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

Saturday 25 February 2012

24 February 2012 – “Frozen” (Madonna, 1998)

All levels 12:30 CET

Yawn… Friday morning and markets behave like usual. Low vol start, pretty much where we closed. Tick better for choice, as the oil story is seen as proof that there’s life out there – and not yet as there’s a wall to be hit soon. Most markets slightly up, although only China more than 1%. View it as catatonic, if you like action; Zen, if you feel like markets are balanced. Weren’t it for the EUR and commodities, you’d feel like slapping your screens the old way to see if they’re not frozen.
German Q4 figures pretty much as expected, although the drop in trade had been forecasted worse. French consumer a tick cheerier, but as chronically depressed that whole index ought to be rebased anyway. Italian retail sales sharply lower, matching early 2009 levels.
Equities initially moderately positive, with credit much stronger by mid morning and financials taking the lead. Markets then trying to dash up 1% in Friday non-gloom squeeze mood, before knowing better.

Sovereign supply restricted to Italian bills, as well as zero coupons and ILBs. All well, as all periphery sales lately, with lower yield and slightly higher BC.

LTRO size competition: An astute reader pointed out an embarrassing big finger on my numbered example, as indeed EUR 300bn +25% were 375, not 400 (Ouch!). To cling to my smart end result, and as number massage has become so commonplace lately, I’ll simply round that up to EUR 400 (that’s a mere 6.7%). Final number unchanged.
Although, after second thoughts, I’ll make that an upper limit, given yesterday’s caveats on collateral and leverage. So that error finally comes in handy and I’ll make it the lower range. My new take: EUR 464 to 489bn, EUR 477bn final number.

New issues taking Friday off, with solely UNEDIC roaming the EUR market (for the second time this week) with a EUR 750m 7 YRS block trade.

ECB deposits add EUR 10bn to EUR 476bn.
VIX crashing to 16.8 at US close, lowest since mid Jul 2011.
Brent about stable at 123.5, but WTI jumped up $2 past 108. WTI within $ 4of the 2011 high. Brent still within one EUR of the July 2008 EUR price all-time high.
Gold once more trading a new 2012 high at 1787 in Asian hours before trailing back to 1779. Still, 1.800 in sight.

Spreads to Germany about static. 10 YRS swaps +42 (0), Finland +44 (), Netherlands +47 (), Austria +109 (-2)France +116 (-1), EFSF +132 (-1), Belgium +175 (-2), Spain+313 (-3) and Italy +355 (-9). DBR 2022 1.89%, up 1bp.

On the week:
-          Another static week. Limited volatility and excitement. We note Spain doing fine and definitively better in weeks without SPGB auctions. Next week thus be a different story, especially given late tight levels achieved.
-          10 YRS spreads: 10 YRS swaps +42 (), Finland +44 (-2), Netherlands +47 (-2), Austria +109 (-7), France+116 (-1), Belgium +175 (+9), Spain+313 (-17) and Italy +355 (-7). Belgium odd man out.
-          Yield-wise: Germany 1.89% (-4 bp), Swaps 2.31% (-3 bp), Finland 2.33% (-5 bp), Netherlands 2.37% (-7 bp),Austria 2.98% (-11 bp), France 3.05% (-5 bp), Belgium 3.65% (+6bp), Spain 5.03% (-20), Italy 5.45% (-11 bp).
-          European equities +0.0% (from 2522) and the S&P +0.2% (from 1358).
-          EUR 1.341 from 1.315 (+2.0%)
-          Credit 130 (from 137 or +5.1%), Financials 214 (from 224 or +4.4%) and Sovereigns 344 (from 340 or -1.2%). Knowing that most of the move comes from this morning. Outperforming equities.
-          Baltic Dry 706 from 717 (falling). VIX 16.8 from 18.2 (sleeping). Brent from 123.5 from 119.5 (+3.3%). Hmmm..


Next week: LTRO and sovereign auction supply. Tons of US figures. Certainly some Greece jitters. Need to track Middle-East tensions.

Sorry for not being able to capture the afternoon session and hoping that markets won’t move in a manner that makes this report totally useless.
Will be off during the next two weeks. Next wrap on Friday 09 Mar.

