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 13 July 2012

13 Jul 2012 – " Slow & Low " (Beastie Boys, 1986)

13 Jul 2012 – " Slow & Low " (Beastie Boys, 1986)

Overnight news was Chinese Q2 GDP clocking in at the widely expected / leaked / expectation-managed +7.6% YoY (after 8.1%) with Jun IP and Retails sales at 9.5% and 13.7% YoY, about in line. Of course, this is the lowest since Q3/2009, but this feels like soft landing steering about on track, with further “collared” measures at hand if needed, in order to support, but yet not to bubble out things. Eventually, not much news. Need to see after the summer.
On the European front, Moody’s downgraded Italy by 2 notches to Baa2. Not a huge surprise per se, although the wording pointing out outside contagion risk is quite franc. Fitch still at A- (unlike Spain) with DBRS, as accepted ECB collateral-rater at AH- (like Spain). So no imminent ECB haircut hike due to being shifted into the BBB-bucket (ECB grid).
Slightly negative US equity close, off lows, although off highs. Asian close eventually about flat, knowing that its wheels fell off already yesterday (weekly performance -2-3%).

European open actually sanguine, maybe a bit too optimistic with equities trying to catch up with the US (+0.25-0.5%). Italy out by 12 past the 6% mark (ahead of this morning’s auction) and Spain wider in sympathy to around 6.70%. Core EGB flat to a little tighter, but, hey, how low can you go…Credit flat. Commodities taking some solace in the controlled Chinese growth and a EUR off yesterday’s 1.217 lows.

No Stats to bite on with Italian CPI data delayed by strikes( eventually unch +3.6%). Talking of which, the downgrade seems to have kicked Italian linkers out of the Barclays ILB Index, leading to a massive sell-off there (2023s off 4.5 points, more than 60bp).
Leaks about the Troika visit in Greece finding out that 210 out of 300 “suggestions” remain open don’t bode well for the new Greek government’s negotiation power.
Spain to guarantee some regional debt, which despite FM assertions of the contrary of it not hurting Spain’s rating, is not exactly enticing news for Spanish bonds.
ECB reserves replenishment by over EUR 40bn to EUR 366bn from EUR 325bn.
EFSF FAQ on Spain is available (link) as is a “confidential” calendar (link). Open questions for next Friday’s ECOFIN.

EUR 3.5bn new Italian 3 YRS sold at 4.65% (compared to 5.30% last month and 4.77% yesterday evening, 20bp wider than the day’s lows). Seems seriously generous, given the situation. Lower B/C, though, given lower yield, as with yesterday’s bills.
As the bonds were quoted 4.86% ahead of auction results, the announcement immediately ripped the bond back down 20bp. And then back up 15… Seems one large stray hand might have “stabilized” some of the demand.
Had as well EUR 1.75bn in off-the runs: short EUR 0.8bn 2019 at 5.58%, EUR 0.6bn at 2022% at 5.82% and short EUR 0.4bn 2023 at 5.89%.

Short-lived confidence boost resulting in bringing Peripherals back to unchanged, as the whole EGB curve, equities up by a small 0.25%. Credit a bit firmer. EUR back over the 22 handle. Before simply shifting back to the initial wider level in BTPs, although with a slightly steeper curve.
Of course, all Italian auction levels were tighter than last month, but not exactly low.

Next news to trade off, please!

With no such news, markets traded totally sideways into the US session with solely the EUR trading back lower (knowing that 1.2135 is the historic 50% high-low retracement).
Headline US PPI higher than expected at +0.1% MoM (from-1% vs. -0.4% fcst), but in line at unch +0.2% ex food / energy.
Waiting for the end of the day reading whaling accident reports, as nothing else happens (outside the EUR that really seems like looking for a reason to test that 2153 support) and trying to count the number of EGBs hitting all-time lows (again), which starts to become boring.
Gapping up NY open, dragging the EUR up 80 pips within minutes, dragging European equities higher to the +1% mark and commodities in its wake. Spontaneous ROn Friday action. Michigan Confidence print of 72, below 73.5 fcst after 73.2, a 7-month low, with no influence on the suddenly brighter Friday mood. Crisis fatigue?

Nice equity (and commodities) close (DAX futures peaking at +2%).
Didn’t seem to impress EGBs, though. Nor credit, as it stands. No ROn mode behaviour here. And certainly not for Italy.

Soft Core action of the day, Belgium (2.64%, -13 on the week) closing in further on France (2.22%, -14 on the week), closing in on Austria (2.13%) closing in on the Hard Core.
BKO eventually closing on a historic -0.047% low.

New Issues restricted to a EUR 500m “ecoop” long 13 YRS bond by the EIB at MS +78.

Closing levels:
10 YRS Yields: Germany 1,25% (unch); Finland 1,61% (+1); Luxembourg 1,67% (unch); Netherlands 1,69% (+1); Swaps 1,76% (+1); Austria 2,13% (-2), EU 2,12% (unch); France 2,22% (-2); EIB 2,35% (+0); EFSF 2,47% (unch); Belgium 2,64% (-4); Italy 6,04% (+14); Spain 6,62% (+2).

10 YRS Spreads: Finland 52bp (+1); Luxembourg 42bp (unch); Netherlands 44bp (+1); Swaps 51bp (+1); Austria 88bp (-2); EU 87bp (unch); France 97bp (-2); EIB 110bp (unch); EFSF 122bp (unch); Belgium 139bp (-4); Italy 479bp (+14); Spain 537bp (+2).

