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

Friday 23 March 2012

23 March 2012 – “Rain on Your Parade” (Duffy, 2008)

Contraction time, part II. Asia finally gave in to the gloom at the end of the week and caught back o yesterday’s 1%+ slide in Europe and tamer US session with the S&P closing back through 1400 and the Dow nearing the 13k mark again. No more specifics than correlation. CNY official fixing at record low (4% appreciation over the last 12 months against USD, 8% over the last 2 years. 10% against the EUR. That ought to soothe trading partners’ nerves).
French biz outlook at 96 on the brighter side with 93 forecasted after 92 (revised to 93). Surprising, as the presidential campaign is set to speed up soon. But here again, the widely heralded “end of the crisis” is probably biasing the outlook. Talking of France and elections: some piqué reactions here and there to the announcement that Eurex was to revive an OAT future by mid April – with implications of easier means to short the French credit. IT retails sales of -0.8%, less badly than expected (-3.4% YoY), but with no noteworthy positive reaction to it.
European open flat to positive in a tentative rebound. EUR back to o1.327 and commodities right back to yesterday morning levels, correcting out Thursday afternoon’s weakness. Bunds unchanged to a tick weaker, but periphery a tad more weak with 10 YRS Spain trading above 5.50%. The Dutch spread spike mentioned yesterday is doing its rounds, too. Credit indices unchanged after the last days post-series rolls readjustments over. The Friday morning stand-still just didn’t last and equities were soon down 0.75% and Bund futures bid up half a point, softening further into the afternoon.
Weak Feb US home sales and the revision to lower numbers of prior data (313k against fcst 325k. MoM -1.6% against a forecast of +1.3% and revision to -5.4% against prior -0.9%) was just what was needed for a final push to end the week on a risk off note, however US markets held once more and floored the European weakness. Sovereign spreads finally by and large stable with Spain actually outperforming, having earlier traded wider in absolute and relative terms. Bunds 20 ticks off highs.

Italy priced a size-able retail offering of EUR 7.3bn of 4 YRS ILB after starting the sales this week. Looking to catch that demand on a quarterly basis, if possible. Would be EUR 20-30bn per year, although the novelty effect might fade at some time and retail maturities tend to be shorter. Still, tapping retail is all the less to raise with institutional investors (2.45% sa on revalued principal + revalued principal pay-out).
Not that it’ll change much, but holders of Greek debt issued under foreign jurisdiction had until tonight to state whether or not to participate in the PSI. That offer was extended to 04 Apr. Not sure holding out will yield much in the short term, given where CDS did settle and the “voluntary” haircut agreed on the bulk. Still, the question is how cumbersome Greece’s “practical” life can become, if hassled over time in foreign jurisdictions. So it’s less a question of reputation then getting your consulate car repossessed every second day. To be followed. Not a huge tail risk, but could provide some headlines next week.
In the meantime, the new GGB have now all broken back through the 20% price level with yields ranging from about 20% to 17% for 2023s and 2042s.
In comparison, 2 YRS Portugal are quoted 15%, 5 YRS 15%, 10 YRS 12.75% and the 2037s about 10.30%

No noteworthy new issues supply.

ECB deposits up EUR 8bn to EUR 763bn.
VIX closed 15.6 in the US from European COB at 16 on Thu. Back through to 15 at European close.
Oil remains range bound and still resilient to the European gloom at 105.5 / 123.7 by noon, getting traction at the NY open and adding another $1.5 into the close at 107.0 / 125.1 (+1.9% from 105.0 / 122.8 WTI / Brent at European COB). Gold softer to 1650 at noon, closing 1660 from 1653 (+0.4%). CRB up 0.9% to 315 on stronger energy and metals.
Baltic Dry up 908 after 902, yet another 0.7% rise.