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23 February 2012 – “Fall Behind Me” (The Donnas, 2004)

Same uneven start as over the last days. US and Asian sessions slightly lower to a tick higher at best, worried by growth outlook, rising oil and lack of other factors, news or figures to push markets one way or another. German IFO good news of the morning, clocking in at 109.6, the highest since Aug 2011 and 5th rise in a row since the through of Oct 11 at 106.5. Then again, limited impact as Germany’s (and to some extend France’s) decoupling from the rest of the EZ over the last month is a reckoned fact. Credit mixed with main stable, financials rather stable, despite worst then expected results, but sovereigns again on the slightly weaker side.
EU commission forecast revisions are not exactly upbeat with the EZ outlook negative and especially the outlook on the periphery markedly lower (Spain -1%, from previous 0.7%, last year 0.7%; Italy -1.3%, from 0.1%, 0.2% in 2011; Portugal -3.3%, from -3% and -1.5% in 2011 and Greece at -4.4%, from previously expected -2.8%, after -6.8% in 2011). France and Germany outlook revised 0.2% lower to +0.4% and 0.6% respectively, after 2011 rates of 1.7% and 3%. Austerity bites – and it won’t be the Franco-German tandem, which will pull the periphery. CPI outlook at +2.1% for the EZ as a whole, and not even much lower for the periphery, meaning you get a good case of getting less goods for money worth less. Ah. Stagflation…
Low volatility morning and lunch session. US open pushing equities 1% lower, though. US job figures about unchanged. Not much on Greece, outside the vote of the PSI swap and CAC activation. Greek FinMin unconcerned, whether CDS are triggered or not. It’s not like this is news, but then again, if that’s the case, why have waited so long??? IMF said to be not overly hot on increasing its share. Not helping afternoon mood. Credit holding better than equities on last day’s bizarre divergence pattern, knowing that by decorrelating every second day, the result remains the same. Final sentiment lifted by US equities ticking up on secondary figures in late afternoon. EUR at 1.33 at close. Life on its own.

No sovereign supply today, but a chuck of bills out of Italy tomorrow.

On the next LTRO size competition (Given reigning austerity, no prize, but a pad on the shoulder for who’s nearest):
Unless checking those 523 banks, which participated the last time, as well as those who didn’t (Some were very vocal about wanting to avoid any stigma), one by one, and actually getting honest answers, there’s no way to get any objective number on the  next LTRO’s size. There are some very educated and/or academic papers out there, but guess work is guess work (range EUR 300 to EUR 1.000bn).
So, I’ll add my guess: The previous LTRO had some EUR 291bn 7-days repo expiring the day before the LTRO, so let’s say a quarter was lengthened to 3 YRS (which already sounds aggressive), so the pure LTRO trade was EUR 489bn minus EUR 73bn, EUR 416 bn. Starting the next day after the first 3 YRS LTRO settlement, ECB deposits surged about EUR 200bn. So let’s pretend this was pre-empted liquidity and the rest really needed and cut this number by 2. Thus, the “Sarko trade” size was about a good EUR 300bn.
Draghi has been pushing this deal as being totally no-stigma laden. This time, some banks who didn’t participate last time will  do . Some will already be full and lacking imagination where the next collateral ought to come from. Finally, some will just take some again, just a little more this time. How much more?
Let’s try a low-fi psychological and totally non-academic approach: You’re invited by your in-laws and are offered seriously good cake. As you obviously enjoyed it, there will be another one for you, slightly bigger, the next time – and you know you’re actually supposed to indulge some more, and you will do so, yet you don’t want to look too voracious or, worse, desperate. So, a quarter more…
EUR 300bn +25% = EUR 400bn. This time we have the following repos maturing around the LTRO date: EUR 166bn 7 days, EUR 39bn 3 months and EUR 50bn 6 months. Let’s assume none of 7 days (as this time predicable), but the whole of the 3m and the 6m get rolled into 3 YRS, so that’s EUR 89bn. Add that to the EUR 400bn. That’s EUR 489bn. Hey, same number as last time! Cool…
Caveat 1: Available collateral and price thereof is certainly different now from December’s situation. Spanish 3 YRS govies at 3.16% are certainly less exciting then end of December, when they were at 3.70%, coming from about 5% when the 3-year LTRO was announced. Same goes for 3 YRS BTPs, now at 3.45%, at 5.50% for the first LTRO and at 6.60%, when announced.
Caveat 2: Wasn’t general consensus that banks should deleverage at some time?
Silly guesswork, but probably no worse than others’. But I may be wrong…Whatever, me too wanted to give a number: so EUR 489bn. And having EUR 978bn expiring within 3 months in 3 years sounds less threatening that EUR 1,000bn and more…

