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 20 April 2012

20 April 2012 – "Walk on Hot Coals" (Rory Gallagher, 1973)

20 April 2012 – "Walk on Hot Coals" (Rory Gallagher, 1973)

Jittery start into the day, ahead of the weekend. US closing down 0.5% and 0.5% from European closing levels. Asia mostly slightly in the red with solely China closing slightly up (but taking into account positive pre-opening future levels in Europe). Had a short term boost in risk assessment as the German IFO printed higher than anticipated and than prior (109.9 after 109.8), although a little pause had been expected. Harking back to pre-summer 2011 levels. Same for producer prices. Germany, an economy de-correlated from everyone else? Odd.

Anyhow. Some wobbles in bonds, with Spain tickling again the 6% mark before thinking better, Italyweakish, France up and down, EFSF correcting towards French levels. Likewise in equities crossing yesterday’s closing levels half a dozen times before settling a bit higher into the lunch break in order to wait for some US impulse (without figures). Commodities flattish. Credit, too, a tick weaker for choice.

New Issues restricted to G4S issuing EUR 600m 5 YRS at MS +150.

In absence of further panic or news, risk assets are drifting a bit higher and the sovereigns, as a whole, suffered a bit of set-back.

Would be surprising to have anything new, concrete or exciting coming out of the G20 spring meeting. These fire wall expansion talks all being in so far dangerous, as, as soon as the new bazooka is in one’s hands, it’s bound to be subject to demands to be tested. Still, some more commitment would be good.
Need to see what comes out of the first round of French elections this weekend. In any case, expect pressure on France to continue. At some time, it will ricochet (further) on Austria, Holland and the EFSF and certainly on Belgium. If markets tense, of course, the periphery will as well overshoot. Having as well Greek elections in 2 weeks and haven’t heard much for the moment... Next two weeks might become rock’n roll.

10 YRS Yields: Germany 1,71% (+1); Luxembourg 2,21% (+4); Swaps 2,24% (+2); Finland 2,25% (+2); Netherlands 2,31% (+4); Austria 2,93% (0); EFSF 3,00% (+6); France 3,08% (-1); Belgium 3,45% (+2); Italy 5,66% (+7); Spain 5,94% (+5).

10 YRS Spreads: Luxembourg 50bp (+2); Swaps 54bp (+2); Finland 54bp (+1); Netherlands 61bp (+2); Austria 122bp (-2); EFSF 130bp (+5); France 137bp (-2); Belgium 174bp (+1); Italy 395bp (+5); Spain 423bp (+3).

EUR swap curve 2-5 YRS 47bp (+0,4); 5-10 YRS 70,7bp (-0,6) 10-30 YRS 26,8bp (+0,0).
2 YRS German BKOs closed 0,14% (+1) and 5 YRS OBLs 0,67% (+2).

Main at 144 from 145 (-0,8%); Financials at 255 after 255 (0,2%). SovX at 283 from 282. Cross at 675 from 684.

Stoxx Futures at 2253 / +1,3% (from 2223) with the S&P at 1385 (+0,1% from 1384, at European close).
VIX index at 17,6 after 18,7 yesterday same time.

EUR 1,321 after 1,313                                                                                                                          
ECB deposits down EUR 11bn to EUR 746bn
Oil 104,6/119,5 (WTI/Brent) from 102,4/118,7 (+2,1%/+0,6%). Gold at 1645 after 1649 (-0,2%). Copper at 369 from 362 (+1,9%). CRB closes 301,4 from 300,0 (+0,5%).
Baltic Dry finally 1067 from 1027 (+3.8%), the highest rise so far this year.
All levels European COB 17:30 CET

On the week (compared to Fri 13 Apr close):

10 YRS Yields: Germany 1,71% (-2); Luxembourg 2,21% (+2); Swaps 2,24% (+3); Finland 2,25% (+4); Netherlands 2,31% (+9); Austria 2,93% (+2); EFSF 3,00% (+14); France 3,08% (+13); Belgium 3,45% (+7); Italy 5,66% (+15); Spain 5,94% (-2).
10 YRS Spreads: Luxembourg 50bp (+4); Swaps 54bp (+5); Finland 54bp (+6); Netherlands 61bp (+11); Austria 122bp (+4); EFSF 130bp (+16); France 137bp (+15); Belgium 174bp (+9); Italy 395bp (+17); Spain 423bp (0)

France certainly this week’s looser (alongside Italy, but the latter IS periphery).
Old DBR reference Jan 2022 at 1.63% (-1), closing again near all-time lows. Another excellent week for the German debt, having as well raised 2 YRS at an all-time low. 2 YRS German BKOs closed 0,14% (+0) and 5 YRS OBLs 0,67% (+0), on the week.). Historic.

