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 1 June 2012

01 Jun 2012 – " Back to Black" (Amy Winehouse, 2007)

01 Jun 2012 – " Back to Black" (Amy Winehouse, 2007)
http://youtu.be/ebf171vP74k

Pretty much a repeat of yesterday’s start. Markets opening close to home after US closed only marginally negative and off lows. Asia mixed to negative with Japan taking the brunt of the Yen upwards pressure, managing to get a rebound of 78 against USD and shy of 97 against the EUR after forcefully voicing official displeasure with the attained levels. Chinese PMI readings lower than expected with official number just above expansion at 50.4 (fcst 52 after 53.3) and HSBC reading down to 48.4 after 49.3. Might keep hopes afloat for some official stimuli (China closing about flat).

European mildly positive open with equities up 0.5% from COB, credit down a tick, but rates still rather bid throughout 10 YRS EGBs. EUR hovering on 1.2350 (after having retested yesterday’s 1.232 lows overnight).

Again not much to chew in terms of European data, except tons of Final PMI readings that all remind the rather bleak picture, although the overall was corrected to 45.1 (Flash was 45 after 45.9 in Apr) on German and French numbers revised slightly higher.  Still, the overall picture shows weakness spreading and the mood hit H1/2009 levels. As for China, numbers also start to show contagion outside the EZ (Switzerland, Sweden, the Czechs). EZ Unemployment stable at 11% after Mar revised up to 11% (from 10.9%).
So back to gloom and reversal of the mood to negative.
You know the drill… Bunds down to new low at 1.16% (-5bp) , BKOs trading at negative yield, very strong Soft Core EGBs down to new historic lows ( 7 to 12bp for the Dutch) and the periphery trading softer (+5) with Spain hitting 545 to Bunds. S
panish regions said to be on track with their budget (deficits), but funding solution unclear until next week.

Lunchtime Blues on equities, adding a further 1% to the slide.
Had contingency-aware BBG system testing on Drachma crosses [XGD Crncy GREEK DRACHMA (POST EURO) Spot], which visibly did the rounds, before BBG retrieved it again (Press relates the BBG help desk as “an internal function which is set up to test”). Anyhow. The old GRD ticker still exists, but so do DEM, FRF and the other legacy currencies. Had Berlusconi propose to force EUR printing or leave – or have the Germans leave (Ticker ITL Crncy)...

US Big Friday with huge Non Farm payrolls miss at +69k (fcst 150k after 115k) and past data revised to +77k. Unemployment rate grinded higher to 8.2% at (fcst 8.1% unchanged). Personal income a tad lower to 0.2% (fcst 0.3% after 0.4%) and Spending likewise only to 0.2% (fcst 0.3% unchanged) with prior down to 0.2%, as well.
Good for another 0.75% in equity slide. Credit wider, but not immensely, although financials back over 300 again. Oil trashed with Brent trading below 100-mark for the first time since Oct 2011.
Bunds new low at 1.13%. German Schätze now trading -0.01%.

France catching back in the finish on the Dutch sprint started in the morning and overtaking the latter with yet another 20bp move, taking the Soft Core along. Austria and later France fast nearing the 2% mark in 10s. France back to through 100-mark to Bunds. Spain mostly treading water.

Final US MAY PMI reading (new data set) at 54 (Flash 53.9). The data week ended with last estimate misses of Manu ISM at 53.5 (fcst 53.8 after 54.8) and Construction Spending at 0.3% (fcst 0.4% after 0.1% MoM). Huge drop in Prices Paid ISM at 47.5 (fcst 57 after 61). Then again, at these depressed levels, it didn’t really matter anymore, because there’s just so much damage that can be done in a week.
Belated catch-up in BTPs, ending the day as star performer.... (Probably misplaced) SMP buying hopes (, as long as things are no clearer.).

The only one profiting for a while was actually the (record-shorted) EUR, which profited from weak US figures to sharply spike back from the 1.234s to 1.245 before dropping back.
Oh!, and Gold did shine nicely and hurdled back the 1600-mark, up 3%, because one never knows when the next LTRO / QE or other operation might pop up.
 

Was wondering yesterday about the sense of “Controlled Panic” and felt something had to yield. Equities did. Outside that, everything seems all over the place... Markets on Visual Flight Rules.

Blank new issue screens.

Greek bonds guesstimates: Greek bonds sinking about stable with polls contracting one another: 2023s softer at 30.50% and 2042s back to 25.5% yesterday. 2042s fast approaching a single digit price quote.
Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,17% (-4); Netherlands 1,52% (-9); Finland 1,53% (-6); Luxembourg 1,60% (-3); Swaps 1,66% (-2); Austria 2,06% (-13); France 2,23% (-13); EIB 2,33% (-2); EFSF 2,47% (-3); Belgium 2,80% (-15); Italy 5,71% (-19); Spain 6,46% (-7).