New issues starting the day on back foot. Still, another BBB (Danish) corporate done at tight levels. One other issue from a Danish Bank. Danish day in EUR markets.
Lack of traction and fantasy here. Won’t see much until next week. Waiting for the LTRO result might be a good excuse to sit on one’s hands. Witnessing recurrent “anti-new issues” in form of daily buy-backs and tender offers. LTRO related.

ECB deposits back to Tuesday levels at EUR 466bn, up EUR 17bn, with the LTRO in sight.
VIX closed again at 18.2, again down from 18.5 in the afternoon. Volatility remaining unvolatile these days. 17.6 at European close. Yawn!
Oil still pushing and ticking higher with Brent 123.3 / WTI 106.3, both up 50 cts in the morning and closing unchanged 123 / 106. Brent in EUR at 92 within one EUR of the July 2008 all-time high (USD 145, but wit the EUR 1.57).
Gold profiting from general unease, trading at out a new 2011 high at 1785, and counting, ready to tackle the 1800 Q4/ 2011 highs. Next stop would then be the 1900 all-time high traded in Sep 2011.
Baltic Dry back 706 from 704 after 706. My canary is regaining some colours, but still looks pretty pale.

Spreads to Germany about static. 10 YRS swaps +42 (0), Finland +44 (), Netherlands +47 (), Austria +111 (-1) France +117 (+1), EFSF +133 (+3), Belgium +177 (+6), Spain+317 (+1) and Italy +365 (+5). DBR 2022 1.88%, down 2bp. Spain 10s @5.05%.

Tomorrow: Raft of German Q4 figures (backwards looking), French Feb consumers (chronically depressed), IT retail sales. US Michigan, Home Sales. EUR 8.75bn Italian 6m bills and EUR 3.5bn 12m, plus EUR 2-3bn 2 YRS CTZ, plus EUR 11.5bn 5 & 7 YRS ILBs.

Uneasy, static market. Wouldn’t know where the good news were to come from.
Something’s gonna fall. Soon.

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22 February 2012 – “Lowdown in the Street” (ZZ Top, 1979)

22 February 2012 – “Lowdown in the Street” (ZZ Top, 1979)

Again an undecided, slightly weakish open in Europe. Yes, NY did have a short-lived flirt with the lucky 13 on the Dow, but traction was not there and the close was about unchanged. Overnight Asia a tad better, but here as well no traction to pull the bulls any further. Chinese Flash PMI under 50 for the 4th time in a row, while a tick better than before (Best in 4 months, if you need a half-full glass), exports and imports components are further down (Baltic Dry, do you see me?).
European mood still seemingly feeling the hair of the dog, faced with a long list of open questions on Greece. German Feb PMI lower than expected, edging just on 50.1 after having crossed that mark from Dec’s 48.4 to Jan’s 51 reading. France again surprisingly better with PMI readings above 50, higher then expected in Manufacturing (first time since July), lower in Services. European Composite PMI at 49.7 from 50.4 (48.3 in Dec). Then again, with 5 EZ countries officially in recession at the latest count, you can’t expect any miracles.
Credit weaker, too, and periphery widening, as not following stronger Bunds to the upside, and later actually dropping.
Fitch downgrade of Greece greeted by a general shrug.
Credit again much softer and diverging from more resilient equities. Main about ok, but financials (10 points wider, searching for 25 Nov 11 - 02 Feb 12 retracement at +230) and sovereigns weak (going back to +350, both 50% high - late low and average since Nov).

