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

Wednesday 11 July 2012

11 Jul 2012 – " Keep On Running " (The Spenser Davis Group, 1965)

11 Jul 2012 – " Keep On Running " (The Spenser Davis Group, 1965)

Slapped my screens a couple of times this morning, because things seemed stuck. But, hey, no, we were still mostly running to mostly stand still. What went up yesterday afternoon just came down this morning with equities down a little and credit a tick wider. Soft Core a little better, ahead of the German auction. Peripherals holding stable with Italy slightly better bid, having cancelled not this week’s but the mid-August auction (wise choice, in any case) because of positive fiscal entries. Will still need to bite the bullet for EUR 3.5bn 3s on Friday, next to some 2019, 2022 and 2023 BTPs.
US close soft, but off lows (T at 1.50%); Asian equities flattish to slightly soft (10 YRS JGB at all-time low 0.79%) with China running slightly against the trend.

No real data to work on. German CPI at 2% unchanged, as expected. French May current account deficit overshooting to EUR 4.1bn after revised deeper EUR 4.4bn (fcst EUR 3.5bn). Spanish housing transactions still falling (-11.6% YoY in May, down from a -9.9% “rebound”) and even US data servings should be minor, which will give people time to read the FOMC in search for QE hints – or not, except if inventories were to surprise a lot.
Leaves people wondering (as raised yesterday) about how the Spanish MoU treatment of sub debt (link) will really be imposed upon hapless savers and check out Rajoy’s speech about how to fix things (Cuts, reductions, further cuts, 3% increased VAT and other tax incomes, savings…). EUR 65bn until the end of 2014 (on EUR 1.074bn GDP in 2011). If all feasible, great on the long run; harsh on the People on the short run. Austerity bites. Usual dilemma. 
No news out of Karlsruhe, a most lovely little town in Baden-Württemberg, home to the German Constitutional Court. And as it stands, this could last for a while…Meaning the EFSF will need to bridge quite something in the meantime.

German bund auction at record-low 1.31% (was last 1.52% in June after the first all-time low at 1.47% in May. COB yesterday 1.32%). EUR 5bn, of which EUR 850m retained for market interventions. EUR 6.4bn bids, of which 2/3 at market price. No tail. Best bid-to-cover since crisis-shaken Sep 2011. Very decent, given the price tag. Did depress equities a little.
This leaves as auctions for this week EUR 7.5bn Italian of 12m bills tomorrow (last 3.97% a month ago) and EUR 3.5bn 3 YRS to on Friday 13th (last 5.30%), next to EUR 1.75bn in 2019 (6.10%, mid June), 2022 (last 6.19%, 2 weeks ago) and 2023 BTPs.

And, hey, I did have the right calendar and thus remain stunned at the level of ECB deposits. The new reserve maintenance period simply started with the smallest blip (from EUR 795bn to EUR 791bn), just to pile up a short EUR 20bn to EUR 809bn yesterday. And we are talking 0% rates. Record high had been EUR 828bn early March, then decreasing slightly and re-peaking for a short while to EUR 824bn early May. This amount of deposits IS high. Ok, 0% is a bargain to Core and Soft Core short term bills…

Had solely equities pacing down and then back up a little, and then down, following the EUR rebound off lows to 1.23 and back lower, and higher. EGBs about static on opening levels with France outshining (8 tighter), pulling Austria and Belgium along in the latest accordion catch-up movement of the Soft Core. Movement has brought French 5s through the 1%-mark (record, of course) and 2s down to 0.16% (record, of course). Peripherals holding in a couple of bp tighter with no curve movement (5.90% & 6.73%).
Slapping screens another time just brought Bunds down to 1.30% and Spain down additional 7 bp over lunch.

Had Bunds shooting up on stops, initially coinciding with reports about demonstration violence in Spain. With no immediate impact on the performing Spanish debt. Probably just stops… Tight market.
US trade balance release (about on fcst). Inventories spot on forecast at +0.3% (after 0.6% revised 0.5%).