EUR swap curve 2-5 YRS 38bp (+unch); 5-10 YRS 69bp (+1,0) 10-30 YRS 42bp (-1,0).
2 YRS German BKOs closed -0,047% (-0,5) and 5 YRS OBLs 0,30% (unch).

Main at 166 from 168 (-1,2%); Financials at 273 after 277 (-1,4%). SovX at 272 from 275. Cross at 665 from 665.

Stoxx Futures at 2251 / +1,2% (from 2225) with S&P minis at 1346 (+1,7% from 1324, at European close).
VIX index at 18,3 after 19,4 yesterday same time.

Oil 86,8/102,3 (WTI/Brent) from 84,9/99,6 (+2,2%/+2,7%). Gold at 1590 after 1559 (+2,0%). Copper at 349 from 340 (+2,6%). CRB at EU COB 293,0 from 288,0 (+1,7%).
Baltic Dry down again 1% to 1110 from 1121.

EUR 1,223 from 1,219

ECB deposits at EUR 366bn after EUR 325bn.

Greek bonds guesstimates: 2023s down 50bp to 24.5% and 2042s unchanged at 21%.

All levels COB 17:30 CET

On the week (compared to Fri 06 Jul COB):
We closed the post-EU package week with the fact that on Friday "Money's Too Tight (To Mention)" (Bunds 1,33% -6; Spain 6,91% +17; Stoxx 2232% -2,2%; EUR 1,23), a strong compression in Soft Core yields, chasing down Bunds, a depressed stock market and a EUR on the slide. Not enough monies around… Sad old red… Having chewed over the whole during the weekend, the mood was tense on what "Call It Stormy Monday" (Bunds 1,33% +0; Spain 7,02% +11; Stoxx 2226% -0,3%; EUR 1,23) saw testing times for the Periphery, but otherwise things didn’t move much. This was too the case on Tuesday with a lot of "Running To Stand Still" (Bunds 1,32% -1; Spain 6,94% -8; Stoxx 2239% +0,6%; EUR 1,225) with the exception of Spain, which started to jog ahead. That was all the more the case on Wednesday with BONOs humming "Keep On Running" (Bunds 1,27% -5; Spain 6,54% -40; Stoxx 2240% +0,0%; EUR 1,224) in a major empty market squeeze. The mood started to shift again yesterday with yields and the EUR seriously "Under Pressure" (Bunds 1,25% -2; Spain 6,6% +6; Stoxx 2225% -0,7%; EUR 1,219).

Another inconclusive week with regards to the resolution of the eurocrisis. While the week before was seriously doubting whatever had been decided at the EU meeting and mainly saw the Periphery being aggressively sold with hopes and money especially flowing into the Soft Core (Hard down 10bp in 10s, AFB down 30 to 40bp and Italy and Spain out by over 20 and 60bp), the ECOFIN outcome gave a little more credibility and things calmed down somewhat. Still, on the week the 10 YRS EGB curve crawled down roughly 10, Italy got back slashed by Moody’s and even if Spain is down over 25 bp on the week, the markets feel far from confident, as seen in the ailing EUR. Non-Peripheral EGBs all closed the week on new all-time lows with the short end of the Core now negative. Confidence, someone?
Equities traded eventually about sideways as were Credit Indices. Commodities held their stand, given the weak EUR.

10 YRS Yields: Germany 1,25% (-8); Finland 1,61% (-7); Luxembourg 1,67% (-5); Netherlands 1,69% (-4); Swaps 1,76% (-5); Austria 2,13% (-6);EU 2,12% (-7); France 2,22% (-14); EIB 2,35% (-8); EFSF 2,47% (-7); Belgium 2,64% (-13); Italy 6,04% (+3); Spain 6,62% (-29).

10 YRS Spreads: Finland 52bp (+4); Luxembourg 42bp (+3); Netherlands 44bp (+4); Swaps 51bp (+3); Austria 88bp (+2); EU 87bp (+1); France 97bp (-6); EIB 110bp (unch); EFSF 122bp (+1); Belgium 139bp (-5); Italy 479bp (+11); Spain 537bp (-21).

EUR swap curve 2-5 YRS 38bp (+2,0); 5-10 YRS 69bp (-3,0) 10-30 YRS 42bp (-1,0).
2 YRS German BKOs closed -0,047% (-3) and 5 YRS OBLs 0,30% (-3), on the week.

Swiss 2-years at -0.49%. One way from -0.38%...

Main at 166 from 172 (-3,5%); Financials at 273 after 283 (-3,5%). SovX at 272 from 284. Cross at 665 from 684.

Stoxx Futures at 2251 / +0,9% from 2232 with S&P minis at 1346 / -0,1% from 1348, at European COB last week.
VIX index at 18,3 after 18,1 last week.

Oil 86,8/102,3 (WTI/Brent) from 84,6/98,3 (+2,6%/+4,0%). Gold at 1590 after 1587 (+0,2%). Copper at 349 from 341 (+2,3%) . CRB closes 293,0 from 290,0 (+1,0%).
After having had the best weekly performance last week (rising over 15% from 1004 to 1157), the Baltic Dry has gone back into reverse and ended the week at 1110, missing out the intermediate 1165 Mar high by 3 ticks on Mon, its last rise.

EUR 1,223 after 1,230 last Friday

Greek bonds guesstimates: Improved to 24.5% from 25.75% for 2023s and to 21% from 21.5% for the 2042s (20.25% and 16.75% before elections).

