked to Austrian and Dutch long end auction hedging). In any case the periphery rapidly drifted out by 10 to 15 bp wider to hit 6.15% (a level last seen end of Jan for Italy) and past 6.60%n but with no immediate flight to quality reaction into Core EZ bonds, maybe hampered by the Dutch and Austrian long auction results. Credit a couple of ticks wider, despite a slight uptick in equities.
Given Core softness and lack of further pressure, BTPs and BONOs recovered from their widest levels going into lunch.

More of the same throughout the afternoon: stable equities, albeit in the smallest of rebounds, quite static actually, heavy bonds from the Core out to the periphery. As if the market had suddenly realized that Germany would finally be on the hook, too, at some point in time. Seems an odd timing for realizing this.
Slapped my pc several times to see if something wasn’t stuck... Obviously tomorrow’s 10 YRS Bund auction is a good excuse to mark them lower and scoop them out then.
Spain trading out November 2011 highs at 6.70%... Worrisome short end flattener with 2 YRS out by over 30 bp and now back above 5%. Short end movement relatively fiercer in Italy with 2s out by over 30 as well, compared to 10s by 15. 3 YRS Italians now over 5%, too, and to be auctioned on Thursday, next to 2019 & 2020. Won’t help.
[Error message 404 : Spailout installation aborted]

Risk Off and Bond Off day, odd. ROff & BOff... ROffBOff? No flight to quality. Just flight...
Surprising the EUR is holding relatively well and hasn’t totally crashed yet, as, when no one wants nothing, then pull out of the currency...
November mood. Must be the weather...

Spain squeezed off the EUR-area high of 6.83% by 15 bp in the closing hour. Seen like this, and against very weak Bunds, it only lost 7 basis points... Italy closing unchanged to Bunds spread-wise. Still, Spain about 50 bp wider than Friday and Italy 40. Odd. Must be the weather...

Supply in long bonds from Austria and the Netherlands, in bills from Belgium and Greece. The Dutch sold EUR 1.65bn of its 20-year bond 2.5% 2033, on a EUR 1.5-2.5bn tap range, at 2.34% (after 2.77% in March). Dutch auctions on “tap”, hence a slightly different way to bring to market with the treasury deciding when to stop, hence no B/C or other stats. Might have been a little on the small side to really convince. Austria issued EUR 660m of 10s at 2.36% (after 2.63% in May) and 440m 2062 at 3.02% (after a launch at 3.84% in January this year).
On the bills-side, Greece sold EUR 1.625bn 6m at 4.73% (after 4.69% last month and 4.55% before). Belgium sold EUR 1.4bn 3m at 0.20% (after 0.21% ) and EUR 1.66bn 12m at 0.56% (after 0.63%), an all-time low.
Getting a chunk of EUR 8.5bn Italian 12m bills (2.34% at last auction in May) tomorrow and EUR 5bn German 10s (1.47% in May), next to EUR 1bn 2018 ILBs, tomorrow. Bunds about 10 cheaper than Friday. Should fare ok.

After yesterday’s whooping EUR 11.25bn in EUR new issues, things were just a little bit quieter today with the EFSF centre-stage with EUR 1.5bn 25 YRS, adding to the x-long supply of the day, next to CADES adding EUR 1bn on an outstanding 2025 benchmark. Another senior financial for French BFCM with EUR 750m 5 YRS at MS +167, next to 3 non-jumbo covered bond issues, courtesy of Norwegian Terra Bolig in 7 YRS for EUR 650m at MS +55, next to German Aareal and Deutsche Hypo, both for EUR 500m 5 YRS at MS +20 and MS +9 respectively. Final, one corporate from German fertilizer K+S with EUR 500m 5 YRS sold at MS +120. Not bad for a day that was rather risk off and certainly bond off...

Closing levels:
10 YRS Yields: Germany 1,43% (+12); Luxembourg 1,84% (+11); Finland 1,89% (+14); Netherlands 1,97% (+14); Swaps 1,88% (+9); Austria 2,45% (+11); EIB 2,55% (+11); France 2,71% (+15); EFSF 2,69% (+11); Belgium 3,18% (+15); Italy 6,15% (+13); Spain 6,68% (+20).

10 YRS Spreads: Luxembourg 41bp (-1); Finland 46bp (+1); Netherlands 54bp (+1); Swaps 46bp (-2); Austria 103bp (-1); EIB 112bp (-2); France 128bp (+3); EFSF 126bp (-1); Belgium 176bp (+2); Italy 473bp (unch); Spain 526bp (+7).

EUR swap curve 2-5 YRS 42,2bp (+1,7); 5-10 YRS 55,7bp (+5,3) 10-30 YRS 21,1bp (+1,8).
2 YRS German BKOs closed 0,090% (+4,4) and 5 YRS OBLs 0,54% (+11).

Main at 183 from 178 (3,0% wider); Financials at 295 after 285 (3,2% wider). SovX at 323 from 322. Cross at 715 from 695.

Stoxx Futures at 2143 / +0,3% (from 2137) with S&P minis at 1310 (-0,2% from 1313, at European close).
VIX index at 23,6 after 21,4 yesterday same time.

Oil 83,6/97,6 (WTI/Brent) from 83,3/98,5 (+0,3%/-0,9%). Gold at 1613 after 1585 (+1,8%). Copper at 334 from 333 (+0,4%). CRB closes 271,5 from 271,6 (-0,1%).
Baltic Dry back in recovery mode with a fixing at 893 after 884 (+1%).

EUR 1,247 from 1,249
ECB deposits at EUR 787bn after EUR 788bn.
Greek bonds guesstimates: 2023s softer at 29% from 28.5% and 2042s at 24% from 23.5% (20.25% and 16.75% before elections).
All levels COB 17:30 CET

Rest of week:
World Bank Global eco forecast release tomorrow.
Germany: Wed May CPI fcst 2.1% unch YoY, Thu Wholesale PX fcst 2.4% YoY
France: Wed CPI
EZ: Wed EZ Apr IP fcst -2.7% after -2.2%, Thu ECB monthly, EZ CPI fcst 2.4% unch, EZ Q1 employment and trade balance
Periphery: IT Wed CPI, Thu Gov Debt / SP Wed CPI, Thu House prices
US: Wed PPI, Retails Sales and Biz inventories, Thu CPI & Claims, Fri IP, Cap Util & U Michigan

Click link on title or below for today’s musical support:
(So never mind the darkness we still can find a way / Nothin' lasts forever even cold November rain –especially in June...)
(Yes, it is odd than Sir Elton was up there. But, hell, why not... And, yes, Slash is Guitar God!)

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