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 13 August 2012

13 Aug 2012 – “ Can You Feel it? " (Mr. Fingers / Ch. Prommers, 1986)

13 Aug 2012 – “ Can You Feel it? " (Mr. Fingers / Ch. Prommers, 1986)

Was this another flip-flop we heard gently falling? Japanese GDP grew solely 0.3% QoQ (fcst 0.6% after prior revised a ticker higher to 1.3%), or 1.4% annualized. Yep, makes the JPY level even more irking for the government. No Chinese data, knowing that RRR cuts seem off the table for now. The US enjoyed a better close on Friday, wringing out a 0.25% gains, helping Asia to mainly only reduced losses, although China is down a hefty 2%.

Muted European open, quite sanguine actually given weekend bits and pieces (Germany suddenly seeming less alone in opposing Periphery bond buying, supported, unsurprisingly, by the Finnish government, as well as by Belgium’s Coene – in actually rather strong worded statements). And the Troika’s frustration with Greek developments is creeping back.
EGBs about unchanged across the board, including the Periphery (for a choice a tick stronger). Curves unchanged. Credit unchanged. Equities at COB levels, maybe a shade weaker. Difficult to feel a pulse here... Only outlier would be Brent, up 1.5% to just shy of $114 (EUR 92.7).

Outside that not much. Data will be sparse this week. No long end auctions. Assumption Day in most of Europe on Wednesday should further diminish activity. Need to drift and flight by sight. 

Auctions in bills out of Italy, Germany and France, to be followed tomorrow by Greece and Belgium. Italy had slated a rather chunky EUR 8bn of 1-year paper (2 year average size was rather EUR 7bn), which was issued at 2.767% (July levels were 2.697%, after 3.972% in June). Stable bid-to-cover. Deal done.
Germany unsurprisingly raised EUR 4bn 6m bills at record low -0.0499% (from -0.034% in July and 0.007% in June) with only EUR 230m retained for market intervention. France followed with a total of nearly EUR 7.2bn, split in EUR 4bn 3m at -0.016% (after -0.01% 2 weeks ago), EUR 1.7bn 6m at -0.01% (after -0.01%) and EUR 1.5bn 12m at 0% (after -0.006% ).

Had a little ROn playing out by late morning with the Italian auction over at a manageable price. Periphery tightening with Spain down to low 6.80s. Short Periphery on stand-still, though, and curve flattening in mechanical manner. Equities flat after the slightest drop at the start. Credit unchanged. EUR “spiking” over 23-mark. Hard Core softer by 5 bp, as the Italian auction results sent Bund futures tanking. Had Greece’s Q2 GDP contract by “only” 6.2% (fcst -7% after 6.5%), as cited for positivism.

Same pattern over midday and into the US open with some more softness in the Hard Core and Spain adding a little in performance. Periphery curves flattening further with the short end still soft, for choice. Equities up a little into positive territory, jolting credit a couple of ticks tighter from a sluggish morning session.
Brent still on the rise on Middle-East tensions.

Levitation exercise coming to an end with the US open and then drifting back to yesterday’s levels. Had news doing rounds that the German High Court would have to delay its ESM ruling because plaintiffs were arguing that a similar case is now treated at the European Court in Lux, but that doesn’t seem to be the best of reasons, knowing that German constitutionality confirmation is requested at this stage. Still, brought back the discussion. ROff.

Not much life. Nor conviction.
Barely a pulse.
Can you feel it?

Bunds at 1.40% (+2). BKO at -0.052% (+2.5). OBLs at 0.37% (+3).
Italy about unchanged. Spain firmed up in the lows 6.80s (6.81%, 7 tighter), but both curves flatter by about 10bp.

European GDP data and ZEW tomorrow..
Wednesday closed in 2/3 of Europe. Hitting summer low point. Beware of patchy liquidity.

New Issues summer lull…

Closing levels:
10 YRS Yields: Germany 1,40% (+2); Finland 1,65% (+3); Luxembourg 1,65% (unch); Netherlands 1,70% (+4); Swaps 1,81% (unch); EU 1,90% (-2), Austria 2,05% (+3); France 2,09% (+2); EIB 2,11% (unch); EFSF 2,18% (-3); Belgium 2,56% (+6); Italy 5,88% (-1); Spain 6,81% (-6).

10 YRS Spreads: Finland 25bp (+1); Luxembourg 25bp (-2); Netherlands 30bp (+2); Swaps 41bp (-2); EU 50bp (-4); Austria 65bp (+1); France 69bp (+0); EIB 71bp (-2); EFSF 78bp (-5); Belgium 116bp (+4); Italy 448bp (-3); Spain 541bp (-8).

EUR swap curve 2-5 YRS 44bp (-1,0); 5-10 YRS 78bp (+0,0) 10-30 YRS 46bp (+1,0).
2 YRS German BKOs closed -0,052% (+2,5) and 5 YRS OBLs 0,37% (+3).

Main at 149 from 149 (unch); Financials at 247 after 246 (0,4% wider). SovX at 248 from 248. Cross at 591 from 589.
Stoxx Futures at 2414 / -0,4% (from 2424) with S&P minis at 1395 (-0,1% from 1396, at European close).
VIX index at 14,4 after 15,2 yesterday same time.

Oil 92,2/113,3 (WTI/Brent) from 92,7/112,2 (-0,5%/+1,0%). Gold at 1617 after 1623 (-0,4%). Copper at 334 from 339 (-1,5%). CRB at EU COB 299,0 from 302,0 (-1,0%).
Baltic Dry on its late daily deep dive, down 1.3% to 764 from 774. Multi-year low at 647 (an inversion of today’s numbers) just 15.3 away%. Next week’s business?

EUR 1,234 from 1,229

ECB deposits at EUR 311bn after EUR 289bn.
SMP buying last week (unsurprisingly) at zero.

Greek bonds guesstimates: static at 2023s at 24.25% and 2042s at 20.00%

All levels COB 17:30 CET

This Week:
No European long end auctions. Further bills tomorrow in Belgium and Greece (for a chunky EUR 3.125bn this time).
Will need to check out the GDP numbers and ZEW in Europe.
Assumption Day on Wed will shot most of Europe (Austria, Belgium, France, Italy, Lux, Portugal, Spain) leaving mostly Germany and Italy to play ball.
Market movements subject to US numbers and European rumours.

Germany: Tue prel. Q2 GDP fcst +0.2% after +0.5%, ZEW Current fcst 18 after 21.1 Sentiment -18.5 after -19.6; Fri PPI fcst +1.1% YoY after +1.6%
France: Tue CPI fcst unch +2.3% YoY, prel. Q2 GDP fcst -0.2% after flat
EZ: Tue Q2 GDP fcst -0.2% after flat, ZEW Thu CPI fcst 1.9% after 1.6%
Periphery: SP Tue CPI
US: Tue Small Biz optimism, PPI YoY fcst +0.5% after +0.7%, Retail Sales fcst +0.3% after -0.5%, Biz inventories fcst unch +0.3%; Wed CPI YoY fcst +0.2% after flat; Empire Manu, IP fcst +0.5% after +0.4%, Capacity fcst 79.2% after 78.9%; Thu Claims, Housing Starts & Building permits, Philly Fed; Fri Michigan Conf & Leading Indicators

Click link on title or below for today’s musical support:
Beat… Beat… Beat.. No beat. Lifeless.

Jump to the real deal!

And of course…

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