10 YRS Yields: Germany 1,87% (-4); Swaps 2,32% (-2); Finland 2,29% (-3); Luxembourg 2,32% (-3); Netherlands 2,45% (-3); Austria 2,89% (-5); France 2,94% (-5); EFSF 3,05% (-4); Belgium 3,36% (0); Italy 5,03% (-5); Spain 5,35% (-12).
10 YRS Spreads: Swaps 43bp (+1); Finland 42bp (+1); Luxembourg 45bp (+1); Netherlands 58bp (+2); Austria 103bp (-1); France 107bp (unch); EFSF 118bp (0); Belgium 149bp (+4); Italy 317bp (-1); Spain 348bp (-8).
EUR swap curve 2-5 YRS 51,8bp (-1,1); 5-10 YRS 71,9bp (-0,1) 10-30 YRS 26,1bp (+0,0).
Bund yields tanking in the morning, as soon as equities turned negative. First outperforming the periphery, but holding quite well the equity and periphery rebound. Didn’t see any specific reason for the Spanish intraday catch-up (except being cheap at 5.54%). Finally spreads by and large unchanged, yields lower. Netherlands, Belgium, Italy a tick softer to Bunds.

On the week:

-                                        Welcome back to gloom, if not yet doom.

-                                        10 YRS Yields: Germany 1,87% (-18); Swaps 2,32% (-13); Finland 2,29% (-17); Luxembourg 2,32% (-15); Netherlands 2,45% (-10); Austria 2,89% (-7); France 2,94% (-7); EFSF 3,05% (-21); Belgium 3,36% (+6); Italy 5,03% (+18); Spain 5,35% (+17).
-                                        10 YRS Spreads: Swaps 43bp (+3); Finland 42bp (+1); Luxembourg 45bp (+3); Netherlands 58bp (+8); Austria 103bp (+12); France 107bp (+11); EFSF 118bp (-3); Belgium 149bp (+24); Italy 317bp (+37); Spain 348bp (+35).
-                                        German 10 YRS have pretty much recouped most of their losses over the last 2 weeks, nearing their generic 1.80% historic floor.
-                                        2 YRS BKO were 0.33% last week, back now 0.23% (-10 bp), 5 YRS OBL were 1.07% last Friday, now 0.88% (-19 bp).
-                                        EFSF bonds fared best, after the issuer’s double-deal in 5s and 20s this week.
-                                        The Netherlands (+8) have decoupled from Luxembourg, Finland and Generic EUR swaps and stick-out from the Core EZ+ group.
-                                        Italy and Spain have both been mostly weak, although Spain 10s got a lift this afternoon Firewall jitters…

-                                        Corporate new issues were really active until Wednesday. Maybe a bit too much for their own good, but demand for household names remains strong, especially if in need to chase yield.
-                                        Credit was uneven to equities, but had roll-induced volatility. Main at 118 (from 119), Financials 209 (from 191 or 9.4% weaker) and Sovereigns ended back up at 280 (after exclusion of Greece and inclusion of Cyprus). Had index rolls from series 16 to 17.

-                                        European equities traded one last, new high for 2012 at 2540 on Monday, closing 2455 / -3.2% (from 2537 last Friday) and the S&P at 1395/ -0.7% (from 1405).
-                                        VIX unchanged 14.9. It’s been witnessed moving this week with spikes at over 16 on Thu. Too much effort.

-                                        EUR 1.326 from 1.318. Still pretty much without risk on / off barometer function.
-                                        Commodities by and large stable on the week. Oil 107.1 / 125.5 from 106.5 / 124.7 / 106.5 (+0.6%/+0.6%). Gold 1661 from 1654 (+0.4%). Brent in EUR at 94.25 about 1.7% off all-time high 95.85 on 13 Mar. Copper 380 from 389 (-2.3%). CRB 315 from 316 (-0.3%). Risks to growth maybe, but commodities are living it well.
-                                        Baltic Dry 908 from 874 (+6.8%, after +6% the week before)

All was too easy and relaxed last week. Post-Greece euphoria, riding the wings of LTRO liquidity, risk assets just seemed a bargain. It has since rained on the parade.
The European unity behind the austerity and the “we need to bring our houses back in order” is crumbling from South (Spain) and North (Holland). The growth needed to sustainably get money back to the coffers seems to have gone missing (worldwide), despite early year upticks, doesn’t seem sustainable. Commodities might further act as break.