All levels Friday COB 17:30 CET

Next week:
Outside the ZEW sentiments, not much out of Europe…Will start the week flooded in a sea of bills on Mon and Tue (More than EUR 16bn out of the Benelux, France, the EFSF, Greece and Spain)
Germany: Tue ZEW Current fcst 32.3 (after 32.2) Sentiment fcst -15 (after -16.9) Fri PPI
France: nothing at all
Periphery: Italy Mon Trade & Govt Debt Thu Indu Orders & Sales // Spain: We Housing Px
EZ: Mon Final CPI fcst unch 2.4%, Trade. Tue ZEW Wed Construction
US: Mon Retail Sales fcst +0.2% after -0.2%; May Biz Inventories Tue CPI fcst 1.6% after 1.7% YoY; IP +0.4% after -0.1%

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

Let yourself go…

Thursday 12 July 2012

12 Jul 2012 – " Under Pressure " (Queen & David Bowie, 1981)

12 Jul 2012 – " Under Pressure " (Queen & David Bowie, 1981)

After days in a row of close to home behaviour, Asia fell out of bed overnight (-1.5-2%, but China). 10 YRS JGBs at record 0.77%. No big trigger seen, outside the surprise BOK rate cut as reminder that things were going slow there, too. The US closed better than started, although here as well only due to a pre-close rally, as the weaker European close and interpretations over what meant “a few” and “some” when poring over the FOMC minutes were initially less rosy. The FED, like the ECB, seems happy to mutter that it may have something up its sleeve, should things get awry. No immediate support, though.
European open hence better bid in EGBs and down 0.75% in equities. Credit a bit wider. EUR in the low 1.22s. Commodities still range bound. Italy (ahead of the bill auction) and Spain (on the back of the late undeterred catch-up movement and yesterday’s austerity package) still doing fine; the first at 5.73% (having lagged its Iberian peer a little yesterday), the second hitting through 6.50% for the first time in a week. Likewise, the catch-up of the Soft to the Hard Core seems unstoppable, as the AFB group is lurching 7-9 bp forward again with France hitting new 10s all-time lows at 2.22%.

French CPI at 2.3% a tick higher than foreseen, unchanged to May. German Wholesale Prices lower at +1.1% after 1.7%. EZ Industrial Production actually better than expected at -2.8% YoY after revised -2.4% (fcst was -3.2%), but lowest since Dec 2009. Pushing the EUR to test the low 22 without actually testing. Greek Unemployment hitting a 22.5% high in Apr (from 21.9%).

Italy sold its targeted EUR 7.5bn 12m bills at 2.697% (down from 3.972% last month). Bid to cover lower, given the price. Need to round up things and close the week with tomorrow’s sales of EUR 3.5bn new 3 YRS (last 5.30%. COB 4.77%, 20bp wider than the tightest print today), next to EUR 1.75bn in 2019 (6.10%, mid June), off-the-run 2022s (last 6.19%, 2 weeks ago) and 2023 BTPs.

MEA MAXIMA CULPA. Ok, I have to admit I messed up big time on the ECB deposits, confusing the right date of the start of the reserve maintenance period (11 Jul) with the start of the week… Silly me! So yesterday’s analysis is just wrong.
So, yes, 0% on deposits drove down the amount to EUR 325bn yesterday, the lowest since late December, from prior EUR 809bn. Then again, most money was just shifted to the current accounts held at the ECB (jumping from EUR 74bn to 540bn), some of which being actually remunerated as well. Need to see the speed of replenishment, though. With short bills and EGB bonds in the negative, 0% ain’t that bad, after all. Will keep wiping that egg off my face for the rest of the week…

Running out of stamina by late morning with equities held down by the EUR, held down by EZ IP figures, holding down Peripherals back to little changed. Fat big Risk Neutral with negative bias. EGB prices would tend to show that the money is on bonds and the market is hunkering down, awaiting some shoe to drop. 
Unsupportable tick by tick thriller on the EUR 22 mark. Tick Tick Tick. With 21 flashing, some stops in Bunds and added pressure on equities.
Peripherals turning negative again, the first such pull-back on Spain since the rally in 10s started Monday late morning and had been pretty much one way since. Under pressure…

Heavy mood with markets barely reacting on (holiday-shortened) Claims at 350k (fcst 372 after revised higher by 2k 376k), focusing on growing continuous claims at 3304k and prior revision higher to 3318k. Pushing EUR further lower to 1.217 and weighting as ROff.
US equities opening right away negative with the S&P through 50d MOV, adding further pressure on European risk.
Nothing more specific in negatives, but mood sliding. Titbits about Merkel’s advisor thinking Germans would need a referendum to sign off the ESM; ECB’s Knot telling rates could fall further if the economy was as well; Dutch wanting the collateral from Spain as well, if given; a further nationalized Spanish bank; IMF to lower its outlook. No bombshell. Just bits and pieces that add to the gloom. Under pressure…

Can’t keep count of EGB all-time lows anymore: let’s simplify by saying that the whole non-Peripherals EGB universe up to 5 YRS has traded new all-time lows today. Under pressure…
BKO on record close at -0.042%. Bunds yielding positive starting at 3 YRS out.

New Issues mainly restricted to Nestlé selling EUR 500m 7 YRS in less than an hour at MS +15 (from initial talks at 30) and Italian gas distributor helping itself for a second serving after last week’s inaugural benchmark with EUR 1bn long 6s at MS +370 (some 50 through BTPs).
Yesterday’s Anheuser deal ended up being a bubbly USD 7.5bn. Pressure on tap…

Closing levels:
10 YRS Yields: Germany 1,25% (-2); Finland 1,60% (-3); Luxembourg 1,67% (-2); Netherlands 1,68% (-2); Swaps 1,75% (-4); EU 2,12% (-3), Austria 2,15% (-3); France 2,24% (-7); EIB 2,35% (-4); EFSF 2,47% (-2); Belgium 2,68% (-6); Italy 5,90% (+9); Spain 6,60% (+6).