EUR swap curve 2-5 YRS 47,3bp (+0,4); 5-10 YRS 70,5bp (-2,0) 10-30 YRS 26,8bp (-1,9). Flight into 5s ongoing.

Portugal faring very good out of the limelight with 2YRS 13.25% 5 YRS 12.75% 10 YRS 11.5% (from 14.25% 14.25% 12.25%)
Greece a bit softer with 2023 yielding 21% from 20.75%  & 2042 17.25% from 16.75%
The ECB confirmed that it didn’t buy any EU sovereign bonds this week, either. So much for the hope…

Main at 144 from 143 (-1,2%); Financials at 255 after 247 (0,4%). SovX at 283 from 279. Cross at 675 from 676.
Credit eventually in line with risk assets in general on a weekly close. What seemed certain is that any surge in sentiment had credit reacting slower and later, so underlying heaviness.

Stoxx Futures at 2253 / +1,1% from 2227 with the S&P at 1385 / +0,8% from 1375, at European COB last week.
VIX index at 17,6 after 18,9 last week.
Eventually stable. YTD performance about zero, compared to S&P at +10%
VIX index at 17,6 after 18,9 last week.

EUR 1,321 after 1,308 last Friday. Seems slightly overdone, hinges on German numbers.
Oil 104,6/119,5 (WTI/Brent) from 103,2/121,4 (+1,4%/-1,6%) . Gold at 1645 after 1665 (-1,2%). Copper at 369 from 361 (+2,1%) . CRB closes 301,4 from 304,2 (-0,9%).Commodities uneven. Brent / WTI decompression continues (3% this week). Gold softer on USD. Copper better on China. Overall slightly lower with the rest of risk assets.
Baltic Dry remains in strong rebound mood, hurdling the 1000-mark and closing at 1067 from 972 (+9.8%) , the most sportive week so far this year.

Next week:
Once more, heading into month end, a thin week for hard data, leaving markets probably trading more on sentiment and technicals. Will need to follow closely post first election round price dynamic on the French debt, as well as Italy and Spain.
French bill auction on Mon shouldn’t yield any surprise. Have Italian test with bills (Tue) and bonds (Fri). Spanish bills on Tue. Some Dutch 2 YRS and German 30 YRS to enhance maturity and credit mix.

Germany: PMI on Mon (Manu fcst 48.9 after 48.4), CPI on Thu (fcst 2.2% after 2.3% YoY), Consumer confidence on Fri
France: Biz confidence (fcst unchanged 96 after 96) & PMI (Manu fcst 47.2 after 46.7), Consumer conf on Tue, Employment on Thu, PPI and Cons Spend on Fri
Other EU: EU PMI on Mon (49.3 fcst after 49.1) & Final 2011 Eurostat figures on EU sovereign debt. EZ confidence figures on Thu.
SP Mortgages on Tue & Budget balance, Retails sales and Unemployment on Fri. IT Cons conf on Mon (fcst 96.5 after 96.8). IT Biz conf Thu and retail sales Fri.
US: Nothing on Mon. Housing & Consumer Conf Tue. Durable goods and FOMC on Wed. Jobs and home sales on Thu. GDP and Mich conf on Fri.
Asia: Japan Small Biz conf Tue. Machinery orders Wed. Industry activity Thu. Busy Fri with Indu Prod, Retail and Construction. China HSBC PMI on Mon. Leading indicator on Tue.

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

Thursday 19 April 2012

19 April 2012 – "Mmm Mmm Mmm Mmm" (Crash Test Dummies, 1993)

Puzzled we were, puzzled we remain. Upbeat European open, notwithstanding a US close on European closing levels and an overtly slightly negative to flat at best Asian close. Maybe it was the sun shinning (at least in Paris) in the morning that propelled equities up to 1% higher by mid-morning…
No major eco data to lean on. POBC is hinting that it might work on RRR at some time, but definitively in targeted manner. Obviously, should there be a need for some measures to prop up the economy; it won’t be a liquidity deluge. No free for all, and a tight fist on housing.