DE IFO 109.5 fcst after 109.6. People will check expectations that might have been too high lately. 102.6 after 102.3
FR job seekers change 2878 from 2862.  IT Consumer Conf 92.8 fcst after 94.2. US MoM pending home sales 1% fcst after 2% / 10.3% YoY.

Next week: Again not much supply pencilled in. On the macro front, IFO on Monday, CPI figures ahead of the following week’s ECB meeting. US a bit of everything every day. Asia, not much. Q1 will end at the end of next week, followed by the biz disruption of the upcoming Easter season the week thereafter.
DE: IFO (Mon), Consumer Conf (Tue), CPI (Wed), Employment (Thu), Retail Sales (Fri)
FR: Employment (Mon), Q4 GDP (Tue), PPI & consumption (Fri)
Other EZ: IT Cons Conf (Mon), Biz Conf (Wed), CPI (Fri). SP Mortgages (Mon), Budget (Tue), CPI (Thu)
US: Home sales (Mon), Consumer Conf (Tue), Durable Goods (Wed), GDP & claims (Thu), Pers Inc & Spending, Chi Purchases, Michigan Conf (Fri) + various housing data throughout the week.
Asia: JP Small biz conf (Tue), Retail trade (Thu), PMI & Ind Prod & Construction (Fri). Not much in China.

Click link on title or below for today’s musical support:

Thursday 22 March 2012

22 March 2012 – “Don't Bring Me Down!” (ELO, 1979)

Contraction time. Asian stocks clearly took lower Chinese PMI figures more bravely on the chin than European equities their own set of figures. Chinese PMI clocked in once in contraction territory at 48.1 after 49.6, the 5th month in a row. While this is no good, it again triggers hope of POBC support, which is probably what kept things afloat.
A mildly softer opening in European risk assets turned into a straight sell-off as PMI sets from both Germany and France, as well as thereafter the European ones, data came lower than expected (GE Manufacturing at 48.1, with 51.0 expected after 50.2 last month, GE Services 51.8, fcst 53.1 after 52.8, FR Manufacturing 47.6, fcst 50.2 after 50.0 and FR Services unchanged at 50.0, fcst 50.3. European Manufacturing at 47.7, fcst 49.5 after 49.0. Composite and Services clocking lower, too). The feeling that the worst was over in Europe and that one would mildly expand step by step into Q1 that supported markets lately has thus been showered.
Mid-morning equities down 1.75%. Credit indices and sovereign spreads wider. EUR down 50 ticks. Bund futures back up 70 cts to mid last week’s levels, correcting all the weakness and belying the long end inflection point reflections. "The reports of my death are greatly exaggerated", as said Mark Twain. In best chartist back-trading manner, we’ll note how nicely Bunds have bounced back off the 200d MVAG in the 135.30s and Fibonacci retracement in 135.60s. Good for algo trading.
Talking of amateur chart mapping: Euro Stoxx have much failed to break the 1-year Fibo retracement at 2576 the other day. Next levels were 50d MVAG at 2488, the 1-year high/low mid point at 2452, then the post-Lehman high/low mid point at 2420, the 200d MVAG at 2392 and 100d MVAG at 2381.
Markets took a breather at lunch with equities a bit higher from their lows and Bunds a ticker lower. Italy and Spain 10 YRS widened by up to 15 bp, before getting some support. US jobless balancing slightly below forecast against slightly revised prior data (+348k, after revised +353k). Final set of figures showing weaker house prices and FEB leading indicators slightly above forecast, but here again with prior data revised lower. For what it’s worth, EZ consumer confidence improved above consensus to -19 from -20.3. Then again, “The crisis is over!” has been widely heralded to the public…

No sovereign supply. A sprinkle of SSA and domestically targeted covered bonds. ArcelorMittal’s EUR 500m 6 YRS MS+275 was the lone candidate trying to defy the gloom. Price and size pointing to limited appetite.