10 YRS Spreads: Netherlands 35bp (-5); Finland 36bp (-2); Luxembourg 43bp (+1); Swaps 48bp (0); Austria 89bp (-9); France 106bp (-9); EIB 116bp (+2); EFSF 130bp (+1); Belgium 163bp (-11); Italy 454bp (-16); Spain 529bp (-3).
Had Austrian 10s trade below 2% for a while, and France under 100 to Bunds. Spain finally through 6.5% in the close. Dutch trying to steal the Finn’s 2nd place on the roster, knowing that the former’s 10 in my figures in an interpolation in absence of a 10 YRS benchmark.

EUR swap curve 2-5 YRS 30,7bp (+1,1); 5-10 YRS 49,3bp (-2,6) 10-30 YRS 15,3bp (-1,5).
2 YRS German BKOs closed 0,01% (+0) and 5 YRS OBLs 0,32% (-3). 2s traded -0.01%
German 2s still cheap compared to 2 YRS Swiss trading at -0.34%... Then again, there’s the CHF...

Main at 184 from 180 (2,1% wider); Financials at 302 after 299 (just 1,0% wider). SovX at 330 from 325. Cross at 736 from 722.
Credit actually holding rather ok, across all classes, given the beating.

Stoxx Futures at 2066 / -1,8% (from 2103) with S&P minis at 1284 (-1,1% from 1299, at European close).
VIX index at 25,8 after 24,8 yesterday same time.
Dow Jones slipping into negative territory for the year (S&P still up 2.4% and the NASDAG 6.4%). VIX now over 25.

Oil 83,2/98,5 (WTI/Brent) from 86,6/102,0 (-4,0%/-3,4%). Gold at 1609 after 1564 (+2,9%). Copper at 331 from 336 (-1,2%). CRB closes 269,0 from 273,5 (-1,6%).
Massive beating, especially in Oil, good Gold outperformance.
Baltic Dry down to 904 from 923 (-2.1%). My canary won’t eat, lost colours, doesn’t tweet…

EUR 1,238 from 1,235
ECB deposits at EUR 769bn after EUR 770bn.
Very stable ECB deposits lately. Seems that we have found cruising speed here.

All levels European COB 17:30 CET

On the week (compared to Fri 25 May close):

Bitter week for the Periphery, which had already ended the previous week on a sad “Mala Vida” note, started Monday with a strong flamenco-style “Foc”. Tuesday was sunny and calmed and markets went surprisingly “Relax”, which couldn’t hold as markets played havoc with the periphery debt with “Il Commendatore” demanding repentance. Thursday we asked “Bass (How low can you go?)” on yet another record low in EGBs (ex Periphery) and USTs. Obviously, there still was room to the downside as we close another RISK OFF week on a saddening “Back to Black”.

And the winner of the week is? France for a while with 38 points on the week at midday, but still down 29 bp on the week, together with Holland and Austria, as well as Belgium. Looser Spain and Italy.

10 YRS Yields: Germany 1,17% (-20); Netherlands 1,52% (-28); Finland 1,53% (-23); Luxembourg 1,60% (-21); Swaps 1,66% (-19); Austria 2,06% (-27);France 2,23% (-28); EIB 2,33% (-21); EFSF 2,47% (-22); Belgium 2,80% (-25); Italy 5,71% (+6); Spain 6,46% (+17).

10 YRS Spreads: Netherlands 35bp (-7); Finland 36bp (-3); Luxembourg 43bp (-1); Swaps 48bp (-1); Austria 89bp (-6); EFSF 130bp (-2); EIB 116bp (0); Belgium 163bp (-5); Italy 454bp (+27); Spain 529bp (+37).

EUR swap curve 2-5 YRS 31,3bp (-5,8); 5-10 YRS 49,3bp (-10,6) 10-30 YRS 15,3bp (-3,8).
2 YRS German BKOs closed 0,01% (-4) and 5 YRS OBLs 0,32% (-13), on the week.

Main at 184 from 174 (5,4%); Financials at 302 after 297 (1,8%). SovX at 330 from 316. Cross at 736 from 717.
Aint that bad after all...

Stoxx Futures at 2066 / -4,1% from 2154 with S&P minis at 1284 / -2,7% from 1320, at European COB last week.
VIX index at 25,8 after 22,1 last week.
Dow Jones slipping into negative territory for the year (S&P still up 2.4% and the NASDAG 6.4%) (FB down 26% from IPO and 33% from high)

Oil 83,2/98,5 (WTI/Brent) from 91,0/106,8 (-8,7%/-7,8%). Gold at 1609 after 1567 (+2,7%). Copper at 331 from 345 (-4,0%) . CRB closes 269,0 from 282,1 (-4,6%).
Massive beating, especially in Oil, good Gold outperformance.
Baltic Dry fixed at 904 from1034 last week ( -12.6%) and 1141 the Friday before (-20.8%).

EUR 1,238 after 1,253 last Friday

Next week:
Will need to live with patchy liquidity with the UK in extended weekend on Mon and Tue. Government supply rush starting again with Spain testing a sale of 2022s on Thu, as biggest test of the week. ECB on Wed.
Not really tons of data.