10 YRS Spreads: Finland 52bp (+1); Luxembourg 42bp (+0); Netherlands 43bp (unch); Swaps 50bp (-2); EU 87bp (-1); Austria 90bp (-1); France 99bp (-5); EIB 110bp (-2); EFSF 122bp (unch); Belgium 143bp (-4); Italy 465bp (+11); Spain 535bp (+8).

EUR swap curve 2-5 YRS 38bp (+0,0); 5-10 YRS 68bp (+1,0) 10-30 YRS 43bp (+1,0).
2 YRS German BKOs closed -0,042% (-2,6) and 5 YRS OBLs 0,30% (-2).

Main at 168 from 168 (unch); Financials at 277 after 280 (1,1% tighter). SovX at 275 from 278. Cross at 665 from 660.

Stoxx Futures at 2225 / -0,8% (from 2243) with S&P minis at 1324 (-0,8% from 1335, at European close).
VIX index at 19,4 after 18,5 yesterday same time.

Oil 84,9/99,6 (WTI/Brent) from 85,0/99,1 (-0,1%/+0,5%). Gold at 1559 after 1576 (-1,0%). Copper at 340 from 341 (-0,3%). CRB at EU COB 288,0 from 290,0 (-0,7%).
Baltic Dry down a third day to 1121 from 1146… Even without the massive 2008 sell-off, we had bit of summer slumps over the last years. Under pressure…

EUR 1,219 from 1,224

ECB deposits at EUR 325bn after EUR 809bn (see above)

Greek bonds guesstimates: Down 50bp with 2023s at 25% and 2042s at 21%.

All levels COB 17:30 CET

Periphery: Italy Fri CPI (prior 3.6%) // Spain Fri CPI (prior 1.8% YoY) // Greece Thu Unemployment
US: Fri PPI fcst 0.2% after 0.7% YoY
Awaiting Chinese GDP release.

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

Um ba ba be
Um ba ba be
De day da
Ee day da - that's o.k.

Wednesday 11 July 2012

11 Jul 2012 – " Keep On Running " (The Spenser Davis Group, 1965)

11 Jul 2012 – " Keep On Running " (The Spenser Davis Group, 1965)

Slapped my screens a couple of times this morning, because things seemed stuck. But, hey, no, we were still mostly running to mostly stand still. What went up yesterday afternoon just came down this morning with equities down a little and credit a tick wider. Soft Core a little better, ahead of the German auction. Peripherals holding stable with Italy slightly better bid, having cancelled not this week’s but the mid-August auction (wise choice, in any case) because of positive fiscal entries. Will still need to bite the bullet for EUR 3.5bn 3s on Friday, next to some 2019, 2022 and 2023 BTPs.
US close soft, but off lows (T at 1.50%); Asian equities flattish to slightly soft (10 YRS JGB at all-time low 0.79%) with China running slightly against the trend.

No real data to work on. German CPI at 2% unchanged, as expected. French May current account deficit overshooting to EUR 4.1bn after revised deeper EUR 4.4bn (fcst EUR 3.5bn). Spanish housing transactions still falling (-11.6% YoY in May, down from a -9.9% “rebound”) and even US data servings should be minor, which will give people time to read the FOMC in search for QE hints – or not, except if inventories were to surprise a lot.
Leaves people wondering (as raised yesterday) about how the Spanish MoU treatment of sub debt (link) will really be imposed upon hapless savers and check out Rajoy’s speech about how to fix things (Cuts, reductions, further cuts, 3% increased VAT and other tax incomes, savings…). EUR 65bn until the end of 2014 (on EUR 1.074bn GDP in 2011). If all feasible, great on the long run; harsh on the People on the short run. Austerity bites. Usual dilemma. 
No news out of Karlsruhe, a most lovely little town in Baden-Württemberg, home to the German Constitutional Court. And as it stands, this could last for a while…Meaning the EFSF will need to bridge quite something in the meantime.

German bund auction at record-low 1.31% (was last 1.52% in June after the first all-time low at 1.47% in May. COB yesterday 1.32%). EUR 5bn, of which EUR 850m retained for market interventions. EUR 6.4bn bids, of which 2/3 at market price. No tail. Best bid-to-cover since crisis-shaken Sep 2011. Very decent, given the price tag. Did depress equities a little.
This leaves as auctions for this week EUR 7.5bn Italian of 12m bills tomorrow (last 3.97% a month ago) and EUR 3.5bn 3 YRS to on Friday 13th (last 5.30%), next to EUR 1.75bn in 2019 (6.10%, mid June), 2022 (last 6.19%, 2 weeks ago) and 2023 BTPs.

And, hey, I did have the right calendar and thus remain stunned at the level of ECB deposits. The new reserve maintenance period simply started with the smallest blip (from EUR 795bn to EUR 791bn), just to pile up a short EUR 20bn to EUR 809bn yesterday. And we are talking 0% rates. Record high had been EUR 828bn early March, then decreasing slightly and re-peaking for a short while to EUR 824bn early May. This amount of deposits IS high. Ok, 0% is a bargain to Core and Soft Core short term bills…

Had solely equities pacing down and then back up a little, and then down, following the EUR rebound off lows to 1.23 and back lower, and higher. EGBs about static on opening levels with France outshining (8 tighter), pulling Austria and Belgium along in the latest accordion catch-up movement of the Soft Core. Movement has brought French 5s through the 1%-mark (record, of course) and 2s down to 0.16% (record, of course). Peripherals holding in a couple of bp tighter with no curve movement (5.90% & 6.73%).
Slapping screens another time just brought Bunds down to 1.30% and Spain down additional 7 bp over lunch.

Had Bunds shooting up on stops, initially coinciding with reports about demonstration violence in Spain. With no immediate impact on the performing Spanish debt. Probably just stops… Tight market.
US trade balance release (about on fcst). Inventories spot on forecast at +0.3% (after 0.6% revised 0.5%).

Continuous Spain running ahead with another jump of 6, dragging Italy, and about even US equity open. And EUR back up 25 pips from the lows. Micro movements in equities and FX in total pip for tick sync.
A small step for equities, a leap for Peripherals… Basically, Spanish 10s move 50 cts by 50 cts, hence these jumps. But no real steepening yet. Tight and empty market. 
Dutch 18m now at 0.000% mark, as are French 1 YRS… German 5s record close at 0.32%.
Dow and S&P trading on 50 MOV. Some closing pressure with stops triggered on EUR at 2-year lows.

Not much else. Will need to keep track of Greek coalition bickering. Greece? Yeah, Greece. Remember?

Mainly German new issue traffic with German GG FMS raising EUR 2.5bn 5s at MS -2 and NRW.Bank in for EUR 500m 4 YRS FRN at 3mE +20. Dutch Aegon raising EUR 500m 5s at MS +195.Had as well an afternoon print of sizeable EUR 2bn 2 YRS, courtesy of Deutsche Bank (3mE +34).
Corporates-on-wheels: BMW EUR 750m 4 YRS speedster at MS +42 (absolute yield a meager 1.37%) and on the other end of spectrum non-IG Fiat rolling out long 4 YRS EUR 600m at 7.765%.
Anheuser Bush Inbev readying a USD 4-trancher with 3s at T+55 area, 5s at T+85a, 10s +110a and 30s +125 a. Good for investor thirst, but light on yield.

Closing levels:
10 YRS Yields: Germany 1,27% (-5); Finland 1,63% (-4); Luxembourg 1,69% (-4); Netherlands 1,70% (-3); Swaps 1,79% (-3); EU 2,15% (-5), Austria 2,18% (-5); France 2,31% (-8); EIB 2,39% (-5); EFSF 2,49% (-5); Belgium 2,74% (-4); Italy 5,81% (-13); Spain 6,54% (-24).

10 YRS Spreads: Finland 51bp (+1); Luxembourg 42bp (+1); Netherlands 43bp (+2); Swaps 52bp (+2); EU 88bp (+0); Austria 91bp (+0); France 104bp (-3); EIB 112bp (+0); EFSF 122bp (+0); Belgium 147bp (+1); Italy 454bp (-8); Spain 527bp (-19).

EUR swap curve 2-5 YRS 38bp (+1,0); 5-10 YRS 67bp (-2,0) 10-30 YRS 42bp (+1,0).
2 YRS German BKOs closed -0,020% (-1) and 5 YRS OBLs 0,32% (-2).

Main at 168 from 168 (0,0%); Financials at 280 after 277 (1,1%). SovX at 278 from 282. Cross at 660 from 664.
Stoxx Futures at 2243 / +0,2% (from 2239) with S&P minis at 1335 (-0,7% from 1344, at European close).

VIX index at 18,5 after 18,1 yesterday same time.

Oil 85,0/99,1 (WTI/Brent) from 85,0/98,6 (+0,1%/+0,4%). Gold at 1576 after 1586 (-0,7%). Copper at 341 from 339 (+0,6%). CRB at EU COB 290,0 from 291,0 (-0,3%).
And Baltic Dry into reverse for a second day at 1146 after 1160...

EUR 1,224 from 1,225

ECB deposits at EUR 809bn after EUR 791bn

Greek bonds guesstimates: Static with 2023s at 25.5% and 2042s at 21.5%.

All levels COB 17:30 CET

Rest of this week:
Germany: Thu Wholesale prices (prior 1.7% YoY)
France: Thu CPI (prior 2% YoY)
Periphery: Italy Fri CPI (prior 3.6%) // Spain Fri CPI (prior 1.8% YoY) // Greece Thu Unemployment
US: Thu Claims fcst 370k (after 374k) Fri PPI fcst 0.2% after 0.7% YoY

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


Tuesday 10 July 2012

10 Jul 2012 – " Running To Stand Still " (U2, 1987)

10 Jul 2012 – " Running To Stand Still " (U2, 1987)

Hmmm… Should we be impressed? Eventually, most was already on the table yesterday afternoon, so the ECOFIN outcome seems to be mainly technical, with further details still to be fine-tuned. A road map, so to speak. Ok. Better than none, but not that much.
Initial result? Peripherals tighter by 5 across the curve. 10 YRS BONOs slightly through 7%. Spanish problem obviously somehow alleviated. And no one spoke of Italy – as there was no obvious reason to do so. Seniority question probably settled. Final lien to the state (debt) visibly not. Conditionality?
Equities flat. Currency unchanged. Credit a couple of ticks tighter. So was that it??? Waiting for details.

US close was slightly negative, though off lows. Alcoa better than expected, but results much lower in absolute terms. Asia slightly down. Chinese trade balance shooting up on diminishing exports (11.3% after 15.3%, although better than the 10.6% fcst), but imports were nearly halved to 6.3% after 12.7% (fcst 11%) pointing to internal growth issues. Looks like the Jan low at 2148 really will be tested, thereafter then we’ll need to see, as these were Mar 2009 post-Lehman levels.
Egan Jones taking Austria and the Netherlands down to A neg.
French Production figures a big miss with Industrial at -1.9% MoM (fcst -1% after revised +1.4%) and Manufacturing at -1% (fcst -0.3% after also revised lower -0.9%). YoY numbers ugly at -3.5% and -4.3%, respectively. Aïe! Italian IP surprising to the upside at +0.8% (fcst -0.6% after -1.9%). Still, that’s -6.8% YoY (after -12%). Better, but nowhere like roaring.

One hour into the session, things hadn’t changed much either. EGBs better bid for choice. Equities a touch weaker. Italy just above 6% and Spain at 6.95%. Peripheral short end a firmer and 2-10 wider by 5. No immediate impact of the German Constitutional Court president stating deciding on the ESM wouldn’t be easy and probably with no results today. On the contrary, had a sudden 1% plus surge in equities on no real discernible news, other than more buyers than sellers in an empty market. Pushing screen sentiment in ROn mode. Or was it because of additional 10bp tightening in Peripherals? Or feeding on one another? Credit pushing tighter as well, including Financials, unharmed by the overnight demise of yet another broker (MFG-style).

Dutch auction rapidly done and dusted, although at the lower end, with EUR 2.6bn sold at 0.218% (COB was 0.235%, with OBL 1 tighter around auction). Record low (down from 0.456% in May), but non-event.
EUR 1.625bn Greek bills at 4.70% (after 4.73%). Pretty much same amounts and bids as last time. Domestic thing. Non-event.
Will have a EUR 5bn reopening on 10 YRS Bunds tomorrow (was last 1.52% in June after the May all-time low at 1.47%). So this one will one way or another mark a new level (COB 1.32%).
Tricky auctions of the week should remain the one for EUR 7.5bn Italian bills on Thu and Italian 3 YRS to close the week on a Friday 13th (amount still open; was EUR 3bn 3s and 1.5bn 7 and 8 –year bonds last month).

Either I didn’t get my calendar right, but the drop in ECB deposits from EUR 795bn to EUR 791bn is just a blip. Usually, new reserve maintenance periods start with a chunky dip, to be repleted thereafter over time. Especially at 0%. Not a game changer, that 0% rate. Very surprising. Then again, if it is to buy Core EGB bills at negative rates, 0% is attractive. To be rechecked tomorrow.

Lunchtime high in equities (+1%) and Peripherals (tighter by additional 10 bp for -22 to 25 bp on the day, 5.87% and 6.76%. Short end an additional 10 bp tighter). US small biz optimism numbers slipping to 91.4 (fcst 93.3 after 94.4), only a temporary upset (that did send EUR down to 1.226, before rebounding too short of 23.
No shoe dropping? Stay ROn.
US open good for an additional 0.25% in equities and a couple of bps in Spain. And, still, Core EGBs just stay put.

Spain bank recap plan seemingly via EFSF bonds into FROB into bad banks, to be refinanced if needed at the ECB. ESM funding once existing and a common banking supervision in place. Need to get the ECB take on that one, unless the final liability / guarantee gets clearer. Conditionality seems missing somehow at this stage, something Draghi is very keen on. And the MoU asking for haircuts on hybrids and sub debt will have retail investors in arms, given what has been sold to them.

Some confusing talk about the ECB acting as agent for the EFSF leading to SMP hopes after all. Given the actual staffing of the EFSF and existing trading desks at the ECB that’s only technical help, similar to the one given to the EFSF by the German Finanzagentur when issuing bills (presentation, page 15) and nothing new. SMP to sleep tight, in order for the ECB to remain credible.
Bundesbank’s Weidman at Constitutional hearing explaining the pros and cons from the mainstream (and BuBa) point of view. Hearing dragging on and the Fiscal Compact part hasn’t even started yet. Final cold shower is the news that the Court could need more than several weeks to come to a conclusion on that subject.

European equities unable to hold on to 1% plus levels with US peers barely up, and then turning negative, and the EUR testing lower as well.
Interesting asset class divergences from the now-often usual correlations. Bunds a tick firmer at 1.32% (ahead of tomorrow’s auction) with BKOs slightly negative again; Spain down to 6.78% (-24 bp) and 2-10 spread 10bp wider; Italy down to 5.94% (-15). Soft Core performing in line. Equities up 0.75%, but off highs. Credit too tight. EUR weak and a drag on commodities. Hmmm… Odd.

Main New Issues courtesy of the EFSF with EUR 6bn 5 YRS at MS +50 (from low 50s premarketing), its biggest syndicated deal to date, profiting from the EZ supportive mood. GDF Suez brought a EUR 1.5bn double-trancher in 5 and 10s at MS +43 and +93 (after a late May double-trancher of EUR 2bn in 4s and 6s). French CDC added to the SSA supply with USD 1bn 3 YRS at MS +105 and EAA increased a 4 YRS deal by EUR 400m at 3mE +35. FMS (German GG) is readying a 5 YRS deal for tomorrow.
NordLB had a nice lift off of its EUR 500m 5 YRS inaugural aircraft-backed covered bonds at MS +55.

Closing levels:
10 YRS Yields: Germany 1,32% (-1); Finland 1,67% (-1); Luxembourg 1,73% (-1); Netherlands 1,73% (-2); Swaps 1,82% (unch); EU 2,20% (-2), Austria 2,23% (-4); France 2,39% (-3); EIB 2,44% (-1); EFSF 2,54% (-2); Belgium 2,78% (-7); Italy 5,94% (-15); Spain 6,78% (-24).

