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 4 December 2012

04 Dec 2012 – “ 11 O'Clock Tick Tock ” (U2, 1980)

04 Dec 2012 – “ 11 O'Clock Tick Tock ” (U2, 1980)

Lather. Rinse. Repeat. Europe doing about fine on its own and with an urge to test higher risk levels, in absence of negative news. US more fickle on FCDRE. If this goes on until year-end… If it wasn’t for a bit of FCDRE… Tick. By. Tick. Movements. Equities high. Soft Core closing on historic lows.
"11 O’Clock Tick Tock " (Bunds 1,39% -2; Spain 5,23% -1; Stoxx 2587 +0,3%; EUR 1,308 +20)
Just more of the same overnight. US had a weaker close, this time, on FCDRE, but in measured manner (-0.4%), taking us back to the levels where the index reshuffling started on Friday and then down 0.3% in the close.
Asian risk trailed the US, down a quarter with, tataa, the notable exception of China, closing up 1%, but after having hit new lows (Shanghai down to 1950, before rebounding 1.5% in the afternoon session).
The RBA graced the world with a quarter point cut to 3% (its post-Lehman low) on, duh!, a weaker global outlook.

In for another probably quieter session until the US come in: Open about in line with yesterday. Equities flat to the tick compared to Monday’s close. EGBs again a tick better bid with Bunds paring yesterday’s afternoon softer patch and quoted 1.39% (-2) with UST 1.61% (-2). Hard Core in line. Soft Core 1bp firmer and Periphery flat to a tick better. Curves unchanged. Credit 1-2 ticks wider.
EUR unchanged. Commodities about 0.5% off with Gold back down above the 1700-handle.

As for yesterday’s PMI data, Spanish unemployment numbers were less bleak than expected +90k with 74k added (from prior +128k).

Again bills on today’s menu: EUR 1bn of Belgian bills in 3m at -0.029% and 6m at -0.01% (from -0.004% and +0.021%) and the EFSF for EUR 1.4bn 3m at -0.047% (from -0.029%). Note that Belgian bills come now inside France in 3m (yesterday -0.022% and -0.008%), but then again, France is a weekly visitor…
Not a huge week in terms of govie supply: The Spanish auction (exceptionally held tomorrow with Thursday a holiday in Spain) will be for up to EUR 4.5bn in 3.75% Oct 2015 (COB 3.415%),4.60% Jul 2019 (COB 4.610%) and the “on-the-run” 10 YRS 5.85% Jan 2022 (COB 5.235%). We’ll have as well additional EUR 4bn in Schätze (COB 0.015%).
Thursday will see a rather modestly-sized EUR 4bn French auction for the 4.25% Oct 2018, 3.75% Oct 2019 and 2.75% Oct 2027 OATs.

Again some good and diversified New Issues supply with Rio Tinto (in longer duration than Xstrata 2 weeks ago) raising EUR 750m May 2020 at MS+80, next to EUR 500m 12 YRS at MS +110 (and GBP 500m 2029 at G +165), Deutsche Post with another 2-trancher of EUR 300m 8 YRS at MS +60 and EUR 700m 12 YRS at MS +100. Further German issuers with Metro EUR 500m May 2018 at MS +140 (Not bad for a BBB- rating) and, on the other end of the credit spectrum, Land Hessen with a EUR 350m increase of a June 2020 line at MS +3. Unicredit raised with EUR 750m 5 YRS senior debt at MS +255. Finally, there was a late-closing deal yesterday for a Spnaish region with Junta de Castilla y Leon closing EUR 200m 2 YRS at a yield of 5.500% (about MS +508).

EZ PPI etching up 0.1% MoM in Oct (fcst flat after +0.2%), +2.6% YoY (fcst +2.5% after +2.7%).