Continuous Spain running ahead with another jump of 6, dragging Italy, and about even US equity open. And EUR back up 25 pips from the lows. Micro movements in equities and FX in total pip for tick sync.
A small step for equities, a leap for Peripherals… Basically, Spanish 10s move 50 cts by 50 cts, hence these jumps. But no real steepening yet. Tight and empty market. 
Dutch 18m now at 0.000% mark, as are French 1 YRS… German 5s record close at 0.32%.
Dow and S&P trading on 50 MOV. Some closing pressure with stops triggered on EUR at 2-year lows.

Not much else. Will need to keep track of Greek coalition bickering. Greece? Yeah, Greece. Remember?

Mainly German new issue traffic with German GG FMS raising EUR 2.5bn 5s at MS -2 and NRW.Bank in for EUR 500m 4 YRS FRN at 3mE +20. Dutch Aegon raising EUR 500m 5s at MS +195.Had as well an afternoon print of sizeable EUR 2bn 2 YRS, courtesy of Deutsche Bank (3mE +34).
Corporates-on-wheels: BMW EUR 750m 4 YRS speedster at MS +42 (absolute yield a meager 1.37%) and on the other end of spectrum non-IG Fiat rolling out long 4 YRS EUR 600m at 7.765%.
Anheuser Bush Inbev readying a USD 4-trancher with 3s at T+55 area, 5s at T+85a, 10s +110a and 30s +125 a. Good for investor thirst, but light on yield.

Closing levels:
10 YRS Yields: Germany 1,27% (-5); Finland 1,63% (-4); Luxembourg 1,69% (-4); Netherlands 1,70% (-3); Swaps 1,79% (-3); EU 2,15% (-5), Austria 2,18% (-5); France 2,31% (-8); EIB 2,39% (-5); EFSF 2,49% (-5); Belgium 2,74% (-4); Italy 5,81% (-13); Spain 6,54% (-24).

10 YRS Spreads: Finland 51bp (+1); Luxembourg 42bp (+1); Netherlands 43bp (+2); Swaps 52bp (+2); EU 88bp (+0); Austria 91bp (+0); France 104bp (-3); EIB 112bp (+0); EFSF 122bp (+0); Belgium 147bp (+1); Italy 454bp (-8); Spain 527bp (-19).

EUR swap curve 2-5 YRS 38bp (+1,0); 5-10 YRS 67bp (-2,0) 10-30 YRS 42bp (+1,0).
2 YRS German BKOs closed -0,020% (-1) and 5 YRS OBLs 0,32% (-2).

Main at 168 from 168 (0,0%); Financials at 280 after 277 (1,1%). SovX at 278 from 282. Cross at 660 from 664.
Stoxx Futures at 2243 / +0,2% (from 2239) with S&P minis at 1335 (-0,7% from 1344, at European close).

VIX index at 18,5 after 18,1 yesterday same time.

Oil 85,0/99,1 (WTI/Brent) from 85,0/98,6 (+0,1%/+0,4%). Gold at 1576 after 1586 (-0,7%). Copper at 341 from 339 (+0,6%). CRB at EU COB 290,0 from 291,0 (-0,3%).
And Baltic Dry into reverse for a second day at 1146 after 1160...

EUR 1,224 from 1,225

ECB deposits at EUR 809bn after EUR 791bn

Greek bonds guesstimates: Static with 2023s at 25.5% and 2042s at 21.5%.

All levels COB 17:30 CET

Rest of this week:
Germany: Thu Wholesale prices (prior 1.7% YoY)
France: Thu CPI (prior 2% YoY)
Periphery: Italy Fri CPI (prior 3.6%) // Spain Fri CPI (prior 1.8% YoY) // Greece Thu Unemployment
US: Thu Claims fcst 370k (after 374k) Fri PPI fcst 0.2% after 0.7% YoY

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


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