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, 15 October 2012

15 Oct 2012 – “ Blue Monday ” (Nouvelle Vague, 2006)

15 Oct 2012 – “ Blue Monday ” (Nouvelle Vague, 2006)

Once more, US Risk in sluggish manner on Friday to end the week with the S&P closing just slightly negative, bang on its 50d average at 1428 and the INDU just 10 ticks above that mark (NASDAQ through that since 05 Oct). Same trading pattern since Tuesday: Start, uptick, 0.75% slide, close. No further IMF revelations out of Tokyo. Weekend news light and scattered. Nothing concrete on Greece (due to finalize Troika negotiations by Thursday) or Spain, knowing that a November schedule for some block assistance to Greece, Cyprus and Spain seems to go its way. While the Swedish FM openly pointed out Grexit in the coming months, Germany’s Schaueble stressed that would never happen, no “Staatsbankrott” – but that Greece ought to continue to tighten its belt, ergh, to follow its path of reforms. And Banking Union for 2013 seems more and more remote.
Chinese CPI tame at +1.9%, as expected, after 2%; PPI sliding further to -3.6% (fcst was unchanged at -3.5%). Trade data showing an unexpected surge in Exports (+9.9% YoY, fcst +5.5% after +2.7%) – iPhone 5-driven? Xmas toy production? – with imports at +2.4% (fcst +2.4% after -2.6%). Foreign reserves at USD 3290bn near Feb all-time high.

Asian equities generally slightly lower, but for Japan. After testing closing levels in early future trading, a little lower, than a little higher, and in absence of major news or data, European Risk started on a positive footing: EGBs all softer, with exception of Italy on ROn trade. European equities up a small 1% compared to Friday evening. Credit roughly unchanged, though. Bunds out by 3bp to 1.48%, Spain out by 4 to 5.64%. Italy remains just below the 5% mark at 4.96%. Belgium unchanged, unharmed by the separatist vote in Antwerp. EUR unchanged at 1.294. Commodities all a little softer. Pure equity rebound.
No European data to speak off, knowing that the whole week won’t show much with regards to hard macro input.

Auction supply restricted to Dutch and French bills: EUR 1.1bn 3m at -0.037% (after -0.047%) and EUR 1bn 6m at -0.021% (after -0.013%), followed by EUR 4bn 3m BTFs at -0.023% (after -0.018%), EUR 1.2bn 6m at -0.007% (after -0.01%) and EUR 1.8bn 12m at +0.016% (after +0.018%). Uneventful.
Will have plenty of bills again tomorrow with EUR 4.5bn Spanish 12 and 18m of interest (last 2.84% and 3.07% mid Sep) as the one to follow. Further supply from Belgium EUR 3.2bn 3 and 12m bills (last -0.003% and +0.095%), Greece with EUR 1.25bn 3m (last 4.46%) and the EFSF with EUR 2bn 6m (last -0.018%).

Uneven midday picture: Equities up over 1%. Hard Core EGBs a bit softer; Soft Core a bit firmer (Austria, France and Belgium 2-4 tighter). Italy on stand-still on the positive opening levels. Spain softer by 5 on the short and 9 on the longer end (after having tightened by 15 on Friday in an empty market). Credit about unchanged, a little firmer for financials.
Bunds 1,47% (+2), OBLs 0,51% (+1), BKOs 0,047% (+0,8). UST 1,66% (+2)
Spanish 2s 3,09% (+5) and 10s 5,69% (+9). Spanish 2-10s 261bp (+5).
Italian 2s 2,09% (-4) and 10s 4,94% (-3). Italian 2-10s 285bp (+1).
Commodities unchanged from opening levels with the EUR pushing a little higher, without much force, though.
US futures up 0.5% from close, so pretty much back to European closing levels.

Split US figures to kick-off the afternoon session with Empire Mfg for Oct at -6.2 (fcst -4 after -10.4), but with Advanced Retail Sales stronger than expected at +1.1% (fcst +0.8% after +0.9%, revised to +1.2%), on “ex” basis +0.9% (fcst +0.4% after +0.1%, revised higher as well at +0.3%), putting some weight on safe haven bonds and supporting equities further, although given the advance already taken these numbers were only good for +0.1-0.2% in futures.
US cash open sluggishly positive, just on post-figure futures uptick levels of about +0.25%. European equities losing some lustre on widening Spanish bonds with 10s nearing 5.75% again, retracing Friday’s squeeze (and a Spanish equities turning negative).
Business Inventories (note that is August data) rising +0.6% (fcst +0.5% after +0.8%) with not other impact than having US equities slipping down back to closing and chart levels (INDU 50d average 13323, S&P 1429).