No follow-up weakness, hence some ROn. Equities climbing 0.75% in a quiet market. EGBs moving back to unchanged. Periphery tightening a tick or two. Credit back a tick or two tighter. Bit of an upside test in the EUR with a 1.3085 high. Commodities flattish to a tick firmer.
Greek rocket stalling at yesterday’s prices.
It’s all a story of a tick - or two. Tick. Two. Tick. Tock. Already 11’ o clock???

Lunchtime levels, as mentioned.
Bunds 1,41% (unch), OBLs 0,43% (unch), BKOs 0,015% (-0,7). UST 1,63% (unch).
Spanish 2s 2,81% (+2), 10s 5,23% (-1). 2-10 YRS spread 242bp (-2).
Italian 2s 1,76% (-1), 10s at 4,41% (-3). 2-10 YRS spread 265bp (-3).

Banking Supervision talks once more put on the longue table. SMP obviously nothing for immediate use. Lack of “clear and immediate danger” obviously a brake on going forward. Tick. Tick. Tock. Tock. To be revisited on 12 Dec, but realistically a 2013 subject (if we make it past the Mayan End of The World)(11 o’clock).
Yet again Franco-German divergences…
And Juncker, who wants to ditch his Head of Eurogroup job… Too bad. Someone has to do it. French and Germans are too oppressing in that position and it would be nice to have someone more charismatic than HvR, as the uninteresting consensus choice par excellence, and someone that does NOT come from the South.
What can we get out of Finland (although too stern) and best of all out of the Netherlands? Too bad Wim Duisenberg is gone, thinking of it.

No US figures to kick-start the afternoon, but with a bit of softness spreading after lunch. US cash open close to home, leaving European Risk outperforming by about 0.5% to the US.
UST back to 1.61% (-2), as most EGBs, including the Periphery.
EUR juuuuuuust made it slightly over the 31-hande. To have it flashed. Matter of principle.
Gold hit below the 17-handle (-1%), as is Oil at American open (-1.5%). On EUR strength???
With US equities eventually soon in slightly positive territory, markets chilled out rapidly (US flat, Europe +0.5%. Bonds 1 to 2bp tighter).
Tick. Tock.
Sole data set of the day with the NY ISM at 52.5 after 45.9 (Sandy-ed) in Oct.

Yawning the rest of the afternoon with ticking sounds in my head.
Aaaand…. finally hitting F9 for yet another rather quiet session (to say the least).
Bunds and EGBs all a tick firmer. Soft Core closing on historic lows.
European equities about a quarter positive. Credit about flat. EUR a tick firmer. Oil and Gold 1% softer.
Spain not moving much ahead of tomorrow’s auction.
Greek bonds 0.25% lower in price than yesterday.
Bunds closed at 1,39% (-2), OBLs at 0,42% (-2) and BKOs 0,015% (-0,7). UST at 1,60% (-3) COB.
Spanish 2s at 2,82% (+3), 10s at 5,23% (-1). 2-10 YRS spread 241bp (-3).
Italian 2s at 1,76% (-1), 10s at 4,42% (-2). 2-10 YRS spread 266bp (-2).

Take-away: Lather. Rinse. Repeat. Europe doing about fine on its own and with an urge to test higher risk levels, in absence of negative news. US more fickle on FCDRE. If this goes on until year-end…

Outlook: More of the same. Lather, Rinse, Repeat. Stand still. Fiscal Cliff Discussion Risk Event still live. Spain maths on budget. Italian maths, French… Bah… etc. etc. etc. Need to see whether Final Service PMIs confirm yesterday picture (Rebound from lowest levels : Half full glass, rebound ; half empty, low base). Spanish auction at late tightest levels.
EZ Composite 45.8 and Services 45.7. EZ Retail Sales fcst -0.2% MoM. German Services PMI 48, France 46.1. Final US Productivity for Q3 (fcst 2.8% after 1.9%), ADP +125k after 158k, Factory Orders for Oct (fcst flat after +4.8%), Non-Mfg Composite ISM (fcst +53.5 after 54.2).