French and Spanish auctions out of the way. France uneventful with next to EUR 8bn raised in 2, 3 and 5s in strong bid to covers (2.3 to 3), albeit at wider levels than last month (1.06% after 0.89% and 1.83% after 1.78%, for 2s and 5s), showing the grind on the French debt over the last weeks and ahead of the presidential elections. Compare this with yesterday’s 2 YRS sold at 0.14% in GermanySpain duly reached the targeted EUR 2.5bn with EUR 1.1bn 2s at 3.46% and EUR 1.4bn 10s at 5.74%. Last 10 YRS auction was in Jan at 5.40%. 3 YRS (as comparison) were sold 2.89% 2 weeks ago. Why the 10 YRS were paid that price, although quoted at 5.79% just before, and yesterday’s close, and 5.82% after the auction is a bit of a mystery... Some generous donors?

Anyhow, the European “test” of auctions thus passed, markets went off the euphoria and hovered just above yesterday’s closing levels throughout ALL asset classes for a while, for once an easy read, before reconsidering things and testing the upside again heading into the lunch.
Very disciplined markets – for a while. Maybe Italy was a bit on the weak side (+5 by late morning), then correcting back. In a nutshell, by noon, things were just fine, thank you.
However nervousness is out there and unwarranted downgrade rumours of France put markets in risk off mode. Negative sentiment took finally over as US figures all came out lower then expected (jobless 386k versus 370 fcst; Philly Fed and homesales, too). Enough to tip everything in the worst of mood...

New issue activity was on the quieter side, despite a better start into the day. French UNEDIC managed to print EUR 1bn 5 YRS at MS +76, before things turned too bleak.

Aïe! France starts to trade in line with Italy and Spain... Won’t get any better in the coming days. Spread to Germany already out by 17 bp since last Friday.
Really bad close.

10 YRS Yields: Germany 1,69% (-2); Luxembourg 2,17% (-1); Swaps 2,21% (+2); Finland 2,22% (+1); Netherlands 2,28% (+4); Austria 2,93% (+4); EFSF 2,94% (+2); France 3,09% (+9); Belgium 3,43% (+5); Italy 5,59% (+12); Spain 5,89% (+10).

10 YRS Spreads: Luxembourg 48bp (+1); Swaps 52bp (+3); Finland 53bp (+3); Netherlands 59bp (+6); Austria 124bp (+6); EFSF 125bp (+4); France 139bp (+11); Belgium 173bp (+7); Italy 390bp (+14); Spain 420bp (+12).

EUR swap curve 2-5 YRS 46,6bp (+0,4); 5-10 YRS 71,3bp (-0,4) 10-30 YRS 26,8bp (-0,4).
2 YRS German BKOs closed 0,13% (-1) and 5 YRS OBLs 0,65% (-1).

Main at 145 from 142 (2,0%); Financials at 255 after 249 (2,3%). SovX at 282 from 279. Cross at 684 from 673.

Stoxx Futures at 2223 / -1,9% (from 2267) with the S&P at 1384 (from 1385, at European close).     
VIX index at 18,7 after 18,6 yesterday same time.                                                                               

EUR 1,313 after 1,312
ECB deposits stable at EUR 757bn
Oil 102,4/118,7 (WTI/Brent) from 103,7/117,8 (-1,2%/+0,8%). Gold at 1649 after 1639 (+0,6%). Copper at 362 from 363 (-0,2%). CRB closes 300,0 from 301,2 (-0,4%).
Baltic Dry finally 1028 (+2.2%)
All levels European COB 17:30 CET

Just German IFO expected at 109.5 after 109.8

Germany: IFO on Fri
France: Running up to first round of presidential elections.
US Nothing on Friday
Asia: Nothing really on the plate in China, likewise for Japan.

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

Wednesday 18 April 2012

18 April 2012 – "Dazed and Confused" (Led Zeppelin, 1969)

18 April 2012 – "Dazed and Confused" (Led Zeppelin, 1969)

Hmmm… US close on highs (+1.5%), Asian close similar (+2%), reducing some of the last 2 weeks’ losses. Not sure to have found anything fundamentally changed or so, so let’s pretend equities were oversold and are bouncing back. Chinese property prices still in the dumps, but it might just increase hopes the POBC will relax, after all.
Eventually, I’m not sure this makes much sense. In any case, it’s just that it didn’t work out for Europe this morning anymore, which trailed lower from the start of the trading session.