Greek bonds still very much en vogue and hitting levels unseen since the PSI for the 2023s falling down to 17.25% (yield-wise) and taking out 32% price-wise. 2042s at 15% in yield / over 22% in price, unseen since late March.
Never mind the fact that the Greek FM, maybe encouraged that the whole haggling of late hasn’t irritated anyone beyond means, seems to be telegraphing that numbers won’t be there for to meet Thursday’s deadline and that tranche pay-out approval would need to be agreed in emergency later this month.

European equities taking comfort from the fact that US peers didn’t break lower, but bounced off closing levels, and clinging to some gains.
Spain drifting wider and losing all of Friday’s squeeze gains (-15 to 5.60%) and back to last Tuesday’s levels of 5.80%. Short end weak, too, with 2s widening by 12bp. Italy eventually unharmed and closing unchanged, fighting off the gravity pull.
Bunds closed at 1,47% (+2), OBLs at 0,52% (+2) and BKOs 0,050% (+1,1) with UST at 1,67% (+3)
Spanish 2s at 3,16% (+12), 10s at 5,80% (+20). Spanish 2-10s 263bp (+7).
Italian 2s at 2,13% (+0), 10s at 4,97% (+0). Italian 2-10s 285bp (+1).Commodities a bit softer. EUR pretty much back to where it started.
Commodities taking a bath across the board. Oil weak, Gold weak, Copper weak. EUR unchanged.

Take-away of today: European equities trying to decouple from EGBs and US equities, trying to trade “No news is good news”. Low action day. Short term trading strategy buy Spain on weekend bail-out hopes and resell rapidly might need to be deepened. Not much to chew on eventually.
Will have German ZEW sentiment tomorrow. US CPI shouldn’t bring much news. US IP to be watched.

New Issue supply surprisingly light, given the Risk On morning, especially in equities: French strategic oil reserve manager SAGESS with EUR 700m 7 YRS at MS +50, French BPCE with EUR 750m April 2018 at MS +105 and Iberdrola increasing a Oct 2018 benchmark by EUR 400m at MS +310.
New 5 YRS EFSF deal announced, probably for delivery tomorrow. Sep 2017, launched in July at MS +50, now about MS +15. May 2019 at MS +low 30s. Long 5 YRS should probably be marketed around MS +low to mid 20s.

Closing levels:
10 YRS Yields: Germany 1,47% (+2); Luxembourg 1,59% (+2); Netherlands 1,72% (+2); Finland 1,73% (+2); Swaps 1,76% (+2); EU 1,88% (+1), Austria 1,94% (-1); EIB 2,14% (+3); France 2,14% (-1); EFSF 2,26% (unch); Belgium 2,33% (-4); Italy 4,97% (unch); Spain 5,80% (+20).

10 YRS Spreads: Luxembourg 12bp (unch); Netherlands 25bp (unch); Finland 26bp (unch); Swaps 29bp (unch); EU 41bp (-1); Austria 47bp (-3); EIB 67bp (+1); France 67bp (-3); EFSF 79bp (-2); Belgium 86bp (-6); Italy 350bp (-2); Spain 433bp (+18).

EUR swap curve 2-5 YRS 46bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 61bp (+1,0).
2 YRS German BKOs closed 0,050% (+1,1) and 5 YRS OBLs 0,52% (+2).

Main unchanged at 127; Financials at 176 after 178 (1,1% tighter). SovX at 125 (-10). Cross at 532 from 540.
Stoxx Futures at 2480 / +0,6% (from 2465) with S&P minis at 1427 (+0,1% from 1426, at European close).
VIX index at 16,1 after 15,6 yesterday same time.

Oil 90,2/114,2 (WTI/Brent) from 91,9/114,3 (-1,8%/-0,1%). Gold at 1735 after 1762 (-1,5%). Copper at 367 from 371 (-1,1%). CRB at EU COB 307,0 from 309,0 (-0,6%).
BDY still on the rise, fixing at 941 from 926 (+1.4%).

EUR 1,294 from 1,294

Greek bonds still very much en vogue and hitting levels unseen since the PSI for the 2023s falling down to 17.25% (yield-wise) (-50) and taking out 32% price-wise. 2042s at 15% in yield (-50) / over 22% in price, unseen since late March.

All levels COB 17:30 CET

This Week’s Macro Data:
Looking forward to this week's data supply doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator tomorrow. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.
Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Tue EZ CPI Final +2.7%; Wed Construction Output
GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)
FR: Pffff… Rien
Italy: Fri 19 Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Tue CPI fcst 1.9% after 1.7%, IP fcst 0.2% after -1.2%, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales
China : Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Yes, I know the original is more exciting (here), but that samba mood seemed more fitting.


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