European 50 & 100d averages: EStoxx 2510/2466, DAX 7270/7123, CAC 3449/3426, MIB 15548/15162, IBEX 7816/7536.
US 50, 100 & 200d averages: INDU 13186/13141/12996, S&P 1421/1410/1385, NASDAQ 3020/3020/2987 with AAPL at 611/625/601.
EUR: 50d 1.291, 100d 1.271& 200d 1.279. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at 1.273& 1.315, then 1.349 (50%).

Closing levels:
10 YRS Yields: Germany 1,39% (-2); Luxembourg 1,49% (-2); Netherlands 1,60% (-3); Finland 1,63% (-2); Swaps 1,68% (-2); EU 1,69% (-3), Austria 1,76% (unch); EIB 1,86% (-2); EFSF 1,98% (-3); France 2,03% (-2); Belgium 2,15% (-1); Italy 4,42% (-2); Spain 5,23% (-1).

10 YRS Spreads: Luxembourg 10bp (unch); Netherlands 21bp (-1); Finland 24bp (unch); Swaps 29bp (unch); EU 30bp (-1); Austria 37bp (+2); EIB 47bp (unch); EFSF 59bp (-1); France 64bp (unch); Belgium 76bp (+1); Italy 303bp (unch); Spain 384bp (+1).

EUR swap curve 2-5 YRS 46bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 63bp (unch).
2 YRS German BKOs closed 0,015% (-0,7) and 5 YRS OBLs 0,42% (-2).

Main unchanged at 120; Financials -2 to 153 (-1,3% tighter); Cross +1 to 487 (0,2% wider).
Stoxx Futures at 2587 / +0,3% (from 2580) with S&P minis at 1405 (-0,6% from 1414, at European close).
VIX index at 16,9 after 16,3 yesterday same time.

Oil 88,4/109,6 (WTI/Brent) from 89,1/111,0 (-0,8%/-1,2%). Gold at 1696 after 1715 (-1,1%). Copper at 365 from 363 (+0,6%). CRB at EU COB 300,0 from 299,0 (+0,3%).
BDIY accelerating down again: today 1054 after 1077 (-2.1%). Xmas shipping already over?

EUR 1,308 from 1,306

Greek guesstimate: Greek bonds balancing out at 38.75% (14.83% yield) after 39% (14.75% yield) for the 2023s and 30.25% (yield 11.92%) after 30.75% (11.77%) for 2042s. Ticking a little lower. Hey, they’re still all-time high... Euh... Somehow. Obviously, that is a post-PSI high…

All levels COB 17:30 CET

Fast-forward Macro and Events:
Hmm…Only bits and pieces on the macro front.Service PMIs on Wednesday Industrial output in Spain on Wed. Factory Orders in Germany on Thu. Fri NFP in the US.
Thursday ECB& BOE (FED on 12 Dec)

Additional EUR 4bn German 2 YRS on Wednesday. Spain will hold an auction of up to EUR 4.5bn in 3, 7 and (short) 10 YRS on Wednesday as well (as Thursday will be closed), while France will supply its monthly OAT auction on Thursday, albeit for only up to EUR 4bn and without 10 YRS (2018, 2019 & 2027).

EC: Wed Final Comp PMI, Retail Sales; Thu EZ GDP and ECB
GE: Wed Final Serv PMI; Thu Factory Orders last -3.3 MoM, Friday Industrial Production last -1.8% MoM/-1.2% YoY
FR: Wed Final Serv PMI; Thu Q3 unemployment
Italy: Wed Final Serv PMI
Spain: Wed Industrial Output (last 7% wda).
US: Wed Factory Orders, Productivity and Labour Costs; Thu Claims; Fri NFP

Click link under title or below for today’s musical support:
We thought that we had the answers
It was the questions we had wrong

(Man, I can’t remember the last time I had seen The Edge’s hairline before screening this clip…)(And that Gibson Explorer looks cool, too. After all…)

Music Link

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