Low volatility day. People still chewing on Greek salvation plans, while awaiting concrete details. Post-announcement political spin rather low key everywhere - and it’s known why. General view seems to be that the general relief of not having to face an imminent default shouldn’t be mistaken with being certain that the can that just got kicked further down the road might ricochet from somewhere and hit back.
The revenge of the can, so to say. Poor thing has been abused by all and everyone over the last 3 years…

German 2 YRS auction faring well in the moody context. EUR 5bn issued, EUR 720m retained. BC of 1.8; half of bids at market price; tail of 1 ct; yield of 0.25%.  Yield 8 bp higher than in Jan, but it’s a new bond maturing 3m later in a steep curve. Nothing to say.

Still some activity in corporate new issues with EUR 500m 7s for Metro and EUR 750m 10s for KPN. Decent prices. German premium on Metro. Sub-jumbo activity in financials with DB increasing a 2 YRS FRN and a 2 YRS Cédulas for Bankia. EIB USD 3.5bn 3 YRS most notable SSA deal, along with a EUR 1bn 30 YRS.
All in all, okay, but somehow sluggish. Speed of corporate books still shows where people put their monies in preferred manner. Mainstream covered bonds taking a week off. Have some GBP instead, as well as a non-AAA Spaniard.

ECB deposits down, for once, to EUR 15bn to EUR 449bn.
VIX closed at 18.2, down from yesterday afternoon’s 18.5, slightly up from the previous session, and now back to 18.5 .
Brent 122.8/ WTI 106.0, crawling higher on Iran nuclear stance. Highest since Aug 2008 for Brent and May 11 for WTI. Watch the growth break, here! Gold pretty much unchanged from yesterday afternoon. It did take out at new 2012 high at 1760 in Asian trading and at European markets open, before being dragged back.
Baltic Dry down again to 2 ticks to 704 from 706. Overcapacities or not in shipping, all international trade stats are now confirming that the last couple of weeks where low. Worth keeping as trade canary in the coalmine indicator.

Spreads to Germany wider, mainly in the periphery, giving back last day’s performance.
10 YRS swaps +42 (+2), Finland +44 (), Netherlands +47 (), Austria +112 (+4) France +116 (+5), EFSF +130 (+4),Belgium +171 (+7), Spain+316 (+6) and Italy +359 (+15). DBR 2022 1.90%, down 7bp. Accelerating into the close.
Italy underperformer of the day. Portugal softer, especially on the short end, but within reasonable limits. All things relative…

Tomorrow: German IFO, European Commission growth outlook. US jobless. Dearth of figures to end the month… No supply.

Everything a little low, everything a little down - and trying to get on bottom of things.

21 February 2012 – “Oops!... I Did It Again” (Britney Spears, 2000)

21 February 2012 – “Oops!... I Did It Again” (Britney Spears, 2000)

Uneven open, for once, with not much cheer or relief out of Asia on news that the Greek bail-out package #2 was going through, after yet another all-nighter. Initial European reaction slightly negative and then balancing out while poring through the results. Nothing to warrant a sell-off, of course, but nothing to carry markets any further for the moment, as everyone is well aware how stretched the final result feels. As 120% debt/GDB was targeted (by 2020), and no backtracking possible, 120.5% was delivered, by pulling all levers and even the Northern front let “fünf gerade lassen”. Seems reminiscent of Greek’s initial entry into the club, doesn’t it?
EUR about the only initial gainer, along with mechanically relieved periphery sovereigns (that is without the famed GGB 4.3% Mar 2012, obviously, which will be caught into the PSI). Portugal and Ireland bonds steady (Any bail-out terms sweetener sometime?)
Markets then drifting lower / wider on “and now, what next?” post-party hang-over. No eco figures to focus on, either.

Research desks, press, blogo- and Twitter-sphere all in arms and chewing on the (bizarrely) (…) widely leaked sustainability analysis of the Troika and the visible stretching and efforts of all to make things happen: PSI participation, IMF participation (what is sizeable?), ECB and NCB participation, CAC, EFSF liquidities, yet to fulfil Greek conditions, escrow account, on-spot Troika monitoring, real austerity versus growth predictions, Greek bank recapitalization needs, privatizations. In case of under-implementation / deviation from the plan, the Troika sees a risk of hitting 160% in terms of debt to GDP by 2020 (“tailored downside scenario”), that’s where we stand now. So the half percentage point deviation from the 120% target after this latest overnighter… Looks like time was bought until early March – and then, we’ll need to see... Default averted in the meantime.