ECB deposits down EUR 14bn to EUR 755bn.
VIX closed 15.1 in the US and jumping down to 16.at European close. Hey, a sign of life here…
Oil remains range bound and rather resilient to the European gloom, initially just giving back the dollar gained yesterday to 106.1 / 123.3 by noon, before loosing further steam by NY open and closing 105.0 / 122.8 (from 107.3 / 124.4 WTI / Brent at European COB). Same for Gold softer to 1639 from 1653 (-0.8%). CRB down 1% on across the board commodities weakness.
Baltic Dry up 902 after 896.

10 YRS Yields: Germany 1,91% (-7); Swaps 2,35% (-2); Finland 2,32% (-4); Luxembourg 2,35% (-4); Netherlands 2,47% (-5); Austria 2,95% (-1); France 2,99% (-1); EFSF 3,1% (-4); Belgium 3,36% (+3); Italy 5,08% (+9); Spain 5,47% (+9).
10 YRS Spreads: Swaps 42bp (+4); Finland 41bp (+3); Luxembourg 44bp (+4); Netherlands 56bp (+3); Austria 104bp (+7); France 108bp (+6); EFSF 119bp (+3); Belgium 145bp (+10); Italy 317bp (+17); Spain 356bp (+16).
EUR swap curve 2-5 YRS 53,2bp (-2,0); 5-10 YRS 72,3bp (+1,0) 10-30 YRS 26,1bp (+0,2).

10 YRS sovereign yields pivoting around Core EZ minus with German Bunds on full steam on one hand and the periphery softer on the other hand. Netherlands standing out negatively in the Core EZ plus group with its spread widening to +60 (+7 bp) intraday before tightening back inn line. Markets are not really forgiving the drift away from its northern austerity stand. We’re nearing the +63 maximum print of mid November last year. At that time, Austria and France were trading +184, respectively +190. Belgium was hitting +360.
Italy past the 5% mark. Spain very rapidly nearing 5.50%
Credit closing weak after the late outperformance with Financials again wider. The wild rally in financials since breaking through 200 and testing the 180s, has been corrected in 2 rough sessions

End of day balancing out off lows as US not really joining in the risk off move and lack of follow-up weakness in absence of further negatives.

Terribly embarrassed about having said there was an ECB meeting today!!! I somehow put Frankfurt mentally on a 2-week schedule, similar to auctions, copy-pasted myself and ended with some serious calendar mistake…. Probably because missing the last meeting due to holidays two weeks ago. Questions to Draghi will have more time for developing.

France Biz confidence fcst 93 (after 92). Italy Retail sales fcst -3.4% YoY (after -3.7%). US New Home sales fcst 325k (after 321). Weekend.

Click link on title or below for today’s musical support:

Wednesday 21 March 2012

21 March 2012 – “Mellow Yellow” (Donovan, 1966)

Despite a US close on the European COB levels and a mildly Asian session, European risk opened on a positive note, even lifting China from its 4-week lows. Rebound mainly technical and in absence of news warranting further weakness to yesterday’s correction. Screen news that this was due to Greece’s parliament approving the bail-out are probably the most ridiculous explanation read so far, as nobody ever gave a thought to that of late. What does seem to spread, on the contrary, are expectations about a 3rd bailout needed at some time (IMF, Eurogroup grumblings, PIMCO), as well as recurrent views about Portugal’s outlook, too. Still, that hasn’t been huge worrying factor lately either. Credit tighter. Bunds weak again. EUR tick firmer. Commodities about unchanged.
EFSF 5 YRS deal, pre-announced yesterday, done and dusted for EUR 4bn one hour after opening.
Talking of Portugal, numbers published showing that public deficit figures for the first 2 months tripled from a year ago on rising spending and weaker revenues, put a lid on the morning glory and markets drifted to more or less unchanged levels by noon with solely credit indices pushing tighter. Greece’s (central government) budget gap, on the contrary, has been shrinking by half, but the reliability of such stat has been subject to some tests over time. To round up deficit target discussions, one will not forget to mention that even some “sturdier” Core EZ+ members are faced with the issue and Netherlands is pitching its case to maintain a 4.6% deficit until 2013. Having gone soft on Spain’s pitch, it’s likely that some of it will be granted. But, the, who’s next?
Lower US mortgage applications were duly noted, but these are noisy figures. More on the weak side, but to be seen in relation with the rise in long end yields over the last week (30 YRS swaps moved out from 2.85% to 3.10% from 09 Mar to 16 Mar, hitting 3.20% early this week). As earlier housing data this week, existing home sales of 4.59m fell short of forecast (4.61m), but data for Jan was revised upwards (4.63m from 4.57m), so levelling out disappointment. Given that recurrent pattern, markets will soon start to zero in on the perception that the US economy might have front-loaded some of the good news during a mild winter and start to run out of steam.

Germany issued EUR 4.1bn at 0.31% with a BC of 1.8 (after 0.25% in Feb with same BC). Non event.
Good Portugal bill auction of EUR 0.4bn 4m 2.17% and EUR 1.6bn 12m at 3.65% (after 4.94% in Feb), but as well pretty much a non-event.. As for Spain, a tail of 9 cts tail does seem quite large for bills. But then again,  these are just EUR 2bn short term bills, after all.
Italy raising about EUR 5bn 4 YRS in a retail-targeted inflation linked exercise since the beginning of the week. Expects to do this once a quarter this year.

Another round of fresh supply with, next to the pre-announced EFSF EUR 4bn 5 YRS at MS +38, some servings of definitively riskier, riding out the credit outperformance to equities, coming from senior financials, Spanish covered bonds or lesser rated / unrated smaller corporates. ABN EUR 1.25bn 10 YRS MS +180; Erste Group EUR 500m 5 YRS MS+175; BPE Cédulas EUR 600m 5 YRS MS +255. Some more senior financials increases squeezing through the door, as well as Munich’ RE’s double-trancher 10 YRS nc 30 in sub for EUR 900 and GBP 450m at MS+395.
For corporates, after yesterday’s massive benchmark supply, some more targeted, domestic names as non-IG Fresenius or unrated Neste Oil.

ECB deposits added EUR 4bn to EUR 769bn (High EUR 827bn on 05 Mar).
VIX closed slightly higher at 15.6 in the US and back down to 15.0 tonight.
Oil back to 107.3 / 124.4 from 106.2 / 124.3 (from European COB) for WTI and Brent (unchanged). Gold unchanged at 1653. CRB up 0.4% mainly on metals.
Baltic Dry up 1.4% to 896. On straight recovery path since the 647 low print early Feb (+38%). Still far off the Dec 1930 high and 2011 high of 2173 in Oct.

10 YRS Yields: Germany 1.98% (-6); Swaps 2.38% (-4); Finland 2.36% (-6); Luxembourg 2.38% (-5); Netherlands 2.52% (-3); Austria 2.96% (-1); France 3.00% (-1); EFSF 3.14% (-7); Belgium 3.33% (+3); Italy 4.99% (+10); Spain 5.38% (+17).
10 YRS Spreads: Swaps 38bp (+2); Finland 38bp (0); Luxembourg 40bp (+1); Netherlands 54bp (+3); Austria 97bp (+5); France 101bp (+5); EFSF 115bp (-1); Belgium 134bp (+9); Italy 301bp (+16); Spain 340bp (+23).
EUR swap curve 2-5 YRS 55,6bp (-2,2); 5-10 YRS 71,8bp (unch) 10-30 YRS 25,9bp (+0,7) .