Spanish 10s still playing catch-up and tightening over 10bp during the morning to hit 5.75% (from over 6.11% on Monday). Beat’s me where that traction comes from? Independent and nowadays un-correlated movement to others… Rest of sovereigns 2-4 bp tighter heading into lunch with European equities confirmed as being down a good 1%. Credit softer, as shedding Tuesday late afternoon outperformance.
EUR back in the 30 handle and commodities generally a bit softer.

Little data restricted to EZ Construction Output for Feb down a whooping 12.9% YoY and Jan numbers revised lower. Likewise, and unsurprising, Spanish Q1 house prices fell another 7.2% YoY.
MBA Mortgage applications up 6.9%, but these are very noisy numbers. Probably driven by last week’s fall in rates.

If things were cool, why on earth would people be willing to pay a record auction low 0.14% at today’s German BKO auction??? EUR 4.2bn sold EUR 800m retained for market interventions. Decent Bid to Cover over 1.8, barely any tail and over half the bids with no price limit, so definite appetite. Is it a give-away? Well, considering they traded down to 0.08% one week ago, today is probably most satisfying, offering a 75% increase in yield…Well, a real Schatz, so to speak…

The again, after Spain and the Netherlands, we now have Italy (today’s non-performer, along with France) trying to backpedal on reaching more austere deficit targets.
Unlike Spain, whose treasury confirmed having so far closed 47% of 2012’s funding, but whose politicians seem to be in a blunder contest lately in order to destabilize investors, Italy was in stealth mode lately. Being put back into limelight might not have been expected. And its funding goals are much further away…

European equities 2% drop and risk reversal move (Bunds tighter by 4 bp, BTPs wider, BONOs unchanged after a 10bp sprint in the morning) somehow mellowed down after official US open, at least in equities. Credit heavy (Main +6, SenFin +7, XO +15), but uptick limited as US indices didn’t manage to crawl into positive territory.
French CDS are back to 200 for the first time since Mid Jan (after a spike to 200 mid Feb).

New issues, which had been on a back foot since the start of the month, saw another two covered bonds, with especially (non-European) (Duh!) CBA’s EUR 1.5bn 5 YRS at MS +88 a success, being 3 times oversubscribed within only a couple of hours and cutting the final spread more than 10 bp from initial pricing thoughts (IPT). Some more (French) (as mostly lately) corporate supply, courtesy of un-rated retailer Galéries Lafayette (EUR 500m 7 YRS MS+300) and Renault’s BBB funding arm RCI with EUR 650m 5 YRS at MS+290.

10 YRS Yields: Germany 1,71% (-4); Luxembourg 2,18% (-4); Swaps 2,19% (-4); Finland 2,21% (-5); Netherlands 2,23% (-3); Austria 2,89% (-3); EFSF 2,93% (-1); France 3,00% (-1); Belgium 3,37% (-2); Italy 5,47% (+1); Spain 5,79% (-7).

10 YRS Spreads: Luxembourg 47bp (+1); Swaps 49bp (0); Finland 50bp (0); Netherlands 52bp (+1); Austria 118bp (+1); EFSF 121bp (+3); France 129bp (+4); Belgium 166bp (+2); Italy 376bp (+5); Spain 408bp (-2).

EUR swap curve 2-5 YRS 46,2bp (-1,3); 5-10 YRS 71,7bp (-0,5) 10-30 YRS 27,2bp (-0,1).
2 YRS German BKOs closed 0,13% (-1) and 5 YRS OBLs 0,67% (-3).

Main at 142 from 136 (4,2%); Financials at 249 after 243 (2,6%). SovX at 279 from 278. Cross at 673 from 653.
Stoxx Futures at 2267 / -1,6% (from 2304) with the S&P at 1385 (-0,2% from 1387, at European close).
VIX index at 18,6 after 17,9 yesterday same time.

