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 15 June 2012

15 Jun 2012 – " Hey Hey, My My (Into the Black) " (Neil Young, 1979)

15 Jun 2012 – " Hey Hey, My My (Into the Black) " (Neil Young, 1979)

There is nothing like a good show of faith like BOE’s King’s “large black cloud of uncertainty” to get you going on a Friday morning. Rumours of the CBU’s (Central Banks United) readiness to stand-by whatever happens after the weekend were good for a close up 1% in the US, although off their highs, while most of Asia closed... about flattish to flattish plus, as most often than not this week, and ending the latter on average about 1.5% higher.

European opening quotes all better, across the board. Still, as you never know,  EGBs opened better, too, from the Core to the Periphery with especially Italy catching up, tighter by over 10 bp, and moving back towards the 6%-mark (having flirted with 6.30% yesterday morning). Spain likewise a little stronger, but at 6.85% still very near the fatal unlucky 7. A first attempt to break through 6% was eventually short-lived for BTPs, but helped Spain crawl another 5 bp tighter. With equities up 1%, credit tightened by 4-6.
Not much impact of slightly loose canon, but lately much buzzed about (and often ahead of the curve) rating agency Egan-Jones taking France down to BBB+ from A-.

Not much data to speak of. Bank of Spain adjusted figures on regional debt, which showed an increase to EUR 145bn (13.5% of GDP), bringing Spain’s total public debt to 72.1% of GDP in Q1 (after 68.5 in Q4 /2011). With a GDP at EUR 1,074bn, adding EUR 100bn would bring the ratio to 81.4%.

Having a bit of a Risk On morning pushing equities up, probably pretty much into the void. Banking union talk ongoing, central bank readiness. An equity bail-out?
Second attempt by Italy and Spain to tighten down to 5.98% (-17) and 6.80% (-9) respectively. AFB tighter by 5. Core wobbly on closing levels, but not trading off despite the equity / credit performance. Waiting…
Periphery not holding symbolic levels, transferring a couple of ticks to the Core. Smallest communicating vessels micro-movements. Waiting…

Round of US data misses didn’t seem to hurt sentiment immediately (as CBU support remains hoped for): Empire Manu down to 2.3 (fcst 12.5 after 17.1); US May Industrial Production at -0.1% (fcst +0.1% after 1.1%); Capacity Utilization 79% (fcst 79.2% unch) and finally Jun Michigan confidence at 74.1 (fcst 77.5 after 79.3). Well, all figures below forecast and pointing to a slowdown.
Had seemingly no impact on equities, but did help EGBs pay up, although Bunds only sluggishly and as laggard to the Soft Core. Spain drifting back to opening levels. Italy stuck above 6%, if only just so.

Odd close. Obviously the equity hopefuls are on board, as well as the bears in EGBs. Good final and conclusive Italian dash through the 6% into the close (-23 to 5.92%), likewise for the AFB team (-8 to -10) and both the EFSF and the EIB.
Italian tightening move is flat across the curve, while Spain’s curve is still flattening out through short-end underperformance with the 5% cut-off now in 2 YRS, 6% cut-off in 4 YRS.

New Issues on hold.

And next week?  Light on hard market data, heavy on political agenda (G20, Ecofin, Greece, Spanish bank audit results)...
Mostly European sentiment indicators to start the week. FED on Wed. EZ PMI data on Thu. US data dump on Thu.
Supply-wise, mainly bills until Wed with the German 0% Jun 2014 auction. Spanish and French short to medium term bonds on Thu.
In case of emergency, break piggy bank and buy Swiss 2 YRS at -0.34% - or 5 YRS at -0.03%, if you don’t feel like going too much into negative territory.

Hey Hey, My My...

Closing levels:
10 YRS Yields: Germany 1,45% (-4); Luxembourg 1,83% (-6); Finland 1,88% (-6); Swaps 1,88% (-4); Netherlands 1,94% (-6); Austria 2,33% (-11); EIB 2,52% (-9); France 2,58% (-10); EFSF 2,67% (-8); Belgium 3,08% (-9); Italy 5,92% (-23); Spain 6,86% (-3).10 YRS

Spreads: Luxembourg 38bp (-2); Finland 43bp (-2); Swaps 43bp (-4); Netherlands 49bp (-2); Austria 88bp (-7); EIB 107bp (-5); France 113bp (-6); EFSF 122bp (-4); Belgium 163bp (-5); Italy 447bp (-19); Spain 541bp (+1).

Greek bonds guesstimates: Trading up quite strongly with 2023s down to 27% from 28.25% and 2042s at 22.75% from 23.25%. (20.25% and 16.75% before elections).

EUR swap curve 2-5 YRS 43bp (unch); 5-10 YRS 58bp (+1,0) 10-30 YRS 27bp (-6,0). Good x-long recovery.
2 YRS German BKOs closed 0,070% (-2) and 5 YRS OBLs 0,52% (-3)

Main at 175 from 180 (tighter by 2,8%); Financials at 279 after 285 ( tighter by 2,1%). SovX at 318 from 322. Cross at 678 from 702.

Stoxx Futures at 2167 / +0,7% (from 2152) with S&P minis at 1331 (+0,9% from 1319, at European close). In sync.
VIX index at 22,3 after 23,0 yesterday same time.

Oil 84,0/98,0 (WTI/Brent) from 83,0/97,0 (+1,2%/+1,0%). Gold at 1627 after 1623 (+0,3%). Copper at 340 from 335 (+1,5%). CRB closes 273,0 from 271,0 (+0,7%).
Baltic Dry up closing the week up again 1.3% to 924 from 912.

EUR 1,264 from 1,261
ECB deposits down to EUR 700bn after EUR 704bn.

All levels COB 17:30 CET

On the week (compared to Fri 08 Jun COB):
Oh yes, markets are still suffering mood swings worth a deeper discussion with Dr. Freud, but then again reality is harsh and that can everyone’s kicking around seems to be more a boomerang than anything else. Spain had closed the week in grand manner, telling all to get lost and in no need for help (“TorĂ©ador / Votre Toast, je peux vous le rendre”) (link), but decided over the weekend that an unconditional credit line wouldn’t harm to fix its banking system. That “shock and awe” attempt had a half-time of a couple of hours, before markets went belly up on that “Unfinished Sympathy” (link), lacking nuts and bolts, sending Spanish bonds wider by 30 bp. Tuesday, depression started to sink in seriously and the mood turned to “November Rain” (link), as Spain kept widening, but so were the rest of EGBs with Bunds getting a beating at the same time. And the pressure was kept on Wednesday, as players seemed to capitulate and taking a “Downtown Train” (link), as if pulling out of Europe for good. “In a Broken Dream” (link) of the EZ spirit, we had Spain testing the 7% mark yesterday.

In a bashing of epic proportions, Spailout, Take 1, pushed BONOs up to 80 bp wider to the tipping point of 7% and out by about 70 basis points on the week, contaminating Italy and then eventually everyone, including Germany, as the final link of a chain of potential paymasters. So eventually, everyone ended up as looser this week.Relatively speaking the Soft Core held best, all things considered. Interestingly, Credit indices are flat on the week. While always rosy equities took comfort that the CBU will just uphold for ever a carry trade made off about 0% short-term yields and ridiculous long term yields. Should have a look on the Nikkei to get back to reality… Gold in any case a winner.
Oh, and thanks to Rajoy’s text message, the world has been brought to attention that Uganda has a debt/GDP ratio of 29.2%.

10 YRS Yields: Germany 1,45% (+12); Luxembourg 1,83% (+8); Finland 1,88% (+12); Swaps 1,88% (+9); Netherlands 1,94% (+11); Austria 2,33% (+2); EIB 2,52% (+4); France 2,58% (+7); EFSF 2,67% (+7); Belgium 3,08% (+11); Italy 5,92% (+16); Spain 6,86% (+67).10 YRS

Spreads: Luxembourg 38bp (-3); Finland 43bp (unch); Swaps 43bp (-5); Netherlands 49bp (-1); Austria 88bp (-10); EFSF 122bp (-5); France 113bp (-5); Belgium 163bp (-1); Italy 447bp (+4); Spain 541bp (+55).

Greek bonds guesstimates: Trading up quite strongly on the week with 2023s down to 27% from 28.5% and 2042s at 22.75% from 23.5%. (20.25% and 16.75% before elections).

EUR swap curve 2-5 YRS 43bp (+3,7); 5-10 YRS 58bp (+5,1) 10-30 YRS 27bp (+7,7). Steeper throughout all segments.
2 YRS German BKOs closed 0,07% (+3) and 5 YRS OBLs 0,52% (+8), on the week.

Main at 175 from 176 (about unch); Financials at 279 after 279 (unch). SovX at 318 from 320. Cross at 678 from 697.

Stoxx Futures at 2167 / +1,1% from 2143 with S&P minis at 1331 / +1,8% from 1308, at European COB last week.
VIX index at 22,3 after 22,5 last week.

Oil 84,0/98,0 (WTI/Brent) from 83,2/98,0 (+1,0%/+0,0%). Gold at 1627 after 1583 (+2,8%). Copper at 340 from 329 (+3,4%) . CRB closes 273,0 from 270,8 (+0,8%). Gold always doing fine in QE mode.
After a wobbly previous week, during which the Baltic Dry finally found a floor, things were better over the last days with today’s fixing at 924 from 877 last Friday (+5.4%).

EUR 1,264 after 1,248 last Friday
All levels Friday COB 17:30 CET

Next Week:
Quite light on hard data and mostly sentiment indicators to start the week. FED on Wed. PMI data on Thu. US data dump on Thu.
All about bills until Wed with German 0% Jun 2014 auction. Spanish and French short to medium term bonds on Thu.
Light on hard market data, heavy on political agenda (G20, Ecofin, Greece, Spanish bank audit results)

Germany: Tue ZEW Eco fcst 5 after 10.8 Current 39 after 44.1 Wed PPI fcst 2.3% after 2.4% YoY Thu PMI Manu fcst 45.4 after 45.2 Services fcst 51.7 after 51.8 Fri IFO Biz fcst 105.9 after 106.9 Current fcst 112 after 113.3 Expect 99.9 after 100.9
France: Tue Company / Prod Outlook Biz Conf fcst 92 after 93 Thu PMI Manu fcst 44.7 unch Services fcst 45.2 after 45.1
EZ: Thu Comp PMI fcst 45.8 after 46 Construction -3.8% YoY prior
Periphery: IT Wed Indu Orders prior -14.3% YoY Fri Cons Conf fcst 86 after 86.5 SP Wed trade balance Thu mortgages
US: Mon NAHB Tue Housing Starts fcst 720k after 717k Wed Mortgage application & FOMC Thu Claims 386k prior PMI prior  53.9 Philly Fed Home Sales fsct 4.57m after 4.62m Leading Ind fcst +0.1% after -0.1%
Asia: China Flash PMI on Thu, Fri leading indics

Click link on title or below for today’s musical support:
(Once you’re gone, You can’t come back... Better to burn out, then to fade away...  Well, about to test that...)

Thursday 14 June 2012

14 Jun 2012 – " In A Broken Dream " (Edwin Collins & Bernard Butler, 2001)

14 Jun 2012 – " In A Broken Dream " (Edwin Collins & Bernard Butler, 2001)

Weak last hour US close, which corrected the previous day’s gains to end on Monday levels. Spailout back with a vengeance with Moody’s fiercely downgrading Spain by 3 notches to Baa3 (from A3) and Cyprus down to Ba3 (, who seems to be already shopping a EUR 4bn bail-out).
The guys at Moody’s were behind their peers’ curve anyway (see 11 Jun post “Unfinished Sympathy”), but have now taken the lead by putting the Kingdom right away on junk outlook. ECB Haircut increase from 4 to 9 % in 10 YRS and probably worse from 1.5 to 6.5% in LTRO-laden 3 YRS paper (ECB link p.73) is thus now hinging on DBRS’ views (Eurosystem credit assessment framework ECAF link).
Asian close softer, but here again, the middle way strategy not to get carried away is worthwhile and reduces volatility.
Relatively tame European reaction with still shell-shocked and traumatized Bunds edging up just a little, despite Spain widening right away hitting 6.85% all-time highs and knocking on Italy to 6.25%. Equities about unchanged. EUR about unchanged. Commodities a little weaker, having been pushed lower in the US session.
Asian strategy? Don’t move, don’t get carried away? Or just markets going catatonic? PTSD (, as most symptoms seem fitting the actual market behaviour)?

German wholesale prices dipping to 1.7% from 2.4% YoY in May. Spanish house prices for Q1 further down 12.6% YoY, -5% QoQ, a record drop. Price graph looks similar to Bund yield blotter... Dutch Apr retail sales tanking 8.7% lower from revised 2.4% in Mar. Austerity, when you hit... Dutch economy diving. If this goes on, we’ll have DSLs moving into the AF(&B) bracket in the coming months. EZ CPI unchanged at 2.4% YoY.

Danish, Dutch and Swedish pension funds regulation changes on liability management said to be behind some of the Bund sell-off and movement on the long end, as they could be subject to more lenient valuations on their liability side, given historic low yields. If that were really the case, the fuse to yet another time-bomb might have been lit there, as gaping holes might just pop up years from now with totally under-funded pensions.
Ok, let’s procrastinate on these for the moment and shift those bail-outs to further away in time.

Had Spanish 10s hitting the 7%-mark ahead of the Italian auction, before retaking some colour after the results. Italy sold the targeted EUR 4.5bn with EUR 3bn 3 YRS sold at 5.30% (in line with yesterday’s close), of course a huge surge from last month’s 3.19%, as well as EUR 0.63bn 7 YRS at 6.10% and EUR 0.87bn 8 YRS at 6.13% (from prior 5.21% and 5.33%). Bid to covers about unchanged to a tick lower, probably courtesy of a disciplined primary dealer group.
As it happens, figures for the Italian general government debt for Apr were published today, growing 3.1% YoY to a record EUR 1.949bn (122.7% of expected 2012 GDP).
Talking of record, Greek Q1 unemployment grew further to 22.6% from 20.7% in Q4 (and 15.9% in Q1/201). Youth unemployment stood at 52.7%.

Diverse Spanish government officials on the tape, repeating (why?) that actual yields are not sustainable, but that there’s European support (still negotiating conditions…). Feels like over the weekend and ahead of the Greek elections results and G20 meeting, this will end into a “real” bail-out of the country, Ireland-style, as the whole bickering and formal fine print interpretations of how to channel what money into which bank is just wasting precious time.
As it happens, leaks of the future conditionality on the FROB credit line went to press, among which VAT hike, eliminating housing deductions or delaying the retirement age. So conditionality will follow.

Lunchtime recovery in the Periphery and in equities with Spain back to low 6.90s% and Italy just a little wider from COB, shy of 6.25%. Stoxx about 1% off its lows, +0.5% to close. Credit drifting sideways. Likewise for other asset classes. Then back lower, as there was no specific reason to stay higher, after all. US pre-open players slightly on the gloomy side, finally pushing EGB yields a couple of ticks lower and Spain back to low mid 6.90s.

As most often lately, US jobless claims disappointed at 386k (fcst 375k after 377k, revised to 380k) with continuous claims on the rise, too, while, while CPI stood at 1.7% YoY / ex 2.3% (fcst 1.8% after 2.3% / fcst 2.2% after 2.3%). Sticky Core CPI.
Added a touch of pressure on risk and shaved another couple of basis points from EGBs, before reverting on risk turning flat again.

In absence of further and especially concrete news, people would probably just like to close books already for the weekend and see what happens thereafter (Greek elections, Spanish Audit, Ecofin, G20 etc.)
By and large a flat close with exception of Italy getting a little better and Spain a little worse (All things relative here, as one gets used to pain...It's just yet another historic high close...But off the 7% intra-day high...).

New Issues down to a trickle with Rentenbank offering EUR 250m 7 YRS flat to swaps and low IG German engine maker MTU Aero Engines’ maiden flight with EUR 250m 5 YRS at MS +165. Happen both to be German issuers.

Closing levels:
10 YRS Yields: Germany 1,49% (-1); Luxembourg 1,89% (unch); Finland 1,94% (-1); Swaps 1,92% (-3); Netherlands 2,00% (-3); Austria 2,44% (-5); EIB 2,61% (unch); France 2,68% (-4); EFSF 2,75% (+1); Belgium 3,17% (-4); Italy 6,15% (-5); Spain 6,89% (+17).

10 YRS Spreads: Luxembourg 40bp (+1); Finland 45bp (unch); Swaps 47bp (+1); Netherlands 51bp (-2); Austria 95bp (-4); EIB 112bp (+1); France 119bp (-4); EFSF 126bp (+1); Belgium 168bp (-4); Italy 466bp (-4); Spain 540bp (+18).

EUR swap curve 2-5 YRS 43bp (-0,5); 5-10 YRS 57bp (-0,5) 10-30 YRS 33bp (+3,0).
2 YRS German BKOs closed 0,090% (-4) and 5 YRS OBLs 0,56% (-4).

Main at 180 from 182 (1,1% tighter); Financials at 285 after 290 (1,7% tighter). SovX unch at 322. Cross at 702 from 709.

Stoxx Futures at 2152 / +0,6% (from 2139) with S&P minis at 1319 (+0,2% from 1317, at European close).
VIX index at 24,1 after 23,0 yesterday same time.

Oil 83,0/97,0 (WTI/Brent) from 83,5/97,5 (-0,6%/-0,5%). Gold at 1623 after 1621 (+0,1%). Copper at 335 from 334 (+0,4%). CRB at COB 271,0 (unch).
Baltic Dry up again 1.1% to 912 from 902.

EUR 1,261 from 1,259
ECB deposits at EUR 704bn after EUR 798bn.  Deposits only down EUR 94bn to start the new reserve maintenance period. While much less, it’s a far cry from the EUR 130-140bn drops of the past months. Looks like money is getting hoarded. Had ECB’s Nowotny thinking aloud about 0% rates and how this would keep parking that much at the ECB. Makes sense...

Greek bonds guesstimates: Trading better with 2023s at 28.25% from 29% and 2042s at 23.25% from 23.75%. Then again, Greek stocks up over 10% on the day on rumours of polls giving New Democracy the lead.
(20.25% and 16.75% before elections).

All levels COB 17:30 CET

Germany: nada / France: nada / pretty much nada elsewhere, too
US: Fri May IP fcst +0.1% after 1.1%, Capacity  Utilization fcst 79.2% unch, Jun Michigan confidence 77.5 after 79.3

Click link on title or below for today’s musical support:
(Couldn’t find any video material of the original by Rod Stewart & Python Lee Jackson, recorded 1968, which is just an awesome classic and had Rod Stewart as its best, before turning all pop and mushy audio)

Wednesday 13 June 2012

13 Jun 2012 – " Downtown Train " (Tom Waits, 1985)

13 Jun 2012 – " Downtown Train " (Tom Waits, 1985)

Good US close, once Europe headed home, with a steady 3-stage rebound that had Dow and co close up over 1%. Asia mainly sideways, having been warned over the last few days that sticking close to home was probably the wise choice. Some late closer pushed well into positive territory on positive European starting quotes. Good jump in Japanese machine orders with 6.6% YoY in Apr beating +4.9% estimates (after -1.1%). No further Asian data. World Bank outlook wording similar to previous OECDs, IMFs and friends’ oracles and pointing to EZ headwinds.
EUR still rather static, on and off the 25 handle. EZ Final May CPI data dump rather unsurprising, maybe with the exception of Germany’s revised up one tick to 2.2% YoY, as somehow already acknowledged by the BuBa. Hardly worrying, though.

Puzzling. Again a wobbly start in EGBs, especially for the Hard Core with Bunds dumped right from the start (checking the future over 2 days reveals a pretty straight diagonal going down from left to right with only few rebounds) and taking the yield up to 1.50% ahead of this morning’s auction (up 7 bp from COB and 17 from Friday). This brings us back to mid May levels, when that level was first taken out, leading to a 1.13% intra-day low on 01 Jun. Unravelling of cheap money dreams? Dutch past 2% again, Austria back to 2.50% and France to 2.75%. Ok, remains bearable from an historic point of view.
Periphery had a short spike out at open to 6.18%, respectively 6.72% before finding solace in falling Bunds. Italy then back to 6.10%, but with no real correction of yesterday’s flattening move. Spain 6.65% (6.83% high yesterday, but definitively Nov 2011 levels).

Sideways market ahead of the auction results. Italy sold the targeted EUR 6.5bn (please excuse yesterday’s typo stating EUR 8.5bn) 12m at 3.97% (after 2.34% last month). Steep increase, but full auction. Full auction, but steep increase. Highest level since the LTRO-induced recovery (Highs were 6.09% in Nov and 5.95% in Dec 2011).
Getting EUR 3bn of 3 YRS BTPs and EUR 1.5bn of 2019 & 2020 on sales tomorrow. 3 YRS were auctioned at 3.91% last month after 3.89% in Apr and trade now in the 5.30s. So we still remain far away from the Nov 2011 auction high at 7.89%, but that’s of small comfort.
Germany tapped its 10-year for EUR 5bn at 1.52% (was trading 1.50% ahead of the auction). For once, not a record low, as last month auction was at 1.47%. Fears had done rounds about yet another “failed” German auction with the BuBa having to pick up slack for later intervention, so that wasn’t the case. Still, that the average yield came at a discount to the already heavily discounted level traded this morning shows the BOff (Bond Off) sentiment prevailing since yesterday. Had a short lived 40 cts uptick in Bunds on the news. Finally, EUR 1bn in German 2018 ILB were sold at -0.31%, but German ILBs is not the biggest market around.
Market comments of yesterday’s bond price action all about puzzlement and few firm explanations.

EZ Industrial Production better than forecast at sa -2.3% (fcst -2.7% after -2.2%, revised -1.5%), but with no impact.

Strange lunchtime picture of yet another day of German “demise”: all asset classes flattish, risk better in financials, BUT German Bunds out by 10bp to 1.53 (hence below auction level) and on the other end of the EGB spectrum Spain tighter by just 1 bp, but Italy getting some colour back at 6.09%. Pretty much opening quote. Hard Core EZ wider by 8 and Soft Core and Belgium by 1– 3 bp. EIB /EFSF equally wider by 7-9 bp. Bund futures down 100 ticks…

US kicking off the afternoon with tame May PPI numbers at +0.7% / 2.7% ex (fcst 1.2% after 1.9%, ex 2.8% after 2.7%) and Retails Sales a bit under expectations (-0.2% fcst -0.2% after +0.1%, but with low ex cars / gas numbers) and with Apr data revised lower. Apr Biz inventories at tick over forecast at 0.4% in Apr (fcst unch at 0.3%).

Had finally German 10s crawl back below the 1.50%-mark as equities turned soft(er), but barely a furious spurt. Tried some tea leaves reading and charts, but difficult to chart well uncharted territory…50d mavg is 1.527% / 100d 1.703%. Taking the last yield “spike” in March (2.07%) as start of the last leg to the 1.13% (01 Jun) low gives us levels at 1.35%, 1.49% and 1.60%. As such, holding the actual levels would be a rather important chart signal.
On futures, the equivalent 133.95-145.97 and back move gives 143.13 / 141.38 / 139.96.
Given the fact that the all-time low was only traded about 2 weeks ago, the relative increase of over 33% in such a short time-span is rather scary. Relative stronger move than for the Periphery, for instance, albeit from spaced-out level. Although VaR has suffered some serious cetacean credibility issues of late, this movement on the Core of Core will end blasting everyone's systems and could trigger reductions in positions here as well.

Not much to chew on otherwise. Grexit scenarios doing rounds. Softer periphery. Price action in EGBs more pavlovian, binary and understandable for a while, as in: Periphery up, Bunds down… And then, finally, no... With US equities rising and lifting Europe back again from its lows, Bunds took the Down Town Train again. Choppy close in equities near their lows.
Odd man out is the EUR, which kept a firmer tone and accelerated some 80 pips in the US session (Feb 1.3490 01 Jun 1.229 move has some resistance at 1.257, then 1.275) and taking out shorts.
Greek cash outflows and this weekend’s election seemingly only casual conversation material any more. Odd. Spailout? Forgotten. Very odd.

New Issues market a bit on back-burner today with the biggest deal a EUR 750m increase of French 10 YRS covered bonds by CRH. Add EUR 500m 8 RS for the German Land of Hessen at MS +5 and EUR 350m from low IG Manpower at 6 YRS at MS +300 to complete the picture.
Note that placement figures for yesterday’s EFSF 25 YRS seemed bare of Asian participation. Then again, such maturities tend to be way out of Asian CB interest.

Closing levels:
10 YRS Yields: Germany 1,50% (+7); Luxembourg 1,89% (+5); Finland 1,95% (+6); Swaps 1,95% (+7); Netherlands 2,03% (+6); Austria 2,49% (+4); EIB 2,61% (+6); France 2,72% (+2); EFSF 2,74% (+6); Belgium 3,21% (+3); Italy 6,20% (+5); Spain 6,72% (+4).

10 YRS Spreads: Luxembourg 39bp (-2); Finland 45bp (-1); Swaps 46bp (+1); Netherlands 53bp (-1); Austria 99bp (-4); EIB 111bp (-1); France 123bp (-6); EFSF 125bp (-1); Belgium 172bp (-4); Italy 470bp (-3); Spain 522bp (-3).

EUR swap curve 2-5 YRS 43,4bp (+1,3); 5-10 YRS 57,3bp (+1,4) 10-30 YRS 30,2bp (+9,1).
2 YRS German BKOs closed 0,130% (+3,7) and 5 YRS OBLs 0,59% (+5).

Main at 182 from 183; Financials at 290 after 295 (1,7% tighter). SovX at 322 from 323. Cross at 709 from 715.

Stoxx Futures at 2139 / -0,2% (from 2143) with S&P minis at 1317 (+0,6% from 1310, at European close).
VIX index at 23,0 after 23,6 yesterday same time.

Oil 83,5/97,7 (WTI/Brent) from 83,6/97,6 (-0,1%/+0,1%). Gold at 1621 after 1613 (+0,5%). Copper at 334 from 334 (-0,2%). CRB closes 271,1 from 271,5 (-0,1%).
Baltic Dry up again 1% to 902 after 893.

EUR 1,259 from 1,247

ECB deposits at EUR 798bn after EUR 787bn. Starting a new reserve maintenance period today, so should see the usual EUR 130bn or so dip as of tomorrow’s figures.

Greek bonds guesstimates: Sideways with 2023s unchanged at 29% and 2042s at 23.75% from 24% (20.25% and 16.75% before elections).

All levels COB 17:30 CET

Rest of week:
Germany: Thu Wholesale PX fcst 2.4% YoY
EZ: Thu ECB monthly, EZ CPI fcst 2.4% unch, EZ Q1 employment and trade balance
Periphery: IT Thu Gov Debt / SP Thu House prices
US: Thu CPI & Claims, Fri IP, Cap Util & U Michigan

Click link on title or below for today’s musical support:
(All my dreams, all my dreams fall like rain  / On a downtown train .. Well, not just the tears...)

Tuesday 12 June 2012

12 Jun 2012 – " November Rain " (Guns ‘N Roses feat. Elton John, 1991)

12 Jun 2012 – " November Rain " (Guns ‘N Roses feat. Elton John, 1991)

Rather tame open. Given the sell-off in the US on Spailout disappointment, Asia fared quite well and closed off lows, down 0.5 to 1% overall. Not much in overnight news. Seeing Yuan loans expanding at a much brisker pace than expected (CNY 793bn after 682, fcst 700) further adding to the mixed picture data out of China has sent lately. No real opening gaps, pre-market quotes pretty much where left at COB, with the exception of Oil that is lower. EUR had a rough night, trading to down 1.245 before opening shy of 25 in Europe.

Pretty much nothing in terms of European data flow. Soft start on the whole EGB curve with Italy and Spain wider within the hour, but without getting traction on the Core EZ (probably linked to Austrian and Dutch long end auction hedging). In any case the periphery rapidly drifted out by 10 to 15 bp wider to hit 6.15% (a level last seen end of Jan for Italy) and past 6.60%n but with no immediate flight to quality reaction into Core EZ bonds, maybe hampered by the Dutch and Austrian long auction results. Credit a couple of ticks wider, despite a slight uptick in equities.
Given Core softness and lack of further pressure, BTPs and BONOs recovered from their widest levels going into lunch.

More of the same throughout the afternoon: stable equities, albeit in the smallest of rebounds, quite static actually, heavy bonds from the Core out to the periphery. As if the market had suddenly realized that Germany would finally be on the hook, too, at some point in time. Seems an odd timing for realizing this.
Slapped my pc several times to see if something wasn’t stuck... Obviously tomorrow’s 10 YRS Bund auction is a good excuse to mark them lower and scoop them out then.
Spain trading out November 2011 highs at 6.70%... Worrisome short end flattener with 2 YRS out by over 30 bp and now back above 5%. Short end movement relatively fiercer in Italy with 2s out by over 30 as well, compared to 10s by 15. 3 YRS Italians now over 5%, too, and to be auctioned on Thursday, next to 2019 & 2020. Won’t help.
[Error message 404 : Spailout installation aborted]

Risk Off and Bond Off day, odd. ROff & BOff... ROffBOff? No flight to quality. Just flight...
Surprising the EUR is holding relatively well and hasn’t totally crashed yet, as, when no one wants nothing, then pull out of the currency...
November mood. Must be the weather...

Spain squeezed off the EUR-area high of 6.83% by 15 bp in the closing hour. Seen like this, and against very weak Bunds, it only lost 7 basis points... Italy closing unchanged to Bunds spread-wise. Still, Spain about 50 bp wider than Friday and Italy 40. Odd. Must be the weather...

Supply in long bonds from Austria and the Netherlands, in bills from Belgium and Greece. The Dutch sold EUR 1.65bn of its 20-year bond 2.5% 2033, on a EUR 1.5-2.5bn tap range, at 2.34% (after 2.77% in March). Dutch auctions on “tap”, hence a slightly different way to bring to market with the treasury deciding when to stop, hence no B/C or other stats. Might have been a little on the small side to really convince. Austria issued EUR 660m of 10s at 2.36% (after 2.63% in May) and 440m 2062 at 3.02% (after a launch at 3.84% in January this year).
On the bills-side, Greece sold EUR 1.625bn 6m at 4.73% (after 4.69% last month and 4.55% before). Belgium sold EUR 1.4bn 3m at 0.20% (after 0.21% ) and EUR 1.66bn 12m at 0.56% (after 0.63%), an all-time low.
Getting a chunk of EUR 8.5bn Italian 12m bills (2.34% at last auction in May) tomorrow and EUR 5bn German 10s (1.47% in May), next to EUR 1bn 2018 ILBs, tomorrow. Bunds about 10 cheaper than Friday. Should fare ok.

After yesterday’s whooping EUR 11.25bn in EUR new issues, things were just a little bit quieter today with the EFSF centre-stage with EUR 1.5bn 25 YRS, adding to the x-long supply of the day, next to CADES adding EUR 1bn on an outstanding 2025 benchmark. Another senior financial for French BFCM with EUR 750m 5 YRS at MS +167, next to 3 non-jumbo covered bond issues, courtesy of Norwegian Terra Bolig in 7 YRS for EUR 650m at MS +55, next to German Aareal and Deutsche Hypo, both for EUR 500m 5 YRS at MS +20 and MS +9 respectively. Final, one corporate from German fertilizer K+S with EUR 500m 5 YRS sold at MS +120. Not bad for a day that was rather risk off and certainly bond off...

Closing levels:
10 YRS Yields: Germany 1,43% (+12); Luxembourg 1,84% (+11); Finland 1,89% (+14); Netherlands 1,97% (+14); Swaps 1,88% (+9); Austria 2,45% (+11); EIB 2,55% (+11); France 2,71% (+15); EFSF 2,69% (+11); Belgium 3,18% (+15); Italy 6,15% (+13); Spain 6,68% (+20).

10 YRS Spreads: Luxembourg 41bp (-1); Finland 46bp (+1); Netherlands 54bp (+1); Swaps 46bp (-2); Austria 103bp (-1); EIB 112bp (-2); France 128bp (+3); EFSF 126bp (-1); Belgium 176bp (+2); Italy 473bp (unch); Spain 526bp (+7).

EUR swap curve 2-5 YRS 42,2bp (+1,7); 5-10 YRS 55,7bp (+5,3) 10-30 YRS 21,1bp (+1,8).
2 YRS German BKOs closed 0,090% (+4,4) and 5 YRS OBLs 0,54% (+11).

Main at 183 from 178 (3,0% wider); Financials at 295 after 285 (3,2% wider). SovX at 323 from 322. Cross at 715 from 695.

Stoxx Futures at 2143 / +0,3% (from 2137) with S&P minis at 1310 (-0,2% from 1313, at European close).
VIX index at 23,6 after 21,4 yesterday same time.

Oil 83,6/97,6 (WTI/Brent) from 83,3/98,5 (+0,3%/-0,9%). Gold at 1613 after 1585 (+1,8%). Copper at 334 from 333 (+0,4%). CRB closes 271,5 from 271,6 (-0,1%).
Baltic Dry back in recovery mode with a fixing at 893 after 884 (+1%).

EUR 1,247 from 1,249
ECB deposits at EUR 787bn after EUR 788bn.
Greek bonds guesstimates: 2023s softer at 29% from 28.5% and 2042s at 24% from 23.5% (20.25% and 16.75% before elections).
All levels COB 17:30 CET

Rest of week:
World Bank Global eco forecast release tomorrow.
Germany: Wed May CPI fcst 2.1% unch YoY, Thu Wholesale PX fcst 2.4% YoY
France: Wed CPI
EZ: Wed EZ Apr IP fcst -2.7% after -2.2%, Thu ECB monthly, EZ CPI fcst 2.4% unch, EZ Q1 employment and trade balance
Periphery: IT Wed CPI, Thu Gov Debt / SP Wed CPI, Thu House prices
US: Wed PPI, Retails Sales and Biz inventories, Thu CPI & Claims, Fri IP, Cap Util & U Michigan

Click link on title or below for today’s musical support:
(So never mind the darkness we still can find a way / Nothin' lasts forever even cold November rain –especially in June...)
(Yes, it is odd than Sir Elton was up there. But, hell, why not... And, yes, Slash is Guitar God!)

Monday 11 June 2012

11 Jun 2012 – " Unfinished Sympathy " (Massive Attack, 1991)

11 Jun 2012 – " Unfinished Sympathy " (Massive Attack, 1991)

What an exciting weekend (outside the weather): First, Moody’s growled after US close about rating downside of pretty much all, in case of Grexit, and of Spain in particular.  Then we had Spain giving in, or about to do so, (before rushing to the football field to play Italy...) and set to receiver up to EUR 100bn aid for its banks. Small (and as it seems capital) print not clear yet, especially as touted without (or few) (or yet to defined) conditions, depending on whom you ask. Oh, by the way, it’s not a bail-out. It’s a credit line...
Tons of things to chew on to start the week, but tons of Redux as well and pavlovian reactions: Will Ireland get the same preferential treatment, as they were brought down by the very same banking woes (Immediate demand already voiced)? Will Finland get collateral (Immediate demand already voiced)? If the loans don’t come from the ESM (, which Germany was about to sign on 01 July), but from the EFSF, what happens with the 13% quota of Spain (Re-dispatched to Germany, France...and Italy? Immediate question answered by no one). German camp very much not into “no special conditions” (Immediate ire already voiced). Cyprus very much interested in such credit line at these conditions (Voiced)... And Greece? Syriza probably very interested in the possibility to negotiate the conditionality of the bail-out, too...
The credit line on the FROB should be part of the official debt, so Spain’s debt/GDP ratio will soar. Coming back to Moody’s, who might not find that subtle difference to its likings; it the last rating agency to hold Spain on the single A line, meaning that a downgrade into the Baa field would trigger Spain to move into a lower rating bucket at the ECB, increasing the haircut by 5%.
Just to be fully complete Ugandan debt/GDP stood at 29.2% (2011.Source: IMF).

Mixed Chinese data dump over the WE: CPI down to 3% YoY (fcst 3.2%), lowest in 3 years, and IP at +9.6 % (fcst +9.8 % after 9.3%). Retail sales up 13.8 % (fcst 14.2% after 14.1%). All rather softish... On the stronger side, trade grew more than expected with Exports up 15.3% YoY (fcst 6.8% after 4.9%), mainly due to US increases, and Imports as well more than expected at 12.7% (fcst 5% after 3%).
Mixed data, but less bad than the surprise POBC cut might have led one to believe. Controlled soft landing? Slow enough for some stimulus?
French IP higher than expect at +0.9% YoY (fcst -0.3% after -0.9%), but balanced by manufacturing down -1.4% YoY (fcst -0.9% after -0.3%). Final Italian Q1/GDP confirmed a tick lower than previous at -1.4% (from -1.3%), so dire.

Very strong Asian session on ROn with equities up some 2% until European open. European open strong, but not explosive. Periphery yields down 12 bp for Italy and up to 20 for Spain, hitting the 6% mark, while the other EGBs went about 5 softer. Equities up 2%. Good credit performance with Main down 6 and especially Financials down 13. EUR of course swinging over the 26 handle and taking commodities along for a 2% increase.
Periphery excitement petering out by mid- / late morning with Spain trailing wider from its opening levels, at less than 10 tighter from Friday, but with equities and credit still remaining on initial higher levels. EGBs pretty much put at initial wider levels, despite the softening of the mood, before very, very slowly crawling back as the Spailout effect started to wane. No notable initial impact of the French election results on OATs.
By noon, the whole magic was over with Italy wider by 8 and Spain by 1 from Friday COB. Short lived... Then again, given all the above mentioned questions and open points, probably less a surprise. As it seems, the memorandum of understanding for the aid package has not begun to be drafted, state EU sources. Very clear contagion to Italy.

Acceleration of the worsening sentiment as US accounts came in with both Italy and Spain up to 20 bp wider and brushing respectively 6.00% and 6.40%, dragging the Soft Core EZ along with the AFB (Austria, France & Belgium) out by about 8 bp. Germany finally unchanged by that time, as equities started to pare gains and credit turned flat to COB. Seems all quite in slow motion, though. Had the seniority of the Spanish bail-out to other creditors raising a lot of questions. No eco figures out of the US to drive direction anywhere else.

All out capitulation in the closing hour with the Periphery out by 25-30 bp and closing over / near symbolic levels of 6% and 6.50%, Bunds reversing into standard flight to quality mode, equities paring their gains and financials drifting near 20 points wider than their opening squeeze. In one word: Ouch!

Germany issued EUR 4bn 6m bills at 0.007% (after 0.067% last month). France, in turn, sold EUR4.5bn 3m at 0.075% (from last 0.082%), EUR 1.8bn 6m at 0.129% (from 0.115%) and EUR 1.4bn 12m at 0.214% (from 0.178%). A cent or two more expensive, but then again... Readying for tomorrow’s long end supply with Dutch 20s and Austrian 10s and 50s (!).

MASSIVE New Issues pile up, right off the start to profit from ROn mood window: New Polish 10 YRS EUR at MS + / 4.00%. EIB adding EUR 350m to an outstanding 2020 deal at MS +55.
In financials, Nordic Swedbank and Svenska Handels in senior deals for EUR 1.25bn each for 3s at 85 and 6s at 92, respectively, as well as DNB Boligkredit for EUR 1.5bn 7 YRS covered bonds at MS+40 for EUR.
Huge corporate line up with no less than 6 deals printed: France Telecom EUR 1bn 10s at MS +122, Volkswagen long 3 YRS EUR 1bn at MS +60, GE 7 YRS EUR 1.25bn at MS +140, Telecom Italia EUR 750m double-trancher with EUR 3 YRS at MS +378 and EUR long 6 YRS EUR at MS +473. Add to this smaller offering of EUR 400m 7 YRS for Michelin and a EUR 250m 10s increase for Suez Env at MS +110.
Wow! Nearly EUR 12bn printed in 12 deals in a single day! Take this! Hope there won’t be any indigestion...

Closing levels:
10 YRS Yields: Germany 1,30% (-3); Luxembourg 1,72% (-2); Finland 1,75% (-1); Netherlands 1,83% (+0); Swaps 1,79% (unch); Austria 2,34% (+3); EIB 2,44% (-4); France 2,56% (+5); EFSF 2,58% (-2); Belgium 3,04% (+6); Italy 6,02% (+26); Spain 6,48% (+30).

10 YRS Spreads: Luxembourg 42bp (+1); Finland 45bp (+2); Netherlands 53bp (+3); Swaps 48bp (unch); Austria 104bp (+6); EIB 114bp (-1); France 125bp (+8); EFSF 128bp (+1); Belgium 173bp (+9); Italy 472bp (+29); Spain 518bp (+32).

EUR swap curve 2-5 YRS 40,5bp (+1,2); 5-10 YRS 50,4bp (-2,5) 10-30 YRS 19,3bp (+0,0).
2 YRS German BKOs closed 0,050% (+0,5) and 5 YRS OBLs 0,43% (-1).

Main at 178 from 176 (1,0% wider); Financials at 285 after 279 (2,2% wider). SovX at 322 from 320. Cross at 695 from 697.

Stoxx Futures at 2137 / -0,3% (from 2143) with S&P minis at 1313 (+0,4% from 1308, at European close).
VIX index at 21,5 after 22,5 yesterday same time.

Oil 83,3/98,5 (WTI/Brent) from 83,2/98,0 (+0,2%/+0,5%). Gold at 1585 after 1583 (+0,1%). Copper at 333 from 329 (+1,3%). CRB closes 271,6 from 270,8 (+0,3%).
Baltic Dry slightly up to 884 from 877.

EUR 1,249 from 1,248
ECB deposits at EUR 788bn after EUR 757bn.
The ECB confirmed once more the absence of any SMP buying last week.

Greek bonds guesstimates: 2023s stable at 28.5% and 2042s at 23.5% (20.25% and 16.75% before elections).

All levels COB 17:30 CET

By the way, I swear to abstain from football-related comments in the coming weeks, as I only like the US version. Still, if I remember well, Real Madrid had Ronaldo and Kaka as collateral with Bankia. Any claw back there?  What bucket? ECB must be looking forward to be fielding a team soon.

Next week:
Europe very light on hard data with mainly inflation figures to be released. Tomorrow long end offers from Austria (10 & 50 YRS) and 20 YRS Dutch bond, as well Greek bills. Wednesday 10 YRS BUND auction and Italian bills. Italian Zeroes on Thu.

World Bank Global eco forecast release tomorrow.
Germany: Wed May CPI fcst 2.1% unch YoY, Thu Wholesale PX fcst 2.4% YoY
France: Wed CPI
EZ: Wed EZ Apr IP fcst -2.7% after -2.2%, Thu ECB monthly, EZ CPI fcst 2.4% unch, EZ Q1 employment and trade balance
Periphery: IT Wed CPI, Thu Gov Debt / SP Wed CPI, Thu House prices
US: Tue Small Biz Optimism, Wed PPI, Retails Sales and Biz inventories, Thu CPI & Claims, Fri IP, Cap Util & U Michigan

Click link on title or below for today’s musical support:
(Just need to put some finishing touches. Here... And there. And here... Oh, and there, too...)