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

Thursday 16 August 2012

16 Aug 2012 – “ Moments in Love " (The Art of Noise, 1984)

16 Aug 2012 – “ Moments in Love " (The Art of Noise, 1984)

An (empty) day can make a difference… Bunds sold off rather aggressively yesterday (+10, about 100 tick in futures, alongside USTs), as equities kept hovering near their highs, while Spain gained further (-10). No European data and half of Europe on leave anyway. US figures mixed, but mixed in a sense that, uh, if there’s organic growth, there won’t be free money from the FED? That’s not good. Organic growth is slow and painful (Boo!), central bank money fast, cheap and with few strings attached (Yes!)…And anyway, QE and other supports have already been priced in… Can’t change the programme.
Early start mixed, as Asia was (partly) roaring ahead, as China’s Wen pointing to headwinds and falling inflation was interpreted differently here and there: Japan and Australia roaring ahead; SE Asia and China unchanged at best, if not negative. After a pre-open uptick, the US having furthermore closed symbolically up yet a further tick on the S&P, European Risk traded slightly lower starting into the day.

Still damaged from Wednesday’s sell-off Bunds opened around 1.56% (having failed to breach 1.60% in early morning Asian equity euphoria) and Spain bouncing off yesterday’s 6.60%. Periphery curves still flattening, albeit because of long end strength. Equities about 0.25% lower, having broadly closed unchanged yesterday. Credit 2 ticks wider. EUR being the weakest link here at 1.226.
Brent still galloping ahead on ME tensions and now past the 116-mark (and a further menace to growth at EUR 94.8 per barrel). As a reminder, peak oil in Summer 2008, had propelled Brent to $144 (then EUR 91.30) and past $ 123 in March this year (then EUR 94.20). So in EUR terms, we’re trading out new highs here. Real lofty… And a serious possible break on consumption and production. Add soft commodities surging and a EUR under pressure and shopping for essentials will trigger long faces, once people will be back from summer holiday.

No major data outside EZ CPI, as expected unchanged at 2.4%. Dutch unemployment picking up to 6.5% (from 6.3%). Not a number that would impress the South, but coming from a 5% intermediate low in Summer 2011 and the highest of the last 5 years. That is ahead of September’s elections (and despite the Netherlands Q2/GDP surprisingly turning positive).
No government supply for the rest of the week.

Midday levels show Hard Core EGBs out by 6-8 from Tuesday evening (a tick or two better than yesterday) and Bunds 1.54%, Soft Core and Agencies out 3 -5bp. Italy unchanged at 5.83%. Spain doing just great at 6.55%, down 16 from Tuesday, of which a good 10 yesterday and an additional 5 this morning. Squeezed into the void. Italian 2s a tick firmer, but Spanish 10s are trading on their own with 2s stuck above 4% at 4.10% since early this week and hence the curve flattening further.
Credit out a tick from Tuesday. Equities a tick lower. EUR stuck below 1.23. Brent over 116.

Mixed US data with slightly higher than foreseen claims at 366k and prior revision (fcst 365k after 361k revised 364k), continuous claims at 3305k (fcst 330k after 3332k revised up to 3336k), lower Housing Starts of 746k (fcst 756k after 760k revised lower to 754k), but with Building Permits at 812k (fcst 769k after 755k revised higher to 760k).
Data managed to prop up the EUR back over the 23 handle, lifting equities by a tick or 2 alongside, moving from slightly negative to ever so slightly positive. Yawn…
Had Philly Fed, reminiscent of yesterday’s Empire figures, print a lower than expected -7.1 (fcst -5 after -12.9). QE, after all? Pushed EUR further up. Organic growth??? Who needs that?

Not much outside that… 
Feels a little like the above mentioned song. Check out the video with the turtle dragging itself along… Feels like a lot of market players…Classic track, in the meantime! Soothing for FB owners... 
And the hypnotic beat equally unnerving for EUR equities and Spanish BONOs shorts (Spread to Germany down 50bp since last Friday). Like, nothing happens, and there’s a daily grind up here.
Moments of Love for Rajoy. Do nothing and be rewarded.

Bunds at 1.53% (+6 from Tuesday). BKO at -0.036% (+0.3). OBLs at 0.46% (+4).
Spain firmed up to hit round 6.500% (down 21 from Tuesday, half of this today), symbolically back through 500 to Bunds. Eventually dragging Italy tighter, down to 5.78%.
Strong afternoon catch-up in Italian and Spanish short-end bonds, erasing earlier weakness and flattening, to end steeper by 17 for Italy and 4 for Spain (2 YRS BONO 3.88% at close, from 4.10% late morning). Credit treading water and leaving equities on their own. EStoxx at the highest since early April, up 20% from early June and about 13% since end of July.

New Issues summer break seemingly starting to end with 2 senior financial deals printed for BNPP EUR 1bn 7 YRS MS +108 and Svenska Handelsbanken EUR 1bn 10 YRS at MS +80. Serious basis for BNPP. Lack of supply.

Closing levels:
10 YRS Yields: Germany 1,53% (+6); Luxembourg 1,74% (+5); Finland 1,77% (+4); Netherlands 1,84% (+7); Swaps 1,90% (+3); EU 1,98% (+3), Austria 2,09% (+4); France 2,14% (+4); EIB 2,19% (+3); EFSF 2,27% (+4); Belgium 2,59% (+2); Italy 5,78% (-5); Spain 6,50% (-21).

10 YRS Spreads: Luxembourg 21bp (-1); Finland 24bp (-2); Netherlands 31bp (+1); Swaps 37bp (-3); EU 45bp (-3); Austria 56bp (-2); France 61bp (-2); EIB 66bp (-3); EFSF 74bp (-2); Belgium 106bp (-4); Italy 425bp (-11); Spain 497bp (-27).

EUR swap curve 2-5 YRS 52bp (+4,0); 5-10 YRS 80bp (+1,0) 10-30 YRS 46bp (+0,0).
2 YRS German BKOs closed -0,036% (+0,3) and 5 YRS OBLs 0,46% (+4).

Main at 146 from 145 (0,7%); Financials at 242 after 241 (0,4%). SovX at 240 from 242. Cross at 585 from 574.
Stoxx Futures at 2454 / +0,9% (from 2431) with S&P minis at 1408 (+0,3% from 1404, at European close).
VIX index at 14,9 after 14,3 yesterday same time.

Oil 95,0/116,1 (WTI/Brent) from 93,4/113,5 (+1,8%/+2,3%). Gold at 1616 after 1601 (+0,9%). Copper at 336 from 336 (+0,0%). CRB at EU COB 302,0 from 300,0 (+0,7%).
Baltic Dry down a further 1.1% to 720, having lost nearly 3% yesterday to 728 from 750. Multi-year low at 647 (an inversion of today’s numbers) just 10.1% away. Next week’s business, probably.
The BDI does remain a very basic coalmine canary…and obviously there aren’t that many goods and ore to ship these days.

EUR 1,236 from 1,232

ECB deposits at EUR 351bn after EUR 329bn.

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

All levels COB 17:30 CET

Germany: Fri PPI fcst +1.1% YoY after +1.6%
US: Michigan Conf fcst unch 72.3 & Leading Indicators fcst +0.2% after -0.3%, both late European afternoon.

Click link on title or below for today’s musical support:
Too trippy!
And video clip
Full version
And even slower version…

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