EUR 1,312 after 1,314
ECB deposits adding EUR 13bn to EUR 758bn after 745bn.
Oil 103,7/117,8 (WTI/Brent) from 104,6/118,7 (-0,8%/-0,8%). Gold at 1639 after 1654 (-0,9%). Copper at 363 from 364 (-0,5%). CRB closes 301,2 from 302,5 (-0,4%). Brent premium to WTI is keeping its deflation movement, in reaction to the late better tone coming out of Iran discussions (13 after reaching 20 high early Apr, near the historical 21 print in Sep 2011).
Baltic Dry finally back over 1000 for the first time since mid Jan, quoted at 1006 (+1.7%). 55% over early Feb lows.
All levels European COB 17:30 CET

Spanish  (EUR up to 2.5bn Oct 2014 & Jan 2022) and French (EUR 8bn 2014, 2015 & 2017 BTANs + EUR 3bn new 2018 ILB) auction
US claims (fcst 370k after prior 380k), Home Sales (fcst 4.62m after prior 4.59m), Leading Indicators (fcst +0.2% after prior +0.7%)

Rest of week:
Germany: IFO on Fri
France: Running up to first round of presidential elections.
US Nothing on Friday
Asia: Nothing really on the plate in China, likewise for Japan.
Click link on title or below for today’s musical support:

Tuesday 17 April 2012

17 April 2012 – "All Right Now" (Free, 1970)

17 April 2012 – "All Right Now" (Free, 1970)

Markets remained hazy. Split US close with Apple dragging down the Nasdaq into negative and the S&P into a flat close, while the Dow fared better. Inconclusive US session, as was the European one y’day, with asset classes all jumping around in surprisingly decorrelated manner, just to broadly come back to square 1. Asian session broadly flat. Same for commodities. Note a EUR back on the 31 handle. Biggest overnight news was probably India cutting rates by 50 bp to 8%. Maybe Japan’s pledge to prop up the IMF.
The YPF expropriation by Argentina is, of course, water on the mills of New Normal believers and those in growing subordination of private holders. And an unwelcome blow to Spain’s Repsol (-8% at open with CDS hitting 400) and probably Spain, as a whole, which just didn’t need another front to fight on.

European open undecided to positive with the periphery tightening back, taking especially Spain back trough the 6% mark, ahead of its bill auction. Only slightly averse effect on Bunds & Co (knowing that the contrary was true yesterday, too).
Spain gaining over 10 bp and then extending after issuing slightly more than intended bills (EUR 3.2bn in 12 and 18m bills). The 1 year paper was issued at 2.62%, coming from 1.42% last month, while the 18m price tag rose to 3.11% from 1.71%, both a reflection of the late change in mood. So, yes, bills sold, but they always get sold. Duh! Even for Greece…
Risk appetite nevertheless increasing and then supported by better then expected Apr ZEW figures, which came out higher than last month, having been expected in decline. Good for an additional 0.5% in equities and 50 pips on the EUR/USD cross. Even credit (very heavy since yesterday) eventually started to tighten in a little.
EZ Mar inflation figures showed some resistance to the expected / wished for slide with 2.7% YoY and core at 1.6% (after 1.5%), both a tick above consensus. ECB’s problem….
Greece EUR 1.6bn 3m bills sold at 4.2% (after 4.25%) and EUR 2bn 6m EFSF bills sold at 0.26% (after 0.19% end of Feb)
Mixed bag of US figures (Housing Starts below, but building permits above consensus. Industrial Prod below forecast), rather not positive per se, but unable to break the stride.
Spanish 10s back below 5.90% in the afternoon.
To round up the good news, the IMF has slightly revised upwards its (world) growth outlook.

All cool. All right now…

Talking of risk: One week ahead of the French elections, we noted that France widened pretty much in sync with the weakest periphery yesterday and that the spread to Belgium has come down to probably unwarranted levels (2 YRS average 65, low 11 2 YRS ago, high 215 in Nov).
First day of Eurex’ new OAT future trading didn’t really impress as being awesome with 2600 contracts exchanged on Mon and 3200 today versus about700k Bunds traded every day), resulting in an open interest of 1800. That means that two thirds of the contracts are traded and closed intraday. Hardly a killer weapon for the moment. Can’t really understand the outcry over its introduction, although the timing one week ahead of the first presidential election round may not have been the most “pc” in the world. Then again, France used to pride itself of having launched the first liquid bond future in Europe in the late 80s, which sadly (I traded tons of them) rapidly disappeared after going electronic in 1999 and then fading in importance, given the overall spread compression of all EZ-sovereigns at that time. During those heydays, I never heard anyone complaining that this was a vile speculators instrument.
What seems certain to me, though, is that we’ll see French bonds coming under, at least temporary, pressure as soon as next week, given the actual state of market fickleness, as well as the overly benign representation by all candidates of economic challenges to tackle.
Sarkozy ends first to Hollande in the first round: +20-25 bp, as “known incumbent, but in need to explain future savings / spending”.
Hollande comes first to Sarkozy: +40-50 bp, as in “untested and definitively in need to explain future saving / spending, despite a general acknowledgment that any centre left elected government will be as realpolitik-driven as a centre right one”.
Any other outcome, minimum +75 bp…
And there’s an OAT auction on Thu 03 May, coming after an extended May6day weekend. As unfortunate, as the Spanish auction during Semana Santa.

New issues market starting to get moving again with the European Union benefiting from a better euro-zone feel to raise EUR 1.8bn of 2038 paper at MS +87. Further on the SSA front KfW and the IFC worked on closing USD deals put on rail yesterday evening (KfW USD 4bn 3 YRS MS +5, IFC USD 2bn 5 YRS MS-12), while Lithuania managed to squeeze in a EUR 400m increase of an outstanding 2018 bond at MS +255. In financials, Helaba issued a EUR 1bn 7 YRS Pfandbrief, domestic-targeted as most German covered bonds, but the first EUR covered bond benchmark since end of March.

Interesting to see how static the Core EZ debt has been on all that feel good factors… No reaction, no sell-off… It’s just the periphery that is wagging back and forth…lifting and lowering Risk On and Off flags. Afternoon equity strength didn’t lift the periphery any further, but helped consolidate gains in credit. Commodities about put. Feels like an equity rebound, but not as massive game changing day.

10 YRS Yields: Germany 1,75% (+4); Luxembourg 2,22% (+3); Finland 2,26% (+3); Swaps 2,23% (+3); Netherlands 2,26% (+1); EFSF 2,94% (+3); Austria 2,93% (-1); France 3,01% (unchanged); Belgium 3,39% (-3); Italy 5,46% (-11); Spain 5,86% (-19).

10 YRS Spreads: Luxembourg 46bp (unch); Finland 50bp (+2); Swaps 49bp (unch); Netherlands 51bp (+1); EFSF 118bp (+4); Austria 117bp (-1); France 125bp (+4); Belgium 164bp (-1); Italy 371bp (-8); Spain 410bp (-13).

EUR swap curve 2-5 YRS 47,5bp (+2,5); 5-10 YRS 72,2bp (+1,0) 10-30 YRS 27,6bp (-0,9).
German 2 YRS BKOs close at 0.15% (from 0.14%) and 5 YRS OBLs at 0.70% (from 0.67%)

Main back to 136 (from 144, 5.6% better); Financials at 243 (from 250, 2.8% better); Sovereigns 278 (from 280).

Stoxx Futures at 2304 / +2,7% (from 2243) with the S&P at 1387 (+1,3% from 1369, at European close).
VIX index down to 17.9 from 19.6, yesterday same time.

EUR 1.314 from 1.307.
ECB deposits stable at EUR 745bn after 743bn.
Oil 104,6/118,7 from 102,3/118,8 (+2,2%/-0,1%) . Gold at 1655 after 1649 (+0,3%). Copper at 365 from 361 (+1,1%) . CRB closes 302,5 from 300,9 (+0,5%). Commodities stronger on afternoon Risk On feel, but not outrageously so.
Baltic Dry at 989 from 975. 1000 mark in sight.
All levels European COB 17:30 CET

Not much European data. Spanish housing. EU Feb Construction. US MBA mortgages.
German 2 YRS auction, near record low yields, just as for last week 10 YRS Bunds…

Rest of week:
Germany: IFO on Fri
France: Running up to first round of presidential elections.
Other EU: House prices in Spain
US:, Claims on Thu, Philly FED & Leading Indicators.
Asia: Nothing really on the plate in China, likewise for Japan.

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

Monday 16 April 2012

16 April 2012 – "Something For the Pain" (Bon Jovi, 1995)

16 April 2012 – "Something For the Pain" (Bon Jovi, 1995)

Difficult to make too much sense in the dealings of the start of the week. Asia in line with Friday sell-off in Europe and weak close in the US.

Not much fresh news over the weekend. China widening Yuan trading bands, which would point both to the government’s feeling of the currency having reached some equilibrium and in order to expand its use, as trading and/or reserve currency.

Not much in terms of hard economic data to lean on and to counter the ongoing euro-depression. Contradictory market signals: Italy and Spain got off on the wrong foot with Spanish 10s shooting to over 6.10% and BTPs spiking to over 5.65%. Had nevertheless only a muted Bund reaction and equities were holding rather well (including the periphery).

Belying the recovery of Southern Europe in the afternoon on the back of stronger US futures and European bourses, Credit remained heavy.
US retail sales much better than expected, Empire manufacturing much worse.

Equities better thereafter. Lifting the periphery. Credit nearly unchanged weak. Understand who wants…
Financials not even profiting from a rating review respite by Moody’s, which postponed some reviews to May (for better or worse?). Italian banks were due this week, Spain’s next week. Still having the rest of Europe’s banking (Germany, France, Benelux, UK) in the week of May 7th and 14th.

Had uneventful sales of Dutch 3 and 6m bills, as well as France selling a total of EUR 7.9bn in 3, 6 & 12m bills at a tick better than before.

New issues market on hold.

Eventually, risk appetite for the Periphery and squeezy equities couldn’t really outweigh heavy credit indices and everything slumped back. Wobbly close, but in equities. Failed recovery is probably as bad as the initial move wider.

Quite inconclusive session, but the pain of the Periphery starts to feel. Political ping pong on ECB action, broader scope just starting. Get ready for some more.

10 YRS Yields: Germany 1,72% (-1); Luxembourg 2,19% (unch); Finland 2,23% (+2); Swaps 2,21% (unch); Netherlands 2,25% (+3); EFSF 2,90% (+4); Austria 2,94% (+3); France 3,01% (+7); Belgium 3,42% (+4); Italy 5,58% (+6); Spain 6,04% (+8).
Spanish print over 6.10%, back through 6% and back out wider…

10 YRS Spreads: Luxembourg 47bp (+1); Finland 51bp (+3); Swaps 50bp (+1); Netherlands 53bp (+3); EFSF 118bp (+5); Austria 122bp (+4); France 129bp (+7); Belgium 170bp (+5); Italy 386bp (+7); Spain 433bp (+9).

EUR swap curve 2-5 YRS 48,1bp (+1,2); 5-10 YRS 71,3bp (-1,2) 10-30 YRS 28,5bp (-0,2).
German 2 YRS BKOs close at 0.14% (from 0.13%) and 5 YRS OBLs at 0.67% (from 0.67%)

Main back to 144 (from 143); Financials at 250 (from 247); Sovereigns 280 (from 280).

Stoxx Futures at 2243 / +0,7% (from 2227) with the S&P at 1369 (-0,4% from 1375, at European close).
VIX index tame at 19.6.

EUR 1.307 from 1.308, but tested below 1.30 for the first time since end of Jan before recovering to unchanged.
ECB deposits adding a further EUR 38bn to EUR 743bn, a steep rise into the just started reserve maintenance period. Weekly SMP disclosure shows another empty week... So much for pre-emptively supporting the periphery.
Oil 102,3/118,9 from 103,2/121,4 (-0,8%/-2,1%) . Gold at 1650 after 1665 (-0,9%). Copper at 361 from 361 (-0,1%) . CRB closes 301,0 from 304,2 (-1,1%).
Baltic Dry at 975 from 972.
All levels European COB 17:30 CET

German ZEW (fcst current 35 after 37.6, sentiment 19 after 22.3). IMF release of global growth outlook. US Housing Starts 705k after 698k. Indu Production +0.3% fcst after 0%.
Greek plus Spanish bills.

Rest of week:
Germany: IFO on Fri
France: Running up to first round of presidential elections.
Other EU: House prices in Spain
US: Housing data + Indu Prod on Tue, Claims on Thu, Philly FED & Leading Indicators.
Asia: Nothing really on the plate in China, likewise for Japan. Tue Japan Indu Prod and Capacity Util.

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