Final PSI agreement: 53.5%, of the principal amount will be forgiven on eligible GGBs; 31.5% exchanged into 20 new 11 to 30 YRS GGBs and 15% into short-dated EFSF bonds. The new GGB coupons will pay 2% from Feb 2012 to 2015; 3% from 2016 to 2020; 4.3% thereafter until 2042. Bonds will thus have average coupons between 3.082% for the 2023 and 3.853% for the 2042, respectively yield between 3.005% and 3.651%. I get 3.586% as average coupon (IIF 3.65%), if all tranches were equal. Average life 20.5 years. Average yield is 3.433%. Possible GDP sweetener, capped, not fully disclosed yet. Accrued interest to be paid in EFSF notes (That’s some EUR 10.8bn for the total of 2012 for Greek domestic and international bonds)
That compares to the French OAT Oct 2032 yielding 3.591%, as of today. By and large, for every tranche, investors will own an investment paying about French risk, or slightly below. Will next need to see whether holders will buy into this, given lingering doubts about the sustainability of things.

Spanish bill auction raised exactly the targeted EUR 2.5bn in 3 and 6m bills at yet again lower yields of respectively 0.396% (vs. 1.285%) and 0.779% (vs. 1.847%, both late Jan). The EFSF raised EUR 1.99bn 6m bills at 0.191% with a B/C of 3.
Need to check in what form the EFSF plans to raise those shorter bonds to back the Greek exchange.

Initial raft of new issues, in riskier classes (senior, cross-over credit), probably mistaken on the risk-appetite that could arise from a solved Greek deal. All deals got done nevertheless, seemingly without problem and on tightened prices from guidance. With 3 senior financials, next to the ones we saw lately, that market seems to reopen nicely for the moment. Covered bonds in hiding at the same time. SSA front quiet, after yesterday’s UNEDIC and CADES taps.

ECB deposits up EUR 10bn to EUR 464bn.
VIX slightly up to 18.5 from 17.8 on Friday.
Brent 120.5/ WTI 104.5, about stable in absence of further Iran / MEA news. Gold up to 1755, 4 below this year’s 1759 high.
Baltic Dry down again to 706 from 715. Had 7 days of uptick from 647, a 25-year low, on 03 Feb to 734 last Tuesday and reversing since.

Spreads to Germany initially tighter, mainly in the periphery, then backing up, and finally closing a bit better for theItaly and Spain.
10 YRS swaps +40 (), Finland +44 (), Netherlands +47 (-1), Austria +108 (-2) France +112 (), EFSF +127 (),Belgium +164 (+3), Spain+311 (-6) and Italy +345 (-5). DBR 2022 1.97%, up 1bp.
Spain targetting the 5% mark (5.08%), lower end of a broad 5 to 5.50% range (with spikes to 6.30% and 6.70%) 10 YRS SPGBs traded since Nov 2010. Italy in sync tightening.

Tomorrow: Chinese Feb PMI. Dec EU Indu Orders. PMI figures for DE, FR & EU. Feb CPI for FR & IT. EUR 5bn German 2 YRS auction.

And now? Probably waiting some more for things to get clearer on and in Greece. For a change…Ooops.

20 February 2012 – “Korobeiniki [Tetris Music]” (Hirokazu Tanaka, 1989)

20 February 2012 – “Korobeiniki [Tetris Music]” (Hirokazu Tanaka, 1989)

Once more positive open with good backing from an Asian market supported by Greek solution hopes, as well as the 0.50% cut of Chinese reserve requirements, worth roughly EUR50bn in added liquidity. Asia initially maybe a little over-optimistic, as second thoughts about why the POBC would cut rates and on the back of Japan’s trade deficit figures weakened some of the rally. Still, good enough for about 1% in equities, adding to Friday’s +1.5% close. Credit playing catch-up on open, having lagged into last week’s close. Periphery initially only slightly tighter to Bunds, then performing. Brent flirting with $ 121 on further Iran news, now pre-empting EU embargo and cutting delivery to France and UK (after Southern EU last week). Spot approaching fast the 125.50 high of May 2011. EUR hovering over 1.32 . French and Italian figures slightly better then expected. Belgian consumer confidence falling an nearing post-Lehman levels.
Markets entering wait and see mode on morning levels, while checking screens on Greece deal updates, noting that first reports of “progresses” late morning were hardly market movers. Lots of positive vibes leaked on pre-talks, knowing the Eurogroup meeting as such was only due to start at 15:30 CET. Obviously discussions were on official sector involvement versus PSI.
Markets in stand-still mode, not trading on comments.
Dutch FinMin a bit of a dampener, though, when asking for rigidity and “by the letter compliance” of Greek promises. Escrow accounts and permanent Troika presence in Greece. Had then news that 90% of issues were solved, which is certainly less than what was pitched during the (sunny) morning. Market lull in absence of US and concrete news.
Euro Stoxx highest since 02 Aug 2011. Main and Financials coming back well, but had underperformed in the close of the week.

Realized everyone was always talking about the EUR 14.5bn 4.3% 20 Mar 2012 redemption (of which the actual outstanding amount is EUR 14.35bn), but always omitting the coupon payment that goes with it (EUR 617m), which is no small change, when considering the late bickering about how to achieve a further EUR 325m in savings. In any case, the amount due on 20 Mar is EUR 14.967m – unless PSI’ed on time.
Rumour has it that the exchange will take place between 08 and 11 March (10 and 11 falling on a WE), so no room for hick-ups, if confirmed. Talking of which, checked Bloomberg for “missing” ECB bonds, but couldn’t trace any major changes.

Dutch EUR 2.25bn 3 and 6m bills at 0.05% both and EUR 8bn French bills (Range 0.127% to 0.38%, 3 to 12m). Stable. Eventless. Some more bills tomorrow. Sole “long” end auction this week are EUR 5bn German 2 YRS on Wednesday.

Mixed, although limited bag of primary supply with AAA French UNEDIC printing a sizeable, although generous EUR 2.5bn 3 YRS deal, The Czech Republic in 10 YRS EUR, Intesa with 5 YRS senior, Pohjola with 10 YRS sub and GE on the corporate front.

ECB deposits up EUR 37bn to EUR 454bn. Sounds big, but last month day 3 rise after the reserve period started was sharper (EUR 25bn the first day, EUR 72bn the day thereafter).
Had no ECB buying of bonds last week, a first since Aug 2011, from a mere EUR 59m the week before. February clocking in at EUR 250m. Then again, the ECB’s Greek bond swap, of which not much more was heard today, is certainly a reminder of the possible conflict of interest, once PSI and other official loss sharing discussions come up. Lots of mulling of the bond subordination in the press.

VIX closed down at 17.8 from 19.2 on Thursday. US closed today.
Baltic Dry down slightly again to 715 from 717. Then again China slow, Japan record slow. No trade, no shipping, no surprise. Let’s keep an eye on it.

Spreads to Germany again tighter. 10 YRS swaps +40 (-1), Finland +44 (-2), Netherlands +48 (-2), Austria +110 (-6) France +112 (-5), Belgium +161 (-5), Spain+317 (-13) and Italy +350 (-13). DBR 2022 1.96%, up 3bp.
Spain nearing the 5% mark (5.13%), which is rather the lower end of a broad 5 to 5.50% range (with spikes) 10 YRS SPGBs traded since Nov 2010.
In comparison, Italy closing in on last summer’s pre- and post-August crisis levels of 4.85-5.00%, but not there yet (5.46%).

Tomorrow: Spain 3 and 6m bills for up to EUR 2.5bn. EFSF 6m bills. EZ consumer confidence. Not much else – outside Greece
Soooo… Waiting for the pieces to fall into place, accelerating… Better not miss those bricks…

17 February 2012 – “Patience” (Guns N’ Roses, 1988)

17 February 2012 – “Patience” (Guns N’ Roses, 1988)

Good initial risk on, following European closing rumours about things to get fixed next week on Greece. ECB bond swap seen as positive by most, although the fact that it is clearly explained that its new holdings will be bare of any CAC implies that the rest will definitively be harnessed with some soon. Helped propelling US and some of Asia up 1% and that’s where we started the morning. Sticking then there for the rest of the morning in static manner. German President resignation (certainly, mostly a protocol function) having no impact, although any stirring of the inner-German political scene could have a negative impact on Germany’s external focus, hardening the fronts. To be followed. Credit mostly better, but it’s mainly banks that keep getting whipsawed wider and today tighter. Markets getting stronger by noon and supported by ok US figures and lots of Greece solution around the corner whispers from the political galaxy.

Contradictory reports on ECB holding exchange and PSI intentions. No need to discuss into the void. Must await Monday.

No auction supply. EFSF has pencilled a EUR 2bn 6m bill auction for Tue 21 Feb (so they obviously expect no malaise during the Eurogroup meeting).

Primary markets even quieter than the rest of the week, as seriously in pre-weekend and “wait-and-see” mode.

ECB deposits back to EUR 417bn from yesterday’s new period starting at a low EUR 392bn. Amazingly pattern replication of the last period (drop of EUR 133bn the first day, recovering of EUR 25bn the very first day).

VIX falling back to sleep yesterday, trading off its late 21.75 spike to close at 19.2 on positive NY close; softer again this afternoon at 18.2 . Yawn! Vol, back to sleep.
Baltic Dry fell for a third day by short 1% to 717, from 723, halting its recovery from its 03 Feb 647 25-year low to Tuesday’s 734. Maybe the first calls after Chinese New Year spurred a rally, but have ceased since? Stalling again. Let’s keep an eye on it.

Spreads to Germany tighter in end of week optimism in Spain and Italy. 10 YRS swaps +41 (-3), Finland +46 (),Netherlands +50 (), Austria +116 (-1) France +117 (-3), Belgium +166 (-1), Spain+330 (-14) and Italy +363 (-19).
DBR 2022 1.93%, up 6bp from yesterday.

On the week:
-          A week totally for nothing!!!
-          10 YRS spreads: 10 YRS swaps +41 (-2), Finland +46 (+2), Netherlands +50 (+3), Austria +116 (+7), France +117 (+8), Belgium +166 (+2), Spain+330 (-5) and Italy +363 (-4). Austria and Franceunderperformer, if you need one.
-          Yield-wise: Germany 1.93% (), Swaps 2.34% (-1), Finland 2.38% (+3 bp), Netherlands 2.43% (+3bp),Austria 3.09% (+7 bp), France 3.10% (+8 bp), Belgium 3.59% (+2bp), Spain 5.23% (-5), Italy 5.56% (-3 bp).
-          European equities +1.7% (from 2480) and the S&P +1.3% (from 1340).
-          EUR 1.315 from 1.318, so unchanged.
-          Credit 137 (from 135 or -1.5%), Financials 224 (from 219 or -2.3%) and Sovereigns 340 (from 329 or -3.3%). Diveregent equity to credit story.
-          Baltic Dry 717 from 715 (stalling). VIX 18.2 from 20.8 (going back to sleep) .Brent from 119.5 from 116.75 onIran.

On Monday’s menu: Eurogroup and, maybe, the beginning of the end of the Greek bailout 2 saga. Or not…
ECO: Getting end of month data fatigue. Nothing major, FR biz confidence, IT Indu orders. US President Day (closed)

Soooooooooooo… A week for nothing with not much new! Just back where we were last week with everyone expecting the Greek delegation to join the Eurogroup meeting next Monday with concrete things in hand. Oh, that’s what everyone was already doing last week? Play it again, Sam!
Let’s acknowledge that the AAA front has been quite rough over the week in its game of chicken and cajoled public and markets in the opinion that any (totally, yes, totally undesired) Grexit contagion risk would be contained. Seems quite optimistic too me. Between perceived or real bond holder subordination, any selective default / EUR exit move would ricochet to hit Southern Europe. So the official word still is that Grexit in not wanted and that pieces will fall together – soon. Then again, voices supporting Grexit start to be louder and louder. The main difference between last week and tonight is that everyone officially acknowledges that we’re far away from some of the most disputed Troika targets (Debt/GDP of 120% by 2020 – 129%, at best, by now) and that someone needs to fill these gaps. Question is who, with how much money.

Need to sit that out and be patient.