Bunds finally getting some uplift, as soon as equities turned back to flat / negative in early afternoon. Back with a vengeance during the afternoon, supported by UST and despite equities recovering to unchanged. Back through 2% mark.
Periphery weaker with especially Spain, as already pointed out several times lately, starting to drift away with some velocity. BTPs flirting back with the 5% mark, since breaking through pots-LTRO.
Spanish 10 YRS yields have bottomed out around 4.75%, respectively 4.78% early Feb and Mar with an intermediary high of 5.41% mid Feb, which has been a recurrent support / ceiling. Looking further in time, ever since the break-out in Spanish yields end of 2010, 10 YRS have mainly traded in a rough 4.75-5.50% range with notable rises to 6.30% in Summer last year and the 6.66% (Come on!) spike in Dec 2011. So, in retrospective…
Credit close uneven with Main about unchanged, but Financials snapping markedly wider. Good for those who raised senior funding this week.

Electrical banana / Is bound to be the very next phase.

Tomorrow: Sovereign supply done for the week. ECB and Draghi conference (rate outlook, pulling the plug on liquidity support, rampant Target 2 imbalance questions and how to juggle divergent France / Germany and rest of EZ price pressures).
Data on China Mar PMI (was 49.6 in Feb). EC Composite (49.6 fcst after 49.3) and Industrial orders (-3.1% YoY fcst, after -1.7%). EZ Consumer confidence of -19.8 fcst after -20.3 German and French PMI with respective forecasts of 51.0 after 50.2 and 50.2 after 50.0.
US jobless claims 350k fcst after 351k. Leading indicators 0.6% fcst after 0.4%

Rest of week:
France Biz confidence fcst 93 (after 92). Italy Retail sales fcst -3.4% YoY (after -3.7%). US New Home sales fcst 325k (after 321)

Click link on title or below for today’s musical support:

Tuesday 20 March 2012

20 March 2012 – “Mellow Down Easy” (The Black Crowes, 1996)

20 March 2012 – “Mellow Down Easy” (The Black Crowes, 1996)

Weak Asian markets didn’t take over from the mildly positive US close (although this was mainly due to Apple’s 2.7% performance to its new historic high of $601, given its weight in the indices, as well as some banks) with China down 1-1.5%, dragging the region lower. POBC won’t mellow on property prices and gas prices were hiked. Most European indices down 0.5% at open and then trading lower to -1% by mid morning and down to -1.5% by noon. EUR down a little to 1.32 area, but has lost its risk on / risk off barometer function lately.  Commodities only a touch softer, though. German PPI +3.2%, as expected. No further macro data to lean on.
Credit view complicated by index roll with 16 series slightly softer and the new series setting in stronger. Should balance out in the coming days. New SovX wider, after inclusion of Cyprus in replacement of Greece.
It’s noteworthy that the1%+ equity slide only triggered a mild rebound in Bund futures, barely lifting them to half of yesterday’s high. Obviously, questions about whether safe haven government bonds have reached once and for all inflection point abound.
US figures uneven with Feb housing starts 2k below forecast, but with prior numbers increased by 7k (698k, 706k). Building permits 686k above consensus (686k) with prior data revised up by 6k to 682k. Then again, the influence of a mild winter on US data is an on-going discussion. Probably just underlines the actual sentiment that the US economy has fared about ok lately. It’s the outlook that is hazy. US equity open in sympathy with the ambient mood nevertheless -0.75%, then crawling a little higher.

Spain issued about EUR 5bn in 12 at 1.42% and 18m bills at 1.71%, but here as well the excitement factor has been lost. Likewise for Greece’s EUR 1.3bn 3m bills at 4.25%. Yes, the sizes get circled. Yields have come down, compared to last month. And, yes, bills get bought by local banks and B/C ratios remain comfortable. Only caveat would be the still rather wide tails that these auctions yield.
To round up supply, the EFSF issued EUR 1.9bn of 6m bills at 0.20% with bids for EUR 5.2bn (BC2.7). Last was 0.19% with BC over 3.1 end of Feb.