Germany: Tue Fact Orders (fcst -3.8% after -1.3%) & Service PMI, Wed IP (fcst 0.8% after 1.6% YoY), Fri Import / Export & trade balance
France: Tue Service PMI, Fri Biz Sen
EZ: Mon Sentix Investor JUN Conf (fcst -30 after -24.5), EZ PPI, Tue Comp PMI (fcst 46.5 unch), Retail Sales, Final Q1 GDP, ECB
Periphery: IT Service, Fri IP, PMI SP Mon Unemployment, Tue Ser PMI, Wed Ind Output
US: Mon Fact Orders (fcst 0.3% after -1.5% revised to -1.9%), Comp ISM May (fcst 53.8 after 53.5), Wed MBA mortg a Q1 Productivity, Thu claims, Fri Inventories.

Click link on title or below for today’s musical support:
http://youtu.be/ebf171vP74k
(So sad...)

Thursday 31 May 2012

31 May 2012 – " Bass (How Low Can You Go?) " (Simon Harris, 1988)

31 May 2012 – " Bass (How Low Can You Go?) " (Simon Harris, 1988)
http://youtu.be/43YGbhwBHds

Uh. Early morning rain check: no shoes dropping. Flattish to positive European open. US closed bad, Asia, as so often lately just stayed close to home.
Official China PMI at 52 after 53.3, confirming the official view of a (controlled and orderly) softer landing (although I remain puzzled by the sharp Baltic Dry drop of late). Japan IP slightly lower than expected. Other stats (YoY vehicle production and housing starts) probably higher, given base effect of last year’s post Fukushima slump. India as headline mood spoiler with Q1/2012 growing a mere 5.3%
German retail sales beating estimates on MoM basis with prior data revised higher. Strange YoY drop. Unemployment dropping and rate at 6.7% after 6.8% expected unchanged. As for Bund yields, yet another all time low. Alles klar!.
French unemployment figures of yesterday evening slightly better than expected, but still 12th increase in a row. PPI flat. Consumer spending rebound at 0.4% YoY after revised higher -1.7%.
Half the EZ not feeling THAT bad, after all. Spanish housing permits still down, but slopping off.
Greek retail sales plunging (-15.1% YoY after revised -11%), reaching early 2009 depressed levels. Outlook sure is bleak.

Slight risk appetite recovery in equities. Credit back better after yesterday’s beating. Good opening rush in the Soft Core Austria / France / Belgium down 10 bp, dragging the Periphery along (so no leading rebound there yet). German curve a bit softer, so no flight FROM quality to speak of yet, either.

Tame EZ CPI figures at 2.4% (after 2.6% and fcst 2.5%). Italian CPI likewise down a tick, as was Spain’s yesterday. All in all, this could / should allow the ECB to sign off a rate cut next week (Wednesday for a change, Thursday being Corpus Christi holiday in parts of Europe), if only not to be seen as being totally unsupportive. Like, let’s go for a quarter, in order to do something and keep something, if needed at a later stage. Of course, the problem is not exactly the rate as such…

Now accustomed verbal ping pong on the tickers: necessity or not of eurobonds, periphery calls for ECB support, Draghi pushing back on mandate limitations and shareholders responsibilities as well as joint vision and bank recaps. Rhen distributing usual appreciation score cards to those who suffer. Nothing new. Cemented fronts here.

Lunch time levels show equities up 0.5%, risk down a couple of ticks, France to Spain tighter by 10 to 15 and the Hard Core softer by 1-2 basis points. 2 YRS BKOs at 0.01% (massively softer from yesterday’s 0.000 %...). EUR back up on the 24-handle from new overnight lows at 1.2360.
Still no shoe dropping, but rather quiet. Waiting.

Equities and Credit back to about flat / plus. Spain steadily inching back 5 by 5 and 20 tighter ahead of the US session. Rest of Soft Core and Italy still 10 tighter, and 15 for France. Hard Core steady nevertheless.  Commodities flat, except for slightly stronger Gold.

US Thursday data dump: ADP employment at 133k missed fcst 150k, with prior data revised lower from 119 to 113k. Claims higher, continuous claims lower, past data corrected higher. Doesn’t seem huge, but shows slower job market. Q1 personal consumption revised lower to 2.7% (from 2.9%). Not huge data set, but nothing positively exciting, either. Did put off the market from RISK “rather ON” to RISK “rather OFF”, but nothing panicky. From ROn/ROff+ to ROn/ROff-… Chicago PM huge miss at 52.7 (versus 56.8 fcts and prior 56.2) pulling the rug under ROn’s feet.

Exhaustion from Hispanic Panic? Markets didn’t blink much on Fitches downgrade of 8 Spanish regions, then again bringing itself in line with Moody’s and S&P peers. Catalunya now non-IG with Moody’s and just one notch above for S&P and Fitch. Talking of which, the Budget Ministry postponed the publication of Q1 regional budget data until tomorrow (for calendar reasons). Ah.
Spanish 10s tagging along the EGB rally, despite Spain CDS quoted about 20 wider at record 600.

Surprising bond close with ALL bond yields down, so no pivoting around the centre. New 10 YRS BUND low, needless information, and at close, at 1.205%. New all time UST low, too, at 1.545%. Then again, final leg of the afternoon is low on risk. RISK OFF. Credit soft, alongside equities and commodities with the EUR trading back mid 1.23s. Italy lagging EGB rally. Spain stuck above 6.50%.
Hmmm... Controlled Panic, I’d say. Something needs to yield. Tough May for risk with all major equities indices down 7-10% on the month. But as they say, "Sell in May etc etc..."

After yesterday’s France hick-up and with today’s recovery, the floor for New Issues was mainly driven by French corporates with Saint Gobain issuing EUR 750m 9 YRS at MS +200 and Aéroports de Paris with a EUR 800m 7 and 12 YRS double-trancher at MS +97 and 135 respectively. Deutsche Bank selling EUR 500m 10 YRS German mortgage covered bonds at MS +12, following yesterday’s Muenchener Hypo deal at +10.

Greek bonds guesstimates: Greek bonds sinking about stable with polls contracting one another: 2023s unchanged at 30% and 2042s probably rather 25% from 25.5% yesterday. Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,21% (-6); Finland 1,59% (-7); Luxembourg 1,63% (-4); Netherlands 1,61% (-8); Swaps 1,68% (-4); Austria 2,19% (-13); France 2,36% (-13); EIB 2,35% (-4); EFSF 2,50% (-4); Belgium 2,95% (-10); Italy 5,90% (-2); Spain 6,53% (-11).

10 YRS Spreads: Finland 38bp (-1); Luxembourg 42bp (+2); Netherlands 40bp (-2); Swaps 48bp (+3); Austria 98bp (-6); France 115bp (-7); EIB 114bp (+2); EFSF 129bp (+2); Belgium 174bp (-4); Italy 470bp (+4); Spain 533bp (-5).

EUR swap curve 2-5 YRS 29,6bp (-1,5); 5-10 YRS 51,9bp (-2,3) 10-30 YRS 16,8bp (+0,7).
2 YRS German BKOs closed 0,000% (unch) and 5 YRS OBLs 0,35% (-2).

Main at 180 from 177 (1,6% wider); Financials at 299 after 299 (unch). SovX at 325 from 321. Cross at 722 from 719.

Stoxx Futures at 2103 / -0,6% (from 2116) with S&P minis at 1299 (-1,4% from 1317, at European close).
VIX index at 24,8 after 23,3 yesterday same time.

Oil 86,6/102,0 (WTI/Brent) from 87,9/103,6 (-1,5%/-1,6%). Gold at 1564 after 1549 (+1,0%). Copper at 336 from 338 (-0,8%). CRB closes 273,5 from 275,1 (-0,6%).
Baltic Dry in deep depression with a fixing at 923 from 950 (-2.8%).

EUR 1,235 from 1,240
ECB deposits at EUR 770bn after EUR 760bn.
All levels European COB 17:30 CET

Tomorrow:
EZ: Fri Unemployment and PMI confirmation
Periphery: IT Fri unemployment & Budget SP. GR Retail sales Thu. PMI Fri
US: Thu Claims, Chicago Purchasing. Fri non-farm payrolls, personal income, ISM, Constr Spending

Click link on title or below for today’s musical support:
http://youtu.be/43YGbhwBHds
(Weren’t these repetitive shrieks real BIG then???)

(Added yesterday’s video with subtitled libretto (link). So on the spot, you can only appreciate the allegory. Plays in Spain, sung in Italian. Picture the Commendatore as the Ghost of Karl-Otto Pöhl’s Bundesbank spirit / ECB / Northern European front trying to wring Don Periphery of its libidinous debt. Treasuries departments in the role of Leporello, trying to be as supportive as possible to their masters...)
(Totally amazed by the sheer number of videos on this. Here another great one (link), very gothic, and the Batman vs. Don Supermani version (link), excellent as well).

Wednesday 30 May 2012

30 May 2012 – " Don Giovanni – Il Commendatore Aria " (Mozart, 1787)

30 May 2012 – " Don Giovanni – Il Commendatore Aria " (Mozart, 1787) 
http://youtu.be/XuUSJxBbOLA

The repeated downgrade of Spain by the rating agency Egan Jones during European close did refresh risk appetite, at least temporarily in the US, which enjoyed a rather healthy 1% plus close nevertheless (witch exception of FB at -10%). It nevertheless send EUR plunging through 1.25, dragging commodities along. Positive equity close all the more surprising. However, media reports that the Spanish Bankia recap plans via government bonds via the ECB was not to the latter likes and Chinese stimulus measures back-pedalling on size and extent, sent markets overnight in risk aversion mood again.

RISK OFF start in Europe with equities down about 1%, Bunds down to (yeah, I know it’s boring) a new historic low for next 3 hours at 1.33% ( 2 YRS quoted just inside 0.03%) and the Periphery wider by 5 for Spain and a chunky 10 for Italy (ahead of its 5 and 10 YRS auction later in the morning). Very evidently, Italy over 5.85% is dangerously close to 6% and Spain over 6.50% is dangerously close to a wipe out to 6.75% or higher if markets get stressed. Sharp snap-back of credit, which had been too sanguine off late, with Main 5 wider and Financials back just below the 300-mark.

Light data front. Spanish CPI a tick lower than expected at 1.9 YoY. EUR M3 growth (or lack thereof) a surprise at 2.5% instead of expected 3.4% (after prior 3.2%). Belgian CPI lower. Portuguese Industrial production contracting further (-7.4% after -5.8% YoY) and retail sales sinking 9% after -4.5% YoY.

Mid-morning publication of EZ economic confidence figures weighting further on the mood: Consumer Confidence down to -19.3; Economic Conf at 90.6 (fcst 91.9 after 92.9); Industrial Conf down to -11.3 (fcst -10.2 after -9) and Service Conf at -4.9 (fcst -2.8 after -2.4). So all worse…
By 11 CET Italy was wider by 18 to 5.93% (still ahead of auction results publication) and Spain by 15 to 6.58%.
Italian auction with low bid to cover ratios not hitting the maximum targeted amounts (EUR 3.5bn for the 5s and EUR 2.75bn for the 10s). EUR 3.4bn new 5 YRS at 5.66% (after 4.86% last month) and EUR 2.3bn 10 YRS Sep 2022 at 6.03% (after 5.84% a month ago). Italian on-the-run 10s immediately hitting 6% after the announcement (pushing the corrective move to 25bp since yesterday COB and 35bp compared to last Friday). Spain adding 5 in sympathy.
Scary Italian short end with 2-3 YRS softer by 50 bp and 5s by 40bp. Spain 2-5 YRS 25 bp softer, flattening less then yesterday.
Had the ECB denied it had opposed Bankia recap plans as rumoured, but simultaneously Spain announcing its FROB bank fund would raise the funds (via government-guaranteed bonds?). Spanish Eco Min stating that 500 over Bunds is not sustainable (...), but that is due to the Greek situation (...) and expecting to tighten after the vote (...). Looks a little light as statement.
IMF report on Spanish banking due in the second week of June.
France, totally against the Core trend, hit real bad in sympathy with 10s trading out up to 10bp wider from COB by lunchtime with the EU pushing the new government hard upfront to get around 2013 deficit targets. Then again, last week’s sudden squeeze didn’t feel like being overly fundamental, either.

Markets getting some support from joint political / EU voicings about understanding Spain’s woes, supporting EU bank recaps etc…
…before Core EZ politicians reminded everyone that they (still) don’t see it that way.
Bunds still squeezing out new lows every 3 hours. Major equity indices and even credit remarkably resilient. EUR down to July 2010 levels. 2 YRS Schätze closed at par, hence 0.000%. Not a rounding error...
Like PIMCO’s Gross said a couple of months ago, it’s not anymore about the return ON your investment, but the return OF your investment.
Quite ugly day, in reality.

No real relief from US data with MBA mortgages down 1.3% (from previous +3.8%), despite record low mortgages, and Home Sales at -5.5% MoM after revised +3.8% a big miss from the expected 0%.

Ugly close... Then again, yesterday’s close was so oddly relaxed. Bloodbath in commodities.
Swaps of course closing on all-time lows 2 YRS 0.87% / 5 YRS 1.18% / 10 YRS 1.72% / 30 YRS 1.88%. Yes, below 2%...

There was a floor for new issuers – provided the issuer was from the Core, a corporate or from outside Europe. Had two German covered bonds for EUR 1.5bn, SSA supply via BNG EUR 2bn 7 YRS at MS +50 and ASFINAG providing solace to German insurers hunting for (a little) yield with EUR 1bn 20 YRS at MS +85 (or 2.87%). Corporates active via German Linde with EUR 500m 7 YRS at MS +35 (so easily competing with some Aa1 German covered bonds, and plenty of other government bonds with a reoffer yield of 1.80%) (Interpolated France at 2.11%, for instance) as well as Hutchinson Whampoa with a EUR 2bn double-trancher in 5s and 10s.

Irish vote on fiscal compact slated for tomorrow with latest polls showing a 18% lead for the yes. Although when seeing the bickering…(Irish Oct 2020s at 7.29%, 2025s at 7.23%)

Greek bonds guestimates: Greek bonds sinking further to all-time price lows on new polls showing Syrza way ahead. 2023s at 30% from 29.5% and 2042s at 25.5% from 24.50%.
Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,27% (-10); Finland 1,66% (-9); Luxembourg 1,67% (-11); Netherlands 1,69% (-9); Swaps 1,72% (-10); Austria 2,32% (-3); France 2,48% (-2); EIB 2,40% (-12); EFSF 2,54% (-12); Belgium 3,05% (-2); Italy 5,93% (+18); Spain 6,64% (+21).
Yeah, yeah, yeah. Core on all-time lows every 3 hours... So yada yada yada historic low etc etc... Ugly day in the periphery. Ugly day forFrance, which eventually contaminated and held back Austria and Belgium.

10 YRS Spreads: Finland 39bp (unch); Luxembourg 40bp (-1); Netherlands 42bp (+1); Swaps 45bp (-2); Austria 105bp (+7); France 121bp (+8); EIB 113bp (-2); EFSF 127bp (-2); Belgium 178bp (+8); Italy 466bp (+28); Spain 537bp (+31).

EUR swap curve 2-5 YRS 31,1bp (-4,2); 5-10 YRS 54,2bp (-2,9) 10-30 YRS 16,1bp (-1,1).
2 YRS German BKOs closed at par, hence 0,000% (-4) and 5 YRS OBLs 0,37% (-7).

Main at 177 from 169 (4,7% wider); Financials at 299 after 289 (3,6% wider ). SovX at 321 from 313. Cross at 719 from 693.

Stoxx Futures at 2116 / -1,8% (from 2155) with S&P minis at 1317 (-0,8% from 1328, at European close).
VIX index at 23,3 after 21,8 yesterday same time.

Oil 87,9/103,6 (WTI/Brent) from 91,9/107,5 (-4,3%/-3,6%). Gold at 1549 after 1574 (-1,6%). Copper at 338 from 349 (-3,2%). CRB closes 275,1 from 283,4 (-2,9%).
Baltic Dry still dropping, today to 950 from 986 (-3.6%). Had finally hurdled the 1000-mark mid-April. 647 was the low in Feb, so that’s still over 30% away…Then again, it didn’t take long during the last slide to get from 974 on 17 Jan to 647 on 02 Feb. It’s not like this is a liquid market.

EUR 1,240 from 1,253
ECB deposits at EUR 760bn after EUR 742bn.
All levels European COB 17:30 CET

Rest of week:
Germany: Thu Retails Sales fcst +0.2% after 0.8% MoM & Unemployment fcst 6.8% unch
France:  Wed evening Apr jobseekers fcst 2904k after 2884k, Thu Cons spending fcst +0.3% Mom after -2.9%
EZ: Fri Unemployment and PMI confirmation
Periphery: IT Thu CPI fcst 3.6% YoY after 3.7%, Fri unemployment & Budget SP Thu Housing permits. GR Retail sales Thu. PMI Fri
US: Thu Claims, Chicago Purchasing. Fri non-farm payrolls, personal income, ISM, Constr Spending

Click link on title or below for today’s musical support:
http://youtu.be/XuUSJxBbOLA
(Need to play that full blast! Very Rock ‘n Roll!)

Tuesday 29 May 2012

29 May 2012 – " Relax " (Frankie Goes to Hollywood, 1983)

29 May 2012 – " Relax " (Frankie Goes to Hollywood, 1983)
http://youtu.be/u2TLAxTY9Xs

Asia doing fine again, despite yesterday’s lukewarm European close. China to boost energy-savings via stimulus measure rumours being the main driver, as it seems. Japanese retailing and small biz confidence numbers mostly declining and rather lower than expected.

Spanish retail trade plunging 11.3% YoY (from prior -4%), the sharpest such drop since Feb 2009. German CPI fcst 2.2% unch YoY, Apr import prices actually lower than expect at 2.3% after prior 3.1% YoY. Then again, the EUR traded on average 1.317 throughout April. Now 4.7% lower, things might look different. German CPI at 2.1% after 2.2%, expected unchanged (EU harmonized).

Mildly positive European open with credit still rather more upbeat than other asset classes and still tightening. The rest pretty much were left yesterday, Core maybe a tad weaker, Periphery a tick stronger. Still, yesterday’s impact on Spain remains visible with 10s over 6.40%, over 500 to Bunds and wider by 15 to Friday afternoon. Italy 5 wider to Fri and could have gotten a little under pressure given tomorrow’s auction, but recouped most of yesterday’s sympathy widening ahead of the bill auction.
On the government funding side, my bad!, I skipped Friday’s announcement of Italy’s 5 and 10 YRS BTP auction tomorrow: EUR 2.5 to 3.5bn new 5s 4.75% June 2017 and EUR 2 to 2.75bn long 10s Sep 2022.

In absence of further shoes dropping, markets running a mildly equities RISK ON morning with equities up 1%. EUR up from the lows, but not bullish.
Italy getting planned EUR 8.5bn 6m bills done. Same as yesterday, and before, size done, price up. Price tag 2.10% after 1.77% last month. BC so that it fits, but nothing outrageous (1.6 after 1.7). Not that this was a surprise, but results showered the mood (once more) with markets slipping into RISK OFF turning slightly negative on equities, flat to soft on the periphery and tighter on the rest (thus triggering the umpteenth new historic low for Hard Core EZ bonds…).
Italian 2’s and 3s heavy again.
France sold EUR 4.2bn 3m at 0.08% (versus 0.07% one week ago), EUR 1.4bn 6m at 0.11% (after 0.10%) and EUR 2.3bn 12m at 0.18% (after 0.17%). For amateurs of macro variations, all 1cts wider, belying the OAT performance of last week.

As pointed out yesterday, the Spanish short end hadn’t flattened, which was surprising. That is solved: 2-5 YRS sold off by 15 to 10 bp, pretty much as Italy yesterday. 2-10 SPGB at 180 from 200 bp yesterday. Once an arb, you never cease to wonder…
EUR drifting sideways, not enjoying RO Day... Equity performance in reality mixed with France and Germany strong, others slightly up. IBEX hitting new lows (YTD -27%, 12m -39%) (All things relative. Italy down 37% on 12m, too, but “only” 13% YTD).
Spanish situation still very, very hazy on bank recaps and fronting regional finance needs (in trade off of some regional sovereignty... Mirroring EU/EZ discussions).
Had usual intra-European and institutional austerity versus growth versus fiscal integration versus sovereignty versus “let’s bail out the banks instead of the countries” versus “No, the ECB won’t do anything more” pitches from all involved parties. Not much traction on any subject, though.
Up a little, down a little, little tighter, little wider... All the while staying close to home. Reduced volatility. As if nothing was really happening. Relaxed...Feels odd.

US data with Case Shiller housing, mixed bag, overall slightly negative bias, though. Consumer confidence only 64.6 versus fcst 69.5 after 69.2, in turn reduced to 68.7. Dallas Fed likewise a miss. Doesn’t matter, as it seems...

EUR new issue basically restricted to Anglo American raising EUR 750m in 7 YRS at MS +123. Some German Pfandbrief issuers lining up deals at single digit levels to swaps.

Greek bonds guestimates: Positive poll momentum of the weekend fading and Greek bonds down again with 2023s at 29.5% from 29% and 2042s at 24.50% from 23.5%. Pretty much on record lows again (in price).
Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,37% (+1); Finland 1,75% (unch); Luxembourg 1,78% (-1); Netherlands 1,79% (-1); Swaps 1,82% (-1); Austria 2,35% (0); France 2,51% (-2); EIB 2,51% (unch); EFSF 2,66% (-1); Belgium 3,07% (-1); Italy 5,75% (+2); Spain 6,43% (-1).
10 YRS Spreads: Finland 38bp (-1); Luxembourg 41bp (-2); Netherlands 42bp (-1); Swaps 47bp (unch); Austria 98bp (-1); France 114bp (-3); EIB 114bp (0); EFSF 129bp (-1); Belgium 170bp (-2); Italy 438bp (+1); Spain 506bp (-2).

EUR swap curve 2-5 YRS 35,3bp (-1,8); 5-10 YRS 57,1bp (-2,8) 10-30 YRS 17,2bp (-1,9).
2 YRS German BKOs closed 0,05% (+2) and 5 YRS OBLs 0,44% (+2).

Main at 169 from 170; Financials at 289 after 294 (tighter by 1,7%). SovX at 313 from 317. Cross at 693 from 699.

Stoxx Futures at 2155 / +0,4% (from 2146) with S&P minis at 1328 (+0,6% from 1320, at European close).
VIX index at 21,8 after 22,1 yesterday same time.

Oil 91,9/107,5 (WTI/Brent) from 91,5/107,6 (+0,5%/-0,1%). Gold at 1574 after 1576 (-0,1%). Copper at 349 from 347 (+0,6%). CRB closes 283,4 from 282,1 (+0,5%). About okay-ish, but no real buoyant reaction to Chinese stimulus hopes.
My canary Baltic Dry is now in the triple-digit again, down to 986 from 1012 (-2.6%). Had finally hurdled the 1000-mark mid-April.

EUR 1,253 from 1,254
ECB deposits at EUR 742bn after EUR 760bn.
All levels European COB 17:30 CET

Rest of week:
Rather thin on data. Markets subject to latest rumour in one way or another. EZ hard data starting mid week. Big Friday US data dump!

Germany: Thu Retails Sales fcst +0.2% after 0.8% MoM & Unemployment fcst 6.8% unch
France:  Wed Apr jobseekers fcst 2904k after 2884k, Thu Cons spending fcst +0.3% Mom after -2.9%
EZ: Wed M3 fcst 3.4% after 3.2%. EZ confidence, Wed EZ CPI fcst 2.5% after 2.6%. Fri Unemployment and PMI confirmation
Periphery: IT Thu CPI fcst 3.6% YoY after 3.7%, Fri unemployment & Budget SP Wed CPI fcst 2.0%, Thu Housing permits. GR Retail sales Thu. PMI Fri
US: Wed MBA mortgages & Home Sales, Thu Claims, Chicago Purchasing. Fri non-farm payrolls, personal income, ISM, Constr Spending

Click link on title or below for today’s musical support:
http://youtu.be/u2TLAxTY9Xs
(Yep. That’s the banned version. Now old enough...)

Monday 28 May 2012

28 May 2012 – " Foc " (Rodrigo y Gabriela, 2001)

28 May 2012 – " Foc " (Rodrigo y Gabriela, 2001)
http://youtu.be/aj1rUJ8rIiE

Holiday-induced reduced update

Positive start into the week with Asia mostly shrugging off European woes on Friday and the US closing near their lows to close mostly positive. Better Asian close even for those closing later and catching a mostly upbeat European open in risk. Major trigger of positive mood were Greek polls showing pro-bail outs getting the lead.

Only had Italian business confidence sinking below consensus, as data: 86.2 after 89.5 revised to 89.1 with forecast that was 88.6. Note that anecdotically Finnish biz took a below-consensus bath as well at -12, taking us back to Q4/2009 outlook. Forecast had been for -5 after -2. Contagion starts to spread.

Major brake on today’s US-free session is the ongoing woes of Spain’s contingent liabilities in banking and regional finances. BONOs taking a dive ride away and hitting 6.45% in the morning. Spread to Bunds, given the late movements, unsurprisingly hitting new records past +505.
Italy weak in sympathy and hitting 5.75%. Had the Italian curve flatten out (unlike Spain), which is bad, with 2-3 YRS adding 15 basis points. Italy now past 4% in 2s and about 5.20% in 5s. Spain past 4.5% in 2s and past 6% in July 2017.
Explain recurrent and increasingly shrieking Spanish calls for ECB support (falling on deaf ears for the moment) to improve “debt sustainability”. Spanish Tesoro’s 2012 gross issuance covered at 56% by now. Remains the question about the contingent funding needs.
Cyprus bail-out discussions seem to do rounds, too. Not huge, but not good to have the list lengthen.

Despite this, a split markets with equities and especially risk enjoying a leg up and the periphery trading like a hot potato.

Italy getting EUR 4.5bn done with EUR 3.5bn 2-year zeros (real zero bonds, not the German 0% coupon ones) at 4.04% (after previously 3.36% in April). Add EUR750m of 4 and 5-year linkers. As lately standard, auction done, but price tag increased.
Will sell EUR 8.5bn of 6m bills tomorrow (Last sold at 1.77% a month ago. Ready for increase here as well).
France to sell as well a total of EUR 8bn bills tomorrow to round off this week’s government supply. Indeed a small week in this respect.

EUR mostly trading in a 1.255 1.26 range. Attempt to break out at European open was dampened by eurodepression.

No new issue supply.

Greek bonds guestimates: reacting positively to weekend polls and yields down with 2023s at 29% from 30.0% and 2042s at 23.50% from 24.0%. Quotes were 20.25% and 16.75% before the elections.

Closing levels:
10 YRS Yields: Germany 1,36% (-1); Finland 1,75% (-1); Luxembourg 1,79% (-2); Swaps 1,79% (-1); Netherlands 1,87% (+0); Austria 2,35% (+2); France 2,53% (+2); EIB 2,51% (-3); EFSF 2,67% (-3); Belgium 3,08% (+3); Italy 5,73% (+8); Spain 6,44% (+14).

10 YRS Spreads: Finland 39bp (+0); Luxembourg 43bp (-1); Swaps 43bp (+0); Netherlands 47bp (-2); Austria 99bp (+3); France 117bp (+3); EIB 115bp (-2); EFSF 131bp (-1); Belgium 172bp (+4); Italy 437bp (+9); Spain 508bp (+15).

EUR swap curve 2-5 YRS 37,1bp (+0,0); 5-10 YRS 59,9bp (+0,0) 10-30 YRS 19,1bp (+0,0).
2 YRS German BKOs closed 0,03% (-2) and 5 YRS OBLs 0,43% (-3).

Main at 170 from 174 (-2,7%); Financials at 294 after 297 (-0,9%). SovX at 317 from 316. Cross at 699 from 717.

Stoxx Futures at 2146 / -0,4% (from 2154) with S&P minis at 1320 (+0,0% from 1320, at European close).
VIX index at 22,1 after 22,1 yesterday same time
.
Oil 91,5/107,6 (WTI/Brent) from 91,0/106,8 (+0,5%/+0,7%). Gold at 1576 after 1567 (+0,6%). Copper at 347 from 345 (+0,6%). CRB closes 282,1 from 282,1 (+0,0%).
Baltic Dry down to 1012 from 1034.

EUR 1,254 from 1,253
ECB deposits at EUR 760bn after EUR 761bn
All levels European COB 17:00 CET

Rest of week:
Long weekend with Monday off in some of Continental Europe & Memorial Day in the US. Running out of hard data. Market subject to latest rumour in one way or another. EZ hard data starting mid week. Big Friday US data dump!

Germany: Tue CPI fcst 2.2% unch YoY, Thu Retails Sales fcst +0.2% after 0.8% MoM & Unemployment fcst 6.8% unch
France:  Wed Apr jobseekers fcst 2904k after 2884k, Thu Cons spending fcst +0.3% Mom after -2.9%
EZ: Wed M3 fcst 3.4% after 3.2%. EZ confidence, Wed EZ CPI fcst 2.5% after 2.6%. Fri Unemployment and PMI confirmation
Periphery: IT Thu CPI fcst 3.6% YoY after 3.7%, Fri unemployment & Budget SP Tue Retails sales, Wed CPI fcst 2.0%, Thu Housing permits. GR Retail sales Thu. PMI Fri
US: Tue Case Shiller housing, Cons conf fcst 69.5 after 69.2, Wed MBA mortgages & Home Sales, Thu Claims, Chicago Purchasing. Fri non-farm payrolls, personal income, ISM, Constr Spending

Click link on title or below for today’s musical support:
http://youtu.be/aj1rUJ8rIiE
(Absolutely amazing guitar work!Probably the best guitar-duo I know.  I’d love to be only at 5% of their feats and I’d hate to be slapped like Gabriela’s guitar...)