10 YRS Spreads: Finland 50bp (unch); Luxembourg 41bp (unch); Netherlands 41bp (-1); Swaps 50bp (+1); EU 88bp (-1); Austria 91bp (-3); France 107bp (-2); EIB 112bp (+0); EFSF 122bp (-1); Belgium 146bp (-6); Italy 462bp (-14); Spain 546bp (-23).

EUR swap curve 2-5 YRS 37bp (+1,0); 5-10 YRS 69bp (-1,0) 10-30 YRS 41bp (unch).
2 YRS German BKOs closed -0,010% (-0,5) and 5 YRS OBLs 0,34% (unch).

Main at 168 from 173 (-2,9%); Financials at 277 after 282 (-1,8%). SovX at 282 from 285. Cross at 664 from 678.

Stoxx Futures at 2239 / +0,6% (from 2226) with S&P minis at 1344 (-0,1% from 1345, at European close).
VIX index at 18,1 after 18,1 yesterday same time.

Oil 85,0/98,6 (WTI/Brent) from 85,2/99,1 (-0,3%/-0,5%). Gold at 1586 after 1587 (-0,1%). Copper at 339 from 342 (-0,9%). CRB closes 291,0 from 291,0 (unch).
Baltic Dry did NOT manage (yet) to hold onto late gains and fell back 2 to 1160. High point in the last recovery from the Q4/2011 slide was 1165.

EUR 1,225 from 1,230

ECB deposits at EUR 791bn after EUR 795bn.

Greek bonds guesstimates: Unchanged with Greece 2023s at 25.5% and 2042s at 21.5%.

All levels COB 17:30 CET

Rest of this week:
Will have Italy selling bills on Thu and especially Bonds on Friday the 13th. Scary.

Germany: Wed Final CPI Thu Wholesale prices
France: Thu CPI
Periphery: Italy Fri CPI // Spain Wed Housing Fri CPI // Greece Tue IP Wed Unemployment
US: Tue Small Biz optimism Wed Trade balance & Inventories, FOMC minutes Thu Claims Fri PPI

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

Lot of stand-still and “unch” on my screens today, outside, of course, equities and the periphery.

Monday 9 July 2012

09 Jul 2012 – " Call It Stormy Monday " (Albert King & Stevie Ray Vaughan , 1983)

09 Jul 2012 – " Call It Stormy Monday " (Albert King & Stevie Ray Vaughan , 1983)

Soft Asian close, especially during the afternoon session, on the heels of Friday’s negative market action. ROff sentiment increased by much worse than foreseen Japanese Machine orders, which decreased by a record 14.8% MoM (fcst -2.6% after +5.7%), such a slide unseen to this date. Likewise, current account balance at -62.6% YoY (fcst -13.6% after -21.2%). 10 YRS JGB at 0.79% at the lowest since Aug 2003. Chinese CPI at 2.2% a tick below fcst and down from 3%. Chinese equities crashing 2% plus, heading for early Jan lows at 2148. EUR had a bout of overnight weakness, hitting 1.2230, a level last seen end of Jun 2010, before reopening on the 23 handle in Europe.

European open relatively tame, mostly unchanged through all asset classes, but Peripheral bonds (+7), ahead of the afternoon ECOFIN (knowing that a follow-up meeting seems already determined for 20 Jul). Italy stuck slightly above the 6%-mark, Spain slightly below the 7%-mark. Still, more worrying is short end weakness with both 2 YRS initially out by 20bp, eventually kicking 10s out by further 5 an hour later.
Credit only a couple of ticks weaker with Financials holding despite the widening Libor-gate, its possible fall-out described by The Economist as the banks’ possible “tobacco moment” with regards to future litigations. Certainly not needed in actual circumstances, but too late now…

German trade data resilient and stronger than expected with May Exports up 3.9% (fcst 0.2% after -1.7%) and Imports up 6.3% (fcst +08% after -4.9%). French Jun Biz sentiment weak, faced with the first decisions by the new government, coming in at 91 (fcst 92 after 93, eventually revised down to 92). This is pretty much the mood of Aug 2009, but was then in an uptrend from the post-Lehman depression. Sentix EZ investor sentiment at -29.6 (fcst -26.6 after -28.9), so not the rebound that was expected…
Minor data week, which will leave market action subject to jitters and rumours, technicals and charts. Tricky auctions of the week will be the one for EUR 8bn Italian bills on Thu and Italian 3 YRS to close the week on a Friday 13th (amount still open; were EUR 3bn 3s and 1.5bn 7 and 8 –year bonds last month). One will bear in mind that the holiday season, which slowly but surely starts to kick in, will further diminish what’s left of liquidity, exacerbating any given move.

ECB wires and weekend snippets from Coeuré and Nowotny in line with last week’s Draghi stand: no more funky stuff for the moment, responsibility to fix things in politicians’ hands. Aware that there ARE “execution problems”, which were announced. Long, hot summer…
Otherwise, rather quiet wires. Bowing out to reality, the EU was said to give Spain an additional year to hit the 3% deficit target (6.3% for this year, then 4.5% and 2.8%). Fair enough. Cyprus, assuming the rotating presidency of the EU Council, still running bail-out discussions with Russia.  Draghi Ctrl-C Ctrl-V on Thu comments ahead of the ECOFIN and doing a Nike-call to politics on implementation. And sees the ECB, as one of the few euro institutions that works…

Government supply restricted to German and French bills. Germany opening the dance with EUR 4bn sold (EUR 700m retained for market interventions) at record -0.0344%. Already had one negative auction at -0.012% in Jan. June levels were 0.007%. BC 1.7. 2 YRS BKOs at -0.005%.
French bills: EUR 3.9bn at -0.005% (0.048%, EUR 2bn 6m at -0.006% (from 0.096%) and EUR 1.8bn 12m at 0.013% (from 0.163% last Mon). Félicitations! France has entered the negative funding cost club as well (at least on the short end). Needless to say these are record lows. Making the money market industry a touch… hmmm… oh, well... As PIMCO’s Gross keeps saying, it’s about the return OF the money (although here it’s not even in full anymore), not ON the money these days.
Will have the Netherlands selling up to EUR 3.5bn 3 YRS tomorrow (0.235% at COB). As well as EUR 1bn Greek 6m bills (last 4.73%).

Late morning situation about same with a bit more of ROff spin. Equities down 0.75%. Italy 6.13%. Spain 7.06%, then drifting back towards little changed during the mid-day break, but with Italian 2s still 30 wider, while Spanish held better being out 15-20. 5% threshold at around 3.5 years. 6% at 3 YRS in Spain. Softer EGB belly (Soft Cores) with Austria and France out by 5.
No major US data to trade, outside Consumer Credit numbers (after EU close, as for Alcoa kicking off Q2 earning season). With the ECOFIN to start at 17CET, this left the full afternoon to drift and delve on restricted titbits.

Not much going. Markets treading water in sync. Going RN, simply on lower levels. The calm before the Storm?

Flat close in Bunds at 1.33%. Flat in Credit. It’s just the EUR that is trading a bit better, taking commodities along. As people get used to it, it’s less of an event, but the Spanish spread to Bunds re-traded the early June high at 575 and hit 580…. Italian 2s out by 30, Spanish one by 15. Italy 6.09%. Spain 7.02%.
“Weaker” German short end with BKOs at 0.000%. OBLs 0.34%
After last week’s compression (AFB tighter by 13-15 on Fri alone), we got some reversal and quite a soft Soft Core today at +6-8.

New Issues on hold in EUR, with the exception of the EFSF that has started marketing a new 5 YRS deal soon around MS low 50s (Outstanding 5s quoted MS +37 / OBL +116, so there’s room to tighten here until tomorrow).

Closing levels:
10 YRS Yields: Germany 1,33% (+0); Finland 1,68% (+0); Luxembourg 1,74% (+2); Netherlands 1,75% (+2); Swaps 1,82% (+1); EU 2,22% (+3), Austria 2,27% (+8); France 2,42% (+6); EIB 2,45% (+2); EFSF 2,56% (+2); Belgium 2,85% (+8); Italy 6,09% (+8); Spain 7,02% (+11).

10 YRS Spreads: Finland 50bp (+2); Luxembourg 41bp (+2); Netherlands 42bp (+2); Swaps 49bp (+1); EU 89bp (+3); Austria 94bp (+8); France 109bp (+6); EIB 112bp (+2); EFSF 123bp (+2); Belgium 152bp (+8); Italy 476bp (+8); Spain 569bp (+11).

EUR swap curve 2-5 YRS 36bp (+0,0); 5-10 YRS 70bp (-2,0) 10-30 YRS 41bp (-2,0).
2 YRS German BKOs closed 0,000% (+1,6) and 5 YRS OBLs 0,34% (+1).

Main at 173 from 172 (0,6%); Financials at 282 after 283 (-0,4%). SovX at 285 from 284. Cross at 678 from 684.

Stoxx Futures at 2226 / -0,3% (from 2232) with S&P minis at 1345 (-0,2% from 1348, at European close).
VIX index at 18,1 after 18,1 yesterday same time.

Oil 85,2/99,1 (WTI/Brent) from 84,6/98,3 (+0,8%/+0,8%). Gold at 1587 after 1587 (+0,0%). Copper at 342 from 341 (+0,3%). CRB closes 291,0 from 290,0 (+0,3%).
Baltic Dry still profiting still on the rise, by 5 to 1162. High point in the last recovery from the Q4/2011 slide was 1165. So we’re about there.

EUR 1,230 from 1,230

ECB deposits at EUR 795bn after EUR 791bn. The 0% deposit rate starting as of today, we’ll see in the coming days whether or not this will push some banks to put money at work elsewhere.
This being also the start of the new reserve maintenance period, we ought to get the usual EUR 120-130bn pull back or so, knowing, too, that the last drop was of “only” EUR 95bn.
Of course, as stated last week, the SMP is fast asleep, hence no buying last week.

Greek bonds guesstimates: Greece 2023s 25 bp tighter at 25.5% and 2042s unchanged at 21.5%.

All levels COB 17:30 CET

This week:
Pfff.. Next to nothing on the data front. Minor stuff here and there. Rather uneventful auction front to start the week (Dutch 3s, German 10s). Will have Italy selling bills on Thu and especially Bonds on Friday the 13th. Scary.
Will leave the market basically finding direction from whatever bits and pieces it can find, probably mainly Periphery-driven

Germany: Wed Final CPI Thu Wholesale prices
France: Tue IP fcst -1.5% after +0.9% YoY Thu CPI
Periphery: Italy Tue IP fcst -9% after -9.2% YoY Fri CPI // Spain Wed Housing Fri CPI // Greece Tue IP Wed Unemployment
US: Mon Consumer Credit Tue Small Biz optimism Wed Trade balance & Inventories, FOMC minutes Thu Claims Fri PPI

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

Always difficult to find song titles on quieter days. And it does feel a little stormy… Like in eerily quiet…