Despite a lesser supportive environment, new issues remained very active. Or maybe, it’s just the last to jump on the band-wagon before it rolls away again. No less than 5 major corporate deals for over EUR 4bn, plus one senior financial and some SSA activity. It’s noteworthy that New Issue Premium (NIP) has all but vanished, if not, as seen with yesterday’s Veolia, gone negative.
EDF long end 2-trancher EUR 1bn 10s MS+145 & GBP 500m 25 YRS UKT+210; Anglo American EUR 750m 10s MS+112; Vinci EUR 750m MS+125; Daimler EUR 750m 5s MS +65; FIAT EUR 850m 5s MS +530.

ECB deposits added EUR 6bn to EUR 765bn. Top were EUR 827bn on 05 Mar. Btw, the ECB’s SMP (GIIPS buying) yielded once more nothing for last week. Freewheeling in recovering markets and Portugal left on its own.
VIX closed slightly higher at 15 in the US and quoted 15.5 tonight.
Oil trading off $1-1.5 to 106.2 / 124.3 from 107.6 / 125.5 (from European COB) for WTI and Brent. Bit softer, but only so much, despite Saudi Arabia’s pitch of potential supply increase. Gold softer, too, at 1653 (from 1668). CRB down 0.9% on energy, grain, metals.
Baltic Dry’s dry incremental rise by 0.6% a day lately continues to 884 again (from 879).

10 YRS yields: Germany 2.04% (-1 bp), Swaps 2.42% (-2 bp), Finland 2.42% (-2 bp), Luxemburg 2.43% (-2 bp), Netherlands 2.55% (+2 bp), Austria 2.96% (+1 bp), France 3.01% (+2 bp), EFSF 3.20% (-2 bp), Belgium 3.30% (+5 bp), Italy 4.89% (+7 bp), Spain 5.21% (+3 bp)
Spreads: Swaps +36 (unch), Finland +38 (-1), Luxembourg +39 (-1), Netherlands +50 (+2), Austria +92 (+2), France +94 (+3), EFSF +116 (-1), Belgium +126 (+6), Italy +285 (+7), Spain+317 (+4).
Bunds just didn’t manage to get any lift at all from the equity weakness with futures turning even negative in late afternoon, as equities “settled” lower (alongside commodities) and despite some (mild) UST rebound. Warily crawling back into the close. Non Core EZ+ a touch softer. Note that Spain is slowly, but surely drifting away from the 5% mark.

Not sure today’s correction already signals a real change of tack at this stage, rather than just some new highs fatigue. Still, it’s a 1%+ correction, which is stronger than seen lately. You wiggle wiggle wiggle everywhere. Then you mellow down easy.

Tomorrow: German 2 YRS and 10 YRS linkers on Wed.
JP Jan Industry activity -0.7% fcst. US Feb home sales 4.61m fcst. Spring!

Rest of week:
EZ PMI and Indu order Thu. Germany PMI Thu. France PMI and Biz confidence Thu & Fri. Italy Retail sales Fri. ECB Thu.
US housing data throughout the week. Jobless and leading indicators Thu. Chinese PMI on Thu.

Click link on title or below for today’s musical support:

Monday 19 March 2012

19 March 2012 – “It Ain’t Easy” (The Raconteurs, 2006)

Slightly weakish start of the week. Fri US close uneven flattish and Asian Mon close slightly positive to kick off the week. European equities down 0.5%, but credit still pushing for tighter prints. Commodities a touch softer. Bunds bouncing off Friday’s high, taking most European sovereigns along the ride at more or less unchanged spreads. Unable to break back through 2% during the morning session.
Chinese property prices remain under pressure with the worst performance in a year, both good (for the government looking to curb excesses there) and bad news, economy-wise. Otherwise, not much in terms of weekend news or official buzz. Had Lagarde stating that things looked better than before, but still striking a cautious note (with oil prices single out, debt and EM slowing growth). That official cautious note has been quite general over the last couple of days, belying the relief sentiment of the markets.
Italian Jan orders and sales well below consensus, a reminder of the above mentioned. Likewise, GIIPS Jan construction output (Italy -10.9, Portugal -11.9, Spain -11.5%) would tend to show that growth won’t be triggered by that sector.
US homebuilder confidence at 28 below forecast (of 30) with prior month revised to 28 (from 29), weighting just a little on sentiment; as levels remain highest since June 2007.
Apple dividend / buy-backs probably the most noticeable news on the screens. Nothing left to buy (except themselves) in the tech world? Had traded new all-time high of $600 (from crossing the $500-mark mid Feb last Thursday and the $400-mark for good just ahead of Xmas, having firs tested that level in Summer 2011). First quotes up $10 (+1.6%).

Initial value of Greece’s CDS settlement set at 21.75 before the ISDA auction (4.369 outstanding swaps for USD 3.2bn). Final price 21.5. Talking of Greece, Venizelos is quitting as FinMin to lead the socialist party.

Some new issues activity, courtesy of the EFSF (EUR 1.5bn 20 YRS MS +115. Books closed over EUR 4.5bn), Veolia Environnement (EUR 750 15 YRS MS +190), ABB (EUR 1.25bn 5 YRS MS +57), as well as unrated German construction company Hochtief (EUR 500m 5 YRS MS +390s). It’s EFSF longest issue to date after its EUR 3bn 10-year deal in Nov last year.

ECB deposits up another EUR 30bn+ to EUR 759bn from EUR 728bn.
VIX closed Fri at 14.7, up from its late afternoon lows of 13.7, but still at the lowest level since June 2007. 14.7 at European close.
Oil rebounding to 107.6 / 125.5 from 106.0 / 124.7 (from European COB) for WTI and Brent. Gold as well firmer at 1668 (from 1654). CRB up 0.3%.
Baltic Dry inching higher to 879 again (from 874). Still rising, albeit the pace of the recovery is slowing down.

10 YRS yields: Germany 2.05% (unch), Swaps 2.44% (-1 bp), Finland 2.44% (-2 bp), Luxemburg 2.45% (-2 bp), Netherlands 2.53% (-2 bp), Austria 2.95% (-1 bp), France 2.99% (-2 bp), EFSF 3.22% (-4 bp), Belgium 3.25% (-5 bp), Italy 4.82% (-3 bp), Spain 5.18% (unch)
Spreads: Swaps +36 (-2), Finland +39 (-2), Luxembourg +40 (-2), Netherlands +48 (-2), Austria +90 (-1), France +94 (-2), EFSF +117 (-2), Belgium +120 (-5), Italy +278 (-2), Spain+313 (unch).
Bunds did flirt back with the 2% area in the morning, but didn’t manage to get traction. Still soft UST were off no help during the afternoon session. Sovereign spreads steady.
Credit extremely outperforming on Financials (-7 bp) and Main (-5 bp). Might be due to index rolls (new series starting tomorrow).

By and large: Not much… Look out over the town / Think about all of the strange things circulating round.
It ain’t easy - after all to find the next dice to roll..

Tomorrow: No sovereign supply, but EUR 2bn EFSF bills. German Producer Prices (f+3.2% YoY fcst). US Feb Housing starts (700k fcst, after 699k) and Building permits (686k fcst, after 676k)

Rest of week:
German 2 YRS and 10 YRS linkers on Wed.
EZ PMI and Indu order Thu. Germany PMI Thu. France PMI and Biz confidence Thu & Fri. Italy Retail sales Fri. ECB Thu.
US housing data throughout the week. Jobless and leading indicators Thu. Japan nothing until mid week. Chinese PMI on Thu.

Click link on title or below for today’s musical support: