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 14 September 2012

14 Sep 2012 – “ Why Does My Heart Feel So Bad " (Moby, 1999)

14 Sep 2012 – “ Why Does My Heart Feel So Bad " (Moby, 1999)

Ok, so now everyone has delivered. Ben is good for USD 40bn per month in MBS while still twisting. Might have POBC add its pebble, but by and large the floor is now back to the economy. This in turn will mean that, having paid up bad news all along the summer as certain indicators for further intervention, this strategy ought to come to an end now. Starting today, bad news will again be bad news. This sounds kind of normal. So to get the ball rolling, we will need good news from now on and every NFP release will now be the one thing to watch.
Unsurprising 1.5% surge in US equities yesterday evening in reaction to QE3, giving a nod to potentially open-ended buying. Then again the S&P had already risen 14% from the 01 Jun low to yesterday. An additional 1.5% seems fair. But, the, what’s next? Initial 10 bp sell-off in 10 YRS UST to 1.82% (as not –yet – on the buying menu), which eventually was reversed, given Ben’s gloomy statements, closing back on the day’s lows, just before the announcement, of 1.72%.Ok, QE3v2 or QE4 option remains to buy USTs. Some overnight weakness in USTs again to 1.76%, as Asian risk in majority hailed QE with some 1.75-2.5% rises (Mainland China aside, still searching for its leader in spe). Gold up 2.5%, Copper even 3% (more a surprise).

Initial explosive ROn start in Europe, unsurprisingly, with equities shooting up 2%, nearing Mar 2012 highs (2608 in EStoxx, broken lower in Aug 2011) and Bunds sold off 7bp. Initial ROff credit torsion (on first quotes Bunds +7, Spain -5, Italy hitting 5% in 10s), Credit 5.5% to 7% tighter, before correcting on the wings within 30 minutes with equities giving back 0.25% and both Bunds and Spain paring some of respective losses or gains.

Some rumours of backstage negotiations on Spain, but any such rumour is an easy one to pull out these days. Will need to see what the EZ FM meeting ending tomorrow will yield. Sees there’s a Franco-German tug of war on whether or not Spain ought to seek support. Of course, everyone’s happy Europe has taken a big step forward (essentially Mario, as it is), everyone will repeat the ECB is totally independent and that market players are simply stupid not to understand that everything is fine out there.
Talking of Spain Q2 debt to GDP has risen 3% to 75.9% with the regional debt to GDP up to 14.2% from 13.8% in Q1 (12.8% in Q2/2011) with Catalonia leading the pack with 22% (EUR 44bn, up 10% from a year earlier), 29% of the total regional debt.. Total regional debt now stands at over EUR150bn. Spanish Aug ECB bank borrowing rose to 389bn from 376bn. Spanish Q2 house prices down a record 14.4% YoY.
Had actually Italian July debt figures published yesterday showing that Italian local debt had diminished 2% YoY. Break-down of the (historical second highest number after June) EUR 1.968bn (down EUR 4bn from June) in terms of maturity unsurprisingly confirms a funding shift to the short end with debt up to 1 YR up to EUR 525bn from EUR 501bn a year ago, 1-5 YRS at EUR 574bn from EUR 533bn and over 5 YRS down to EUR 869bn from EUR 877bn. Funding mix is now 26.7% up to 1 year, 29.2% in 1-5 YRS and 44.2% in longer than 5s (from a year ago 26.2%, 27.9% and 45.9%). Amounts due within 5 YRS hence now EUR 1.098bn from EUR 1.034bn, 85% of that in government bills and bonds due out to 2017 EUR 937bn. EUR 148bn still to redeem in 2012, EUR 250bn in 2013, EUR 160bn in 2014 and EUR 165bn in 2015. 57% of total bonds and bills. Spain in comparison has EUR 487bn due until 2017 included (2012 EUR 554bn, 2013 EUR 127bn, 2014 EUR 90bn, 2015 EUR 71bn, 2016 EUR 71bn, 2017 EUR 72bn. 66% of total bonds and bills).  OMG! OMT fodder?
Germany up to 5 YRS vs. total 60.1%. France 57.5%.

ECB Spanish negotiations rumours denied by the ECB. Not huge impact, but good for light equity push to the opening highs and for the EUR to hit again1.305.
EUR 2010 – 2012 levels: 1.188 low – 1.260 – 1.305 – 1.341 mid – 1.377 – 1.422 – 1.494 high. Moving averages 50d 1.242 100 1.254 200 1.283

Midday levels still showing some ROn, as well as Hard and even Core decompression (+7 to 12 for Bunds). All spreads to Germany tighter. Equities in post-QE euphoria, but outshined by Credit.
Bunds 1,68% (+12), OBLs 0,69% (+9) ;BKOs 0,096% (+3,6).
Spanish 2s heavy at 2,90% (+3) and 10 YRS BONOs static at 5,60% (+0). Italian 2s 2.20% (-5) and 10s 5.01% (-6) faring well.
Steeper EUR swap curve with 2-5 YRS 53bp (+2,0); 5-10 YRS 83bp (+2,0) and flat 10-30 YRS 58bp (+0,0).
Credit risk diving well beyond Equities with Main at 118 from 127 (-7,1%); Financials at 186 after 203 (-8,4%). SovX at 172 from 182. Cross down 40 points (8%) at 456 from 496.
Stoxx Futures at 2596 / +2,0% (from 2545) with S&P minis at 1458 (+1,8% from 1432, at European close, before QE3).
Commodities strong on weaker USD, QE and ME tensions: Oil 100,1/117,7 (+2,0%/+0,8%). Gold 1775 (+2,4%). Copper 384 (+3,5%). EUR 1,311 from 1,291, off 1.315 lows.
UST back up to 1.82%, yesterday’s high, on European trading and Bund sell-off.

Getting afternoon chatter out Cyprus’ FM / CB meetings on positive climate, softer stance towards Greece. Of course, no one pushed Spain to a bail-out, which it is the sole to decide. Banking Union not a done thing, though, with Germany blocking. Portugal on track and everyone’s darling.
Positive mood spin to keep the spirits going, but nothing neither concrete nor new.

US data showing CPI in line with expectations, up 0.6% MoM, 1.7% YoY. Retail Sales probably rather on the soft side with +0.9% a tick over forecast, but with prior data revised down 2 ticks to +0.6%. Sales ex cars and gas only rising 0.1% (fcst 0.4% after +0.9% revised +0.8%).

US Industrial Production quite a miss at -01.2% (fcst +0% after +0.6% revised +0.5%). Manu Production likewise a miss at -0.7% (fcst -0.3% after +0.5% revised 0.4%). Ok, no impact. As QE has actually started yet, we’ll turn a blind eye on that number, but behave in the future, right? At some point, bad numbers will just be bad numbers. Whatever Mich Sentiment was a roaring 79 (fcst 74 after 74.3). Biz Inventories eventually up 0.8% (fcst +0.4% after +0.1%). All is good.

Afternoon rumours of Spanish downgrade doing rounds, accelerating weakness on the short end (+20 past 3%) and pushing out 10s over 5.70%. Economy Minister talking about EUR 60bn needs for the bank bailout, in line with figures given during the summer.
Belgium faces a EU fine of EUR 700m for trying to postpone further austerity measures after local elections mid-Oct. Ah, austerity…

Bunds closed at 1,70% (+14), OBLs at 0,71% (+11) and BKOs 0,101% (+4,1).
Spanish 2s closed at 3,07% (+20) and 10 YRS BONOs at 5,76% (+16). Italian 2s managed to close tighter at 2.23% (-2) after dropping earlier. Likewise for 10s closing unchanged at 5.07%. Spanish 2-10s 269bp (-4). Italian 2-10s 284bp (+2).

10 YRS Bunds closing well past the sort of double top, as well as YTD average AND 50% HiLo retracement, we had around 1.60% and back to end of Apr 2012 levels. Retracements at 1.71% and 1.85%. High was 2.07% end of March.
Risk closing off highs on renewed EUR malaise.
UST now at 1.86%

Given how many unconventional means have been deployed over the last weeks, I wouldn’t exclude some form of stimulus postpartum depression… With nothing in immediate sight, it’d better hold. Why does my heart feel so bad?

Primary Markets in EUR saw a single, however symbolic transaction, with (non-IG) Energias do Portugal (EDP) being the first Portuguese corporate issuer hitting the screens since Jan 2011 with EUR 750m 5 YRS around MS +478, about 25bp through the Portuguese state.
This closes a MASSIVE EUR supply week with EUR 36 benchmark transactions launched for roughly EUR 25bn, of which over half the amount of roughly EUR 13bn was for Periphery borrowers (7 Italians for EUR 6.75bn, 7 Spanish for EUR 5.4bn and today’s EDP deal to round it off).

Closing levels:
10 YRS Yields: Germany 1,70% (+14); Luxembourg 1,76% (+10); Netherlands 1,94% (+13); Finland 1,94% (+13); Swaps 1,94% (+11); EU 2,06% (+10), Austria 2,15% (+8); France 2,25% (+8); EIB 2,31% (+10); EFSF 2,51% (+8); Belgium 2,61% (+7); Italy 5,07% (unch); Spain 5,76% (+16).

10 YRS Spreads: Luxembourg 6bp (-4); Netherlands 24bp (-1); Finland 24bp (-1); Swaps 24bp (-3); EU 36bp (-4); Austria 45bp (-6); France 55bp (-6); EIB 61bp (-4); EFSF 81bp (-6); Belgium 91bp (-7); Italy 337bp (-14); Spain 406bp (+2).

EUR swap curve 2-5 YRS 56bp (+5,0); 5-10 YRS 84bp (+3,0) 10-30 YRS 58bp (unch).
2 YRS German BKOs closed 0,101% (+4,1) and 5 YRS OBLs 0,71% (+11).

Main at 118 from 127 (7,1% tighter); Financials at 185 after 203 (8,9% tighter). SovX at 172 from 182. Cross at 460 from 496.
Stoxx Futures at 2592 / +1,8% (from 2545) with S&P minis at 1461 (+2,0% from 1432, at European close, before QE).
VIX index at 14,3 after 15,7 yesterday same time, traded below 14 before rebounding.

Oil 99,5/117,1 (WTI/Brent) from 98,2/116,8 (+1,3%/+0,2%). Gold at 1774 after 1733 (+2,3%). Copper at 384 from 371 (+3,5%). CRB at EU COB 320,0 from 316,0 (+1,3%).
Baltic Dry down 1 tick to 662, after yesterday’s lone 2 tick rise…2.3% to the 647 low.

Greek bonds guesstimates: All stable with 2023s at 20.50% and 2042s 18.25%.

EUR 1,315 from 1,291

All levels COB 17:30 CET

On the week (compared to Fri 07 Sep COB):

The follow-up to last Thursday’s rally lasted into the end of the week. "It's So Easy" (Bunds 1,52% -5; Spain 5,61% -38; Stoxx 2544% +0,8%; EUR 1,279) seemed to be on Central Bankers’ mind. The mood peaked then, but what a way to end the week. Promises yield results before application. Monday we got played "The Number of the Beast" (Bunds 1,55% +3; Spain 5,67% +6; Stoxx 2531% -0,5%; EUR 1,28), as the Baltic Dry slid to a beastly combination. Outside this, the most notable feat was a New Issue bonanza of over EUR 14bn, with over half for cash-deprived peripheral borrowers. Risk appetite started to wane nevertheless, as almost all stimuli hopes have been about fulfilled, but macro figures are dire. Tuesday felt grey in Europe, hadn’t it been for the last of trading things were mostly unchanged and ended with Moody’s comments on the US pushing the EUR higher, in turn pulling stocks. "Here Comes The Rain Again" (Bunds 1,54% -1; Spain 5,66% -1; Stoxx 2560% +1,1%; EUR 1,287) Among all boxes to check, there still was the German Constitutional Court’s decision on the ESM. That was done on Wednesday, allowing Europe in theory to go "Yes Sir, I Can Boogie" (Bunds 1,62% +8; Spain 5,6% -6; Stoxx 2567% +0,3%; EUR 1,29). Ok, connect that iPhone 5 into the speakers! Still, long awaited, as the iPhone 5, already discounted the surprise effect was contained. Thursday was Ben’s days, like Wednesday had been the GCC day, as last Thursday had been the OMT day. Everyone was waiting for him to "Sing, Sing, Sing" (Bunds 1,56% -6; Spain 5,6% +0; Stoxx 2545% -0,9%; EUR 1,291), expecting he would deliver what was expected. In the meantime, the lofty Risk levels were hard to hold. And he sung well!

Well, that was another hell of a positive week. Or at least in parts. Following the OMT decompression of last week (Bunds +18 to 1.52%, Spain down 125 to 5.61% and Italy down 79 to 5.15%) and associated Risk On (Equities +4.4%, Main 15% tighter, Financials 18%), things went a bit sideways, even with the Karlsruhe ESM sign-off in pocket, for most of the week. Yesterday’s QE re-lit flight OUT of quality with Germany ending the week wider by another 18 bp to 1.70%. Italy and Spain are (were) doing fine, but somehow less than one could have imagined, closing the week at 5.07% (-8) and 5.76% (+15 ), as both curves short end struggled and flattened. Italian 2s managed to close flat at 2.20% (+7) on the week, Spain closing much softer, especially on Friday, wider by 40 bp to 3.07% (from 2.67%). Good Soft Core performance with Austria and France holding about alright on the week. Best performer of the week is actually Belgium.
The EUR swap curve steepened some more throughout the week.
Equities rose about 2% on the week, mainly on today’s post-QE reaction, as between ups and downs, we were about flat on the week going into QE. Note that the VIX has crashed back through 14 this Friday. Credit, on the other hand, kept its outperformance pretty steadily throughout the days.
This closes a MASSIVE EUR supply week with EUR 36 benchmark transactions launched for roughly EUR 25bn, of which over half the amount of roughly EUR 13bn was for Periphery borrowers (7 Italians for EUR 6.75bn, 7 Spanish for EUR 5.4bn and today’s EDP deal to round it off).
Commodities were pushed on by a softer USD with Copper and Gold adding to the previous week’s gain (Gold +3.5%, Copper +5.8%) and Oil was upheld by Middle East tensions with the WTI on the 100-mark. CRB +3.2%.
EUR up 350 pips from 1.28 last week and 550 from 1.26 a fortnight ago (…). Too many shorts.

10 YRS Yields: Germany 1,70% (+18); Luxembourg 1,76% (+10); Netherlands 1,94% (+9); Finland 1,94% (+12); Swaps 1,94% (+11); EU 2,06% (+11); Austria 2,15% (+7); France 2,25% (+5); EIB 2,31% (+10); EFSF 2,51% (+3); Belgium 2,61% (-1); Italy 5,07% (-8); Spain 5,76% (+15).

10 YRS Spreads: Luxembourg 6bp (-8); Netherlands 24bp (-9); Finland 24bp (-6); Swaps 24bp (-7); EU 36bp (-7); Austria 45bp (-11); France 55bp (-13); EIB 61bp (-8); EFSF 81bp (-15); Belgium 91bp (-19); Italy 337bp (-26); Spain 406bp (-3).

EUR swap curve 2-5 YRS 56bp (+6,0); 5-10 YRS 84bp (+3,0) 10-30 YRS 58bp (+3,0).
2 YRS German BKOs closed 0,101% (+7) and 5 YRS OBLs 0,71% (+16), on the week.
Swiss 2-years eventually stable at -0.17 (up 1bp on the week and from  -0.48% 2 weeks ago).

Main at 118 from 126 (6,3% tighter); Financials at 185 after 204 (9,3% tighter). SovX at 172 from 189. Cross at 460 from 508.
Stoxx Futures at 2592 / +1,9% from 2544 with S&P minis at 1461 / +1,9% from 1434, at European COB last week.
VIX index at 14,3 after 14,8 last week.

Oil 99,5/117,1 (WTI/Brent) from 95,6/113,6 (+4,1%/+3,0%). Gold at 1774 after 1735 (+2,2%). Copper at 384 from 364 (+5,5%) . CRB closes 320 from 310 (+3,2%).
Baltic Dry down 1% to 662 from 669 on its relentless slide towards February’s century low of 647.. Just another 2.3%. Did tick up 2 ticks on Thursday, though…

EUR 1,315 after 1,279 last Friday

Greek bonds guesstimates: And another good week with 2023s down to 20.5% from 21.5% and 2042s stable at 18.25%

All levels Friday COB 17:30 CET

Next week:
Light on data. US housing on Wed. Flash PMIs on Thursday are all expected a tick better.
Spanish 3 and 10 YRS auction on Thursday.

EZ: Tue Sep ZEW prior -21.2, Wed Construction, Thu Advanced PMI Comp fcst 46.6 from 46.3, Manu 45.5 from 45.1, Services 47.5 from 47.2, EZ Confidence fcst -24 after -24.6
GE: Tue ZEW Current fcst 18 after 18. and Sentiment -20 after -25.5; Thu PPI fcst +1.5% after 0.9% YoY, PMI Manu fcst 45.2 after 44.7, Services fcst 48.5 after 48.3
FR: Thu PMI Manu fcst 46.5 after 46, Services 49.4 after 49.2
Italy: Thu Indu Orders prior -9.4% YoY, Sales prior +2.7% YoY Spain: Fri Mortgages
US: Mon Empire -2 after -5.9; Tue NAHB Index fcst 38 after 37; Wed Housing Starts fcst 765k after 746k, Build Permits fcst 795k after 811k, Home Sales fcst 4.56m after 4.47m; Claims fcst 370k after 382k, PMI 51.5, Philly Fed fcst -3.3 after -7.1, Leading Ind fcst -0.1% after +0.4%

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

For all other little guys wondering out there.

Thursday 13 September 2012

13 Sep 2012 – “ Sing, Sing, Sing " (Benny Goodman, 1937)

13 Sep 2012 – “ Sing, Sing, Sing " (Benny Goodman, 1937)

One of the real questions of modern days’ Western economics is not about solving the EZ crisis, a Spanish bail-out or whether we’ll get Q3 tonight or just skip to QE4v.2 in 2 months. The real question is whether a product launch like the iPhone 5 shouldn’t be declared as national priority. Indeed, if the world’s largest economy counts on a smart phone, as nice at it may be, to add 0.5% to the GDP, then this product and associated fruit shop might need to be declared of systemic importance, if not even TBTF (too big to fail). And obviously the intrinsic value of such a product of such importance is grossly underestimated. This ought to be eligible as collateral, as barter unit, as safe haven product. But that’s just a passing thought…
Flattish plus US close, as Apple did not disappoint on its newest product, but nothing spectacular, as the latest version still doesn’t do your errands or cleans the kitchen, and ahead of today’s FED announcements. Asia more on the flattish minus side with China on a softer patch, searching for its next leader (launch as pre-leaked as the newest iPhone).

The Dutch reconducted PM Rutte, which in itself wasn’t won in advance and is a first in the last couple of years, as most incumbent leaders in Europe have been shoved aside. Note that finalizing coalition governments in the Netherlands tends to be a rather lengthy process. The incumbent government was brought down on austerity haggles to hit deficit targets. So this is better than a plain Eurosceptic vote, but the Netherlands will certainly remain a rather tight-fisted EU partner going forward.
No real macro data for fundamental leads.
Softer European kick-off with equities down some 0.25%. EGBs recovering a basis point or two up the Periphery, which in turn is roughly some 5 bp softer, across the curve. Credit giving back some of yesterday’s tightening with Financials visually back over the 200-mark. Commodities a touch softer. EUR still lofty on the 29-handle.

OMT? Tick. Karlsruhe? Tick. ESM / EFSF com OMT up and running. Soon. Tick.
QE3? Ok, maybe tonight. Half tick.
What’s next? Banking Union? Pfff… Months away. Fundamental good macro news? Probably not tick. Spain situation? Waiting. The Catalan situation has obviously potential to develop into an irksome play within the play, as it increasingly pitches for independence, EUR exit et al. Italy? Below the radar. Waiting for Spain. Greece? Uh… Before lunch… procrastinating to early October. After lunch…

The Italian auction raised the targeted EUR 4bn at 2.75%, slightly discounted from morning levels, but tighter than yesterday’s 2.79% close. Obviously, borrowing costs are down from the 4.65% paid in July. These bonds were closing 3.08% one week ago, 3.75% 2 weeks ago and spiked past 5.60% end of July.
Additional EUR 1bn were sold in 5 YRS at 3.71% (from COB 3.77% and 4.73% in Aug) and EUR 1.5bn in 2026s at 5.32% (from COB 5.35%). Bid to cover ratios ranging from 1.5 to 1.9 just so so.
Ireland auctioning EUR 500m 3m bills at 0.70% for a second time since Sep 2010. Levels down 110 bp from early July’s 1.80%. Flat to yesterday’s Italian bills. 5 YRS Ireland about 3.95%, so BTP +20s and 2025s at 5.65, so BTPs +30s. Ba1/BBB+/BBB+ against Italy’s Baa2/A-/BBB+. There’s definitively a life after a bail-out.
A real candidate for OMT support.
Spain announced a EUR 3bn Jan 2016 FRN private placement to be launched on 21 Sep (announced as already fully underwritten) to fill the gap of its Regional Liquidity Fund FLA (so EUR 6bn PP, EUR 8bn via loans with Spanish banks – backed by BONOs, EUR 6bn from the Spanish lottery – funded in loans, too, if I remember well, as well as the probably missing EUR 1bn in 2015, 2016 and 2017 bonds). Spanish Q2 regional budgets to be published after COB.

Out of Steam midday picture. Equities down about 0.75%. Credit out 1-2 ticks. EGB Risk Off credit torsion unwinding some of yesterday’s Bund decompression. 
Bunds 1,58% (-4); OBLs 0,61% (-3); BKOs 0,058% (-1,8). EUR swap curve flatter on long end outperformance.
Spanish 2s 2,84% (+9); 10 YRS BONOs 5,65% (+5). Italian 2s 10 wider to 2.26%.  and 10s 3 wider to 5.11%. Spanish 2-10s 281bp (-4). Italian 2-10s 285bp (-7).
Softer Periphery, caught between a heavy Italian auction (2.85% +10, 3.82% +11 and 5.37% +5) and Catalan separatist calls.
Commodities unchanged. EUR unchanged, not reacting to negative deposit rate discussions. Not fiercely reacting either to the SNB sticking to the 1.20 level (A 1.22 peg rumoured last week saw a move from 1.20 up to 1.216).

Greek Q2 unemployment at record 23.6% (from 22.6 in Q1 and 16.3% in Q2/2011). Youth unemployment (16-24) at 53.9%.

US data to kick-start the afternoon:  PPI +2% higher fcst +1.7% after +0.5% YoY, ex food & energy stable at 2.5%; Claims missing expectations at +382k (fcst +370k after 365k, revised up +2k); Continuous clams better at 3283k (fcst 3318k after 3322%, revised up by 10k).
Bit of weight on Risk. Ok, one more reason for QE, but QE doesn’t create jobs.

Afternoon titbits: WSJ article citing the IMF that Greece wouldn’t make it and was in need for a 3rd bail out. Sending markets spinning into (limited) ROff. Quite limited ROff. Of course, denied by the Greek government.
Limited fall out, though…
Waiting for the Fed to Sing, Sing, Sing.

Bunds closed at 1,56% (-6), OBLs at 0,60% (-5) and BKOs 0,061% (-1,5).
Spanish 2s closed at 2,87% (+12) and 10 YRS BONOs at 5,60% (unch). Italian 2s up 9 to 2.25%. 
Spanish 2-10s 273bp (-12). Italian 2-10s 282bp (-10).
Limited 1% drop in equities. Some correction in Credit.
EUR unchanged, commodities mainly unchanged as well. Some upside pressure on Oil on Middle-East tensions.
Waiting for the Fed to Sing, Sing, Sing.

Primary Markets reopening for some more Periphery corporates and covered bonds with Intesa San Paolo EUR 1bn 7 YRS OBG at MS +245 (some 50 through Italy), Telecom Italia EUR 1bn 5 YRS at MS +355, Repsol EUR 750m long 5 YRS at MS +335 (Spain curve -25), next to MAN issuing EUR 500m 3 YRS at MS +45 and Reed Elsevier with EUR 550m 8 YRS at MS +95.

Closing levels:
10 YRS Yields: Germany 1,56% (-6); Luxembourg 1,66% (-6); Netherlands 1,81% (-7); Finland 1,81% (-7); Swaps 1,83% (-6); EU 1,96% (-6), Austria 2,07% (-3); France 2,17% (-3); EIB 2,21% (-7); EFSF 2,43% (-9); Belgium 2,54% (-2); Italy 5,07% (-1); Spain 5,60% (unch).

10 YRS Spreads: Luxembourg 10bp (unch); Netherlands 25bp (-1); Finland 25bp (-1); Swaps 27bp (unch); EU 40bp (unch); Austria 51bp (+3); France 61bp (+3); EIB 65bp (-1); EFSF 87bp (-3); Belgium 98bp (+4); Italy 351bp (+5); Spain 404bp (+6).

EUR swap curve 2-5 YRS 51bp (-1,0); 5-10 YRS 81bp (-2,0) 10-30 YRS 58bp (-1,0).
2 YRS German BKOs closed 0,061% (-1,5) and 5 YRS OBLs 0,60% (-5).

Main at 127 from 125 (1,6% wider); Financials at 203 after 199 (2,0% wider). SovX at 182 from 182. Cross at 496 from 491.
Stoxx Futures at 2545 / -0,9% (from 2567) with S&P minis at 1432 (-0,3% from 1437, at European close).
VIX index at 15,7 after 16,2 yesterday same time.

Oil 98,2/116,8 (WTI/Brent) from 97,3/116,0 (+1,0%/+0,6%). Gold at 1733 after 1733 (unch). Copper at 371 from 371 (unch). CRB at EU COB 316,0 from 315,0 (+0,3%).
Baltic Dry UP 2 ticks to 663! First rise since the beginning of September (at 724). Feb low at 647 2.4% away.

EUR 1,291 from 1,290

Greek bonds guesstimates: 2023s stable at 20.50% and 2042s softer, back to 18.25% from 17.50%. Limited fall-out

All levels COB 17:30 CET

EZ: EZ Aug CPI fcst +2.6% after +2.4%
Spain: Q2 House prices prior -12.6% YoY
US: Aug CPI fcst +1.6% after +1.4%, Retail Sales fcst +0.6% after +0.8%; IP +0.2% after +0.6%, Mich Conf 74 after 74.3

Click link on title or below for today’s musical support:
Actually some 3s & 40s tunes were pretty explosive. Old day hard rock, so to speak… And Gene Krupa was a wild drummer.

Or this other outstanding classic !

Wednesday 12 September 2012

12 Sep 2012 – “ Yes Sir, I Can Boogie " (Baccara, 1977)

12 Sep 2012 – “  Yes Sir, I Can Boogie " (Baccara, 1977)

Positive, albeit tight US close with the Dow on 2007 levels now. Grinding. Up. Waiting for QE confirmation. Asia, after a sluggish end of week and start finally joining in the worldwide relief. Japan up over 1.5% as well on higher than expected Machinery Orders (+4.6% MoM vs +2% fcst after +5.6%). Still, all eyes on Germany Constitutional Court’s verdict due at 10 CET.
Barroso’s “State of the Union address” mellowing a slightly positive start, as well as leaks that Court approval could be tied to conditions. Spain still “considering” options, as usual. Note the irony of yesterday’s the Catalan rally for independence in response to austerity calls. Mirroring the state of the EU / EZ zone. Had ECB’s Asmussen stress the conditionality aspect again yesterday evening, not excluding per se sales of bonds bought from later non-conforming borrowers. Seems very theoretical, but a huge bazooka. Re-selling a couple of hundred billions of such bonds would de facto mean kill those countries' market access and push them into default and out of the EZ. Seems very unlikely. At least at this stage.
Barroso pushing for a more federalist and integrated approach, unsurprising. Does the statement that Greece can stay in the EZ, subject to abiding to the push for reforms, mean that it is otherwise asked to leave??? Of course, as already widely announced, Banking Union supervision is pushed to the ECB. And the ECB, of course, is independent and works within its mandate.

No real noteworthy macro data on the slate. Final French CPI a tick higher than expected at 2.1% (preliminary was +2.% after +1.9% YoY). Italian IP a bit better than expected, albeit still low at -7.3% (fcst -7.6% after -8.2% revised -7.9%).  EZ IP in Jul better then expected, too, with a 0.6% MoM increase (fcst +0.1% after -0.6%), but remains unchanged at -2.1% YoY.

Softer EGBs again (roughly +3) with the far end about unchanged. Periphery maybe a tick better. Curves unchanged. Equities eventually down a little, after initial slightly positive opening quotes (then again yesterday’s 1% surge mainly took place in the last hour of the trading session). Credit still grinding tighter a couple of ticks.  EUR trading water just below the 29-handle and commodities flat. All half an hour ahead of the Karlsruhe call.

Eventually, as leaked and hoped / expected, the German Constitutional Court’s decision allowed ESM ratification, albeit with conditions including a EUR 190bn cap and approval of both German parliamentary chambers. ECB buying appeal simply rejected. It’s up to the democratically and constitutionally elected politicians to do their job within their given mandate. Given Germany’s integration within the EU / EZ, it has to play (within limits and in such manner that contingent risks don’t become uncontrollable budget-wise). The ESM banking licence was shelved from an European constitutional point of view at the same time. Decision link.
Had some wobbly back and forth in the markets during the initial reading, but eventually in the immediate aftermath weighted heavily on Bunds (+9 in 10s), kept the Periphery just a couple of bp tighter to the close and pushed EStoxx up 1%. EUR eventually just unchanged.
Question is whether the cap of Germany’s participation will limit the final ESM amount, as countries under duress can opt out, For the moment, in such situations, the remaining members do pick up the slack. While this was actually raised in the reading, I’m not totally certain whether my interpretation of the Court’s reading is right that, as the capital is not yet paid-in, Germany has an ongoing possibility to raise conditions to remain sure its risks remain under control (additional conditions, security or collateral), knowing that the voting right of non-paying countries diminishes. Here, again, it’s up to Parliament’s control duty to watch out for the right use of means. Ok, EUR 190bn alone remains quite a sizeable amount…Awful lot of “Ja, aber…” and conditions that should allowed quite some control by the German parliament. Any top-up needs, in case members were to pull out of ESM commitments (GIIPS + Cyprus and Slovenia hold 37.4% of the ESM capital), seem pretty much under Bundestag control, too.
Whatever, allows for final sign off by the German president and a start-up session announced by Juncker for 08 Oct.
Yes, Sir, I Can Boogie.

Italian bill sales raised the targeted EUR 12bn with EUR3bn 3m at 0.70% (after 0.87%) and a (chunky) EUR 9bn 1.69% (after 2.77% in Aug), the lowest since Mar 2012. Stable bid to cover ratios. The size of this auction (EUR 9bn is the highest amount auctioned in 12m bills in the last 10 years) does hark back to last week’s question at the ECB, whether the OMT wouldn’t entice borrowers in need to increase their short term debt. This is less the case for tomorrow’s 3-year auction, although EUR 4bn is sizeable. 10 YRS average is EUR 2.9bn, but ranging between EUR 2.5bn and EUR 4bn with peaks up to EUR 5bn seen several times.
Will need to check this EUR 4bn 3YRS BTP auction tomorrow (+ additional EUR 2.5bn in 5 YRS and 2026s) to assess the “Draghi put” after one week (COB levels 2.79%, 3.77% and 5.35%, respectively). Those 3s were closing 3.08% one week ago, 3.75% 2 weeks ago and spiked past 5.60% end of July. 3 YRS were last auctioned in Jul at 4.49% and 5 YRS in Aug at 4.73%.
Tough to go for a German auction is such a flight OUT of quality movement (as the GCC was already speaking). New 5 YRS were quoted 0.63% (old 0.52%, both +5 bp to COB) just ahead of the auction.
EUR 4bn sold at 0.61%, pretty much fully allotted. Total bids of EUR 5.5bn not exactly roaring (B/C 1.4) and 1bp tail. Still better than last week’s 10 YRS auction. Prior levels for 5 YRS were 0.31% in Aug and 0.52% in July. Allows for screaming headline that fundig costs have double of late… April levels were 0.80%. DE0001141646

Newest Spanish aid comments “not urgent, given actual market levels”… Liars’ Poker square. No Boogie?
Merkel on ticker, but with not much news. ESM ruling positive, ECB plan positive (as strictly conditional), need for further political / economical union, but against debt union. Supportive to everyone’s efforts to become thrifty. And the ECB can’t be expected to oversee everyone (especially not the smaller German banks…). And to make the message clear, Schaueble reiterating that the ECB should mainly concentrate on systemic banks. NIMBY!

Risk On picture by midday with Bund futures trashed nearly 100 ticks. Germany very soft, as confirmed as everyone’s paymaster. Periphery relieved, although not frantically either. Short end eventually down 10bp. Italian 10s on hold and Spanish 10s down in sync with the short end.
Pretty much all non-Periphery EGB 10 YRS at their tightest spread to Bunds in a year with the Hard Cores nearing +25, Austria through and France nearing +50 and Belgium now through the symbolic 100 over.
European equities up 0.5-0.75%, a bit more in Italy and Spain. Credit again outperforming with Financials now through the 200-mark, for the first time since the end of March 2012, taking leads from banking union and end of sovereign-banking loop. Crossover well through 500 and the 2012 low and back to early Aug 2011 levels. EUR holding above 1.29. Commodities up 0.5-1%.
Bunds 1,63% (+9), OBLs 0,64% (+6), BKOs 0,063% (+2).
Spanish 2s 2,78% (-8), 10s 5,59% (-7). Italian 2s 2.20% (-8) 10s 5.13% (-1). Spanish 2-10s 281bp (+1). Italian 293bp (+7).
Stoxx Futures +0,7% . Main 124 from 127 (-2,4%); Financials at 198 after 208 (-4,8%). Cross at 484 from 502.
Oil 97/116. Gold 1744 Copper 373. EUR 1,292

US import prices on the tame side, up 0.7% MoM /-2.2% YoY (fcst +1.5% after -0.7% MoM / -3.2% YoY).

Afternoon trading drifting off Risk highs in search for follow-up impetus.

Afternoon titbits: Has some Chinese pep cooperation talk, supportive of ESM / EFSF.
In an effort not to let the government-banking loop ease too much, Spain is raising about EUR 8bn in syndicated loans (collaterized by government bonds) from domestic banks to close the EUR 18bn regional rescue fund (Additional EUR 6bn will be provided by the lottery).
Talking of Spanish regions and Europe in general: Yesterday’s 1.5m taking the streets in Catalonia to protest the Spanish central government’s austerity measures and calling for independence represents 20% of a 7.5m regional population. Compare this with the Netherlands’ 16.7m (just as an example) or Belgium’s 11m inhabitants and imagine 10% of these countries’ population doing the same against EU budgets or measures to support GIPPS borrowers… Scary on a EU-integration basis. Robert Schuman wouldn’t appreciate.
US inventories rising 0.7M% MoM on falling sales (-0.1%). Fcst was +0.3% after -0.2%. Stockpiling.
Final leaks of the day on Greece / Troika on-going haggling and possible decision postponements to Nov.

Equities running out of steam during the afternoon and trailing back to yesterday’s closing levels. Sole really outperforming index of the day is Financial Credit (4.3% tighter).
SP & IT in close tango these days, but the movements are neither explosive nor dramatic anymore.
Bunds closed at 1,62% (+8), New OBLs at 0,64% (+6) and BKOs 0,076% (+3,3).
Spanish 2s closed at 2,75% (-11) and 10 YRS BONOs at 5,60% (-6). Spanish 2-10s 285bp (+5). Italian 2-10s 292bp (+6). 
Totally Quiet commodity front

Primary markets on hold. No Boogie.

Closing levels:
10 YRS Yields: Germany 1,62% (+8); Luxembourg 1,72% (+7); Swaps 1,89% (+7); Finland 1,88% (+4); Netherlands 1,88% (+2); EU 2,02% (+7), Austria 2,10% (+4); France 2,20% (+3); EIB 2,28% (+7); EFSF 2,52% (+6); Belgium 2,56% (-1); Italy 5,08% (-6); Spain 5,60% (-6).

10 YRS Spreads: Luxembourg 10bp (-1); Swaps 27bp (-1); Finland 26bp (-4); Netherlands 26bp (-6); EU 40bp (-1); Austria 48bp (-4); France 58bp (-5); EIB 66bp (-1); EFSF 90bp (-2); Belgium 94bp (-9); Italy 346bp (-14); Spain 398bp (-14).

EUR swap curve 2-5 YRS 52bp (+2,0); 5-10 YRS 83bp (+1,0) 10-30 YRS 59bp (+2,0).
2 YRS German BKOs closed 0,076% (+3,3) and 5 YRS OBLs 0,64% (+6).

Main at 125 from 127 (1,6% tighter); Financials at 199 after 208 (4,3% tighter). SovX at 182 from 190. Cross at 491 from 502.
Financials now through the 200-mark, for the first time since the end of March 2012, next level in the low 180s, the low point seen early March 2012 and breached to the upside in August 2011 to hit 358 end of Nov 2011. Highs for 2012 were some kind of triple-top around +300.
Stoxx Futures at 2567 / +0,3% (from 2560) with S&P minis at 1437 (+0,1% from 1436, at European close).
VIX index at 16,2 after 15,9 yesterday same time.

Oil 97,3/116,0 (WTI/Brent) from 96,9/114,9 (+0,4%/+1,0%). Gold at 1733 after 1734 (-0,1%). Copper at 371 (unch). CRB at EU COB 315,0 from 314,0 (+0,3%).
Baltic Dry down 1 tick to 661 0 662. Another 2.1% until hitting the Feb low at 647.

EUR 1,290 from 1,287

Greek bonds guesstimates: Down 100bp with 2023s at 20.50% and 2042s at 17.50%, highest since early May!

Will stop mentioning ECB deposits, as this has become a rather meaningless marker. Will monitor, if changes in pattern reappear.

All levels COB 17:30 CET

Rest of the Week:
EZ: Fri EZ Aug CPI fcst +2.6% after +2.4%
Italy: Thu final CPI +3.5%, Gov Debt
Spain: Fri Q2 House prices prior -12.6% YoY
US: Wed Imp Prices, Jul Inventories fcst +0.3% after -0.2%; Thu PPI fcst +1.7% after +0.5% YoY; Claims fcst +370k after 365k; Fri Aug CPI fcst +1.6% after +1.4%, Retail Sales fcst +0.6% after +0.8%; IP +0.2% after +0.6%, Mich Conf 74 after 74.3

Click link on title or below for today’s musical support:
What? Hasn’t the party started yet??? Thought all was set and ready?

And, because I think they’re quite cool, the Ukulele Orchestra of Great Britain’s take of it

Tuesday 11 September 2012

11 Sep 2012 – “ Here Comes the Rain Again" (Eurythmics, 1984)

11 Sep 2012 – “ Here Comes the Rain Again" (Eurythmics, 1984)

The US closed on an “off day”, as rarely these days. Unlike in past sessions, when the European close was used to trade up thereafter, the S&P steadily lost ground during the evening. No real news. Greece worries. Waiting for the priced-in QE announcement and questioning what happens next. Then again, it remains by and large a 4-year high and this entitles to some breath-taking. Only data set were contracting Consumer Credits. Asia likewise down about 0.5% overall.
New Yuan loans in China expanded more than expected to CNY 704bn (from CNY 540bn. Fcst was CNY 600bn).
German Aug Wholesale prices up 1.1% MoM after +0.3% (A healthy +3.1% YoY, the steepest rise since Nov 2011). Spanish Jul house transaction down solely 2.5% YoY (after -11.4% in June), but there’s a bit of seasonality in there. Still, best figure since Feb 2011. Nothing else on the data slate until this afternoon’s secondary US figures.

Slightest Risk Off start of the day: Equities down about 0.25%; Credit unchanged to a tick wider. EGB a tick tighter. Some Periphery weakness with softer 2s (+10), pulling 10s along (+5). Commodities by and large at COB levels. EUR unchanged right on the 28-handle.
Not much to do, except waiting for some smoke signs from the German Constitutional Court. That the announcement tomorrow wouldn’t be delayed because of late injunctions didn’t, in turn, stir anything.

The Netherlands sold EUR 2bn 10 YRS on tap at 1.846% (Last 1.995% end of June). Close yesterday was 1.89%, so no discount here.
Germany will issue EUR 5bn new 5 YRS 0.50% Oct 2017 tomorrow (DE0001141646). Last auctions of the previous reference yielded 0.31% in Aug and 0.52% in July. COB 0.58% (old reference +11).
Will need to check the Italian EUR 4bn 3YRS auction (+ additional EUR 2.5bn in 5 YRS and 2026s) on Thursday to assess the Draghi put after one week.
Of the 3 Spanish bonds issued last Thursday, ahead of the OMT announcement, the 2s are just a tick tighter at 2.78% at close (from auction level 2.80%), 3 YRS performed to 3.49% (from 3.68%) and 4 YRS are down to 4.33% from 4.60%. All recovered 5-10 during the afternoon. Still shaky ground.

Rather hard-line sounding Schäuble on the tickers (now back in bad cop costume) with needs for reforms stressed and reservations about the limitations of the word “unlimited”, while still pushing against a totally single ECB-supervision (on behalf of Germany’s more scattered banking landscape).

Static markets by mid-day. Bunds at 1,53% (-2), OBLs at 0,46% (-1) and BKOs 0,033% (-0,5). Spanish 2s at 2,89% (+10) and 10 YRS BONOs at 5,69% (+2). Spanish 2-10s 280bp (-8). Italian 2-10s 286bp (-9). Credit out 2-3 ticks. Equities down 0.5%. Commodities and EUR unchanged.

US trade balance figures a non-event (after revisions about unchanged at –USD 42bn).
Afternoon dragging along, waiting for US open and input. Had a (now accustomed) EUR 50 pips spike-out with no discernable trigger turn around Risk sentiment to the better. In absence of other key levels, 1.2830 is the 200d-MAV. Algo trading system fodder. Finnish-Spanish summit producing love and understanding. And a further “haven’t decided yet” from Rajoy, which seemingly intends to postpone any such decision to mid October’s post-ECOFIN (if at all). Italian 2s paring losses and allowing 10s to perform. Strong soft core performance.
Moody’s comments about cutting the US’ Aaa rating, if budget talks in 2013 turn inconclusive put a break on buoyancy, but THAT is no fresh news. Looks like a loop bad US news, good EUR; good EUR must be good news. Shaky logical foundation.
Cyprus bail-out seemingly back on the stove with Nicosia “preparing intensively”, but wants to be spared dogmatic austerity steps. Brings us back to the Conditionality question. Talking of mini-bail outs, if that exists, Slovenia off the radar screen on that subject lately.
And, while at it, Portugal confirmed the bail-out avoided the sovereign’s bankruptcy. Seeing some wiggle room after its fifth Troika review confirmed progresses, to push back 3% deficit by one year to 2014 and widening the 2012 by 0.5% to 5%. Lighter conditions for further austerity after a harsher start? Portugal’s example gives arguments to both sides: German’s “Thrift is Good!” on one hand against Italian and Spanish fears that once signed up to the medicine, the doctors might remain strict.
Had final positive tones after Samaras – Draghi meeting. Love boat, everywhere. Final Risk On, or so. And up 1%

Bunds closed at 1,54% (-1), OBLs at 0,47% (unch) and BKOs 0,043% (+0,5).
Spanish 2s closed at 2,86% (+7) and 10 YRS BONOs at 5,66% (-1). Spanish 2-10s 280bp (-8). Italian 2-10s 286bp (-9) with 2s unchanged.
Periphery again recouping some losses in the afternoon, but with still curves flattening.
Credit in line with equities in late afternoon squeeze, following the EUR.
Quiet commodity front

Tomorrow Dutch elections and Karlsruhe verdict.

Primary markets remained fairly brisk, although below yesterday’s field day, especially for peripheral issuers. Still, another 13 deals came out for EUR 6.9bn, driven by corporates, with a lot of low or non-IG ratings, and covered bonds. German Land Rheinland-Pfalz was in for EUR 1bn 5 YRS FRN at 3mE flat. Covered bonds saw ANZ for EUR 750m 5 YRS at MS +43, Austrian BAWAG for EUR 500m 7 YRS at MS +55, Belgian AXA Bank for EUR 500m 7 YRS in French OF format at MS +52 and finally Banco Sabadell for EUR 500m 2 YRS at MS +375.
Lone senior financial supply from MPS with EUR 500m 2 YRS at MS +450.
Strong corporate traffic with French Total issuing EUR 500m long 10s YRS at MS +40 (thus slightly through France), Anglo American with EUR 750m 6 YRS at MS +133, Société Foncière Lyonnaise with EUR 500m 5 YRS at MS +250 and Finnish Neste Oil for EUR 400m 7 YRS at MS +270. To round off the higher yielding segment FGA issued EUR 500m 2 YRS at MS +395 and non-IG Stora Enso raised EUR 500m long 5 YRS at MS +400.
Periphery deals, coming after yesterday’s glut of EUR 7.9bn seemed to have struggled somewhat.

Despite time flying by so fast, a thought to all 9/11 victims.

Closing levels:
10 YRS Yields: Germany 1,54% (-1); Luxembourg 1,65% (unch); Swaps 1,82% (unch); Finland 1,84% (-3); Netherlands 1,86% (-3); EU 1,95% (unch), Austria 2,06% (-7); EIB 2,21% (unch); France 2,17% (-8); EFSF 2,46% (-1); Belgium 2,57% (-10); Italy 5,14% (-9); Spain 5,66% (-1).

10 YRS Spreads: Luxembourg 11bp (+1); Swaps 28bp (+1); Finland 30bp (-2); Netherlands 32bp (-2); EU 41bp (+1); Austria 52bp (-6); EIB 67bp (+1); France 63bp (-7); EFSF 92bp (+0); Belgium 103bp (-9); Italy 360bp (-8); Spain 412bp (unch).

EUR swap curve 2-5 YRS 50bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 57bp (+1,0).
2 YRS German BKOs closed 0,043% (+0,5) and 5 YRS OBLs 0,47% (unch) / New ref Oct 2017 0.58%

Main at 127 from 129 (1,6% tighter); Financials at 208 after 213 (2,3% tighter). SovX at 190 from 193. Cross at 502 from 510.
Stoxx Futures at 2560 / +1,1% (from 2531) with S&P minis at 1436 (-0,1% from 1437, at European close).
VIX index at 15,9 after 14,2 yesterday same time.

Oil 96,9/114,9 (WTI/Brent) from 96,5/114,9 (+0,4%/0,0%). Gold at 1734 after 1732 (+0,1%). Copper at 371 from 371 (unch). CRB at EU COB 314,0 from 312,0 (+0,6%).
Baltic Dry down 0.2% to 662 from a beastly 666. Another 2.3% until hitting the Feb low at 647. Comes despite rebound in Iron Ore prices yesterday.

EUR 1,287 from 1,280

ECB deposits at EUR 331bn after EUR 327bn.

Greek bonds guesstimates: Unchanged in 2023s at 21.50% and 2042s at 18.50%. 

All levels COB 17:30 CET

This Week:
Pretty much a minor macro week. End of week brisker in the US, but anyhow subordinated to the FED decision on Thursday.
No exciting auctions. Will check the Italian EUR 4bn 3YRS auction (+ additional EUR 2.5bn in 5 YRS and 2026s) on Thursday to assess the Draghi put after one week.

EZ: Wed Jul IP fcst -3.4% after -2.1%; Fri EZ Aug CPI fcst +2.6% after +2.4%
Germany: Wed final CPI 2.2%
France: Wed final CPI +2.3%
Italy: Wed IP fcst -0.5% Mom after -1.4% / -7.6% YoY after -8.2%, Thu final CPI +3.5%, Gov Debt
Spain: Wed final CPI +2.7%; Fri Q2 House prices prior -12.6% YoY
US: Wed Imp Prices, Jul Inventories fcst +0.3% after -0.2%; Thu PPI fcst +1.7% after +0.5% YoY; Claims fcst +370k after 365k; Fri Aug CPI fcst +1.6% after +1.4%, Retail Sales fcst +0.6% after +0.8%; IP +0.2% after +0.6%, Mich Conf 74 after 74.3

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

Monday 10 September 2012

10 Sep 2012 – “ The Number of the Beast " (Iron Maiden, 1982)

10 Sep 2012 – “ The Number of the Beast " (Iron Maiden, 1982)

Pretty boring start into the week on a mainly unchanged basis. The US markets managed to keep their head above water into the close in the tightest range and lack of volatility (the S&P mainly traded between 1435 and 1437…). Asia off to a similar start with most indices closing close to home. Chinese data sets over the weekend were poor, but as stimulus measures had already been announced at the end of last week, the fall-out was thus limited. It’s however a stark reminder that things are slowing off everywhere (Chinese Aug CPI on fcst at 2.0% after 1.8%, PPI below fcst at -3.5% after -2.9%, YoY Industrial production slowing to 8.9% after 9.2%, Retail Sales at 13.2% after 13.1%. Exports up 2.7% after1%, but imports down a dismal -2.7% after +4.7% and +3.5% fcst). To round up soft Asian data, Japanese final Q2 GDP was revised lower to +0.2% QoQ / +0.7% annualized (from +0.3%/ +1% after +0.3 / +1.4%).
On the European front, French macro data were on the brighter side, though, with Biz Sentiment up to 93 (fcst was 89 after90), July IP down to -3.1% YoY (fcst was -3.7% after -2.3% revised lower to -2.5%) and Manufacturing declining as well less than feared to -2.8% (fcst -4.2% after -2.6% revised lower to -2.9%). So all less than feared, but still in absolute terms low data. A bit like last week’s German data, if we are bottoming out somehow, it’s clearly not in v-shape…
Wrangling in Greece with the government so far failing to close a Troika-requested EUR 11.5bn austerity deal.
French 2013 budget to be squared with EUR 20bn in taxes and EUR 10bn of spending cuts.
Moody’s seemingly unimpressed by the OTM, but sees positive time-buying element.

So not exactly the right backdrop for a roaring start, but as seen last week, a good support for further stimulus hopes, this week courtesy of the Federal Reserve’s minting and printing teams. Most indicators unchanged. Commodities a tick stronger, for choice. EGB’s close to Friday closing levels, a tick better for the Core a tick softer for the Periphery. Curves unchanged.

EZ Sentix Investor sentiment actually quite positive eat -23.2 after -30.3 and a fcst that was bleaker at -28.3. Italian final Q2 GDP unfortunately revised lower to -0.8% QoQ/ -2.6% YoY. Third quarter in a row, brings us back to 2008-2009 levels.

Good that there were only bills on the auction front, as the new issue traffic was EXPLOSIVE, comparable to last Tuesday. Flurry of periphery financials and corporates hitting the screens. Experience has shown that periphery windows can be rather small and that one should use these opportunities. Might have been a little too much in choice and range with 19 deals live by mid-morning.
Germany sold EUR 4bn 6m at -0.0147% (after -0.05% last month). EUR 600m retained. Bids for EUR 5.125bn. France sold EUR 4bn 3m bills at -0.021%, EUR 1.6bn 6m at -0.008% and EUR 1.4bn 12m at 0.004%. Roughly unchanged from last week.
The Netherlands will sell up to EUR 2.5bn 10 YRS on tap tomorrow (Last 1.995% end of June. COB 1.89%).

Interesting midday combination of a touch softer equities, softer EGBs, much softer Italy, about unchanged Spain in 10s, but with the Peripherals’ curves going 10 to 20 bp flatter on. Swaps unchanged with Agencies hence about unchanged levels, too.
Bunds 4 bp wider at 1,56%, OBLs at 0,48% (+3) and BKOs 0,043% (+1,3).
Spanish 2s softer at 2,85% (+18), 10 YRS BONOs about unchanged at 5,60%.  Italy 10 bp softer at 5,25%.
Spanish 2-10s 275bp (-19). Italian 2-10s 285bp (-10).
Credit tick softer with Main at 127 (+1) and Financials at 207 after 204 (+3). Stoxx Futures down 0.5%. EUR 1,278 from 1,279

No US data to steer things one way or another until NY open, which was rather eventless, slightly negative. En Attendant Godot.

Greek situation doing rounds. Ah, hmm, yes, Greece… Looping with Italian and Spanish bonds up to 5 YRS softening some good 20bp. Not much else to chew on. Risk is lofty and we’re nearing the point where all stimulus measures that were already priced have been delivered. So, what next until the FED? Dutch elections on Wed. German high court might actually deliver some statement tomorrow. Targeted had been for decision by Wednesday - if not blocked by additional calls, demanding to re-consider on the basis of the now-announced OMT. Talking about the German creditor status, Target2 claims rose by EUR 24bn to a record EUR 751bn in August.
Had news leaking that Spain sold EUR6bn of debt to finance the FROB. Details missing (sold to the FROB, then repo’ed by the latter at the ECB?).

Bunds closed at 1,55% (+3), OBLs at 0,47% (+2) and BKOs 0,038% (+0,8).
Spanish 2s closed at 2,79% (+12) and 10 YRS BONOs at 5,67% (+6). Spanish 2-10s 288bp (-6). Italian 2-10s 295bp (unch).
Periphery recouping some losses in the afternoon with both 2s eventually only “only” up 12 bp.
Credit giving back some of its late outperformance with Financials wider by 9 (4.4%).
Quiet commodity front with exception of Copper continuing its rise to 370 (+2%), having now broken this year’s 50% retracement to the upside, and the Baltic Dry continuing its deep sea exploration, now at  666.

New Issues bonanza with EUR 14.5bn printed in 19 trades, of which 7 totalling EUR 7.9bn for Italian and Spanish borrowers. Will need to be digested.
SSA: NRW.Bank EUR 1bn 10 YRS MS +19, ICO EUR 600m 3.5 YRS MS +410, EIB EUR 250m increase 2025 MS +45.
Covereds: CASA PS EUR 1bn 7 YRS MS +50, Banesto EUR 500m Jan 2017 MS +395, Hypo NOE EUR 500m 7 YRS MS +32.
Senior Financials: BBVA EUR 1.5bn 3 YRS MS +380, Intesa SanPaolo EUR 1.25bn 4 YRS MS +345.
Corporates: SNAM (Italian Gas) 2-trancher EUR 1.5bn long 5 YRS MS +285 & EUR 1bn 10 YRS MS +350 (final books were an impressive EUR 12bn), Gas Natural EUR 800m Jan 2020 MS +465, Iberdrola EUR 750m 5 YRS MS +360, Dong Energy EUR 750m 10 YRS MS +88, RTE (French electricity grid) EUR 600m 7 YRS MS +75, Klepierre (French real estate) EUR 500m 7 YRS MS +145, LeasePlan EUR 500m 4 YRS MS +172, as well as US biotech AMGen with EUR 675m 7 YRS MS +80 & GBP 700m 17 YRS UKT +185.
Finally, unrated Austrian retailer Spar for EUR 200m 5 YRS at 3.50% (ca. MS +251) and non- IG Renault EUR 600m 5 YRS MS +365.

Closing levels:
10 YRS Yields: Germany 1,55% (+3); Luxembourg 1,65% (-1); Finland 1,87% (+5); Swaps 1,82% (-1); Netherlands 1,89% (+4); EU 1,95% (unch), Austria 2,13% (+5); France 2,25% (+5); EIB 2,21% (unch); EFSF 2,47% (-1); Belgium 2,67% (+5); Italy 5,23% (+8); Spain 5,67% (+6).

10 YRS Spreads: Luxembourg 10bp (-4); Finland 32bp (+2); Swaps 27bp (-4); Netherlands 34bp (+1); EU 40bp (-3); Austria 58bp (+2); France 70bp (+2); EIB 66bp (-3); EFSF 92bp (-4); Belgium 112bp (+2); Italy 368bp (+5); Spain 412bp (+3).

EUR swap curve 2-5 YRS 50bp (unch); 5-10 YRS 82bp (+1,0) 10-30 YRS 56bp (+1,0).
2 YRS German BKOs closed 0,038% (+0,8) and 5 YRS OBLs 0,47% (+2).

Main at 129 from 126 (2,4% wider); Financials at 213 after 204 (4,4% wider). SovX at 193 from 189. Cross at 510 from 508.
Stoxx Futures at 2531 / -0,5% (from 2544) with S&P minis at 1437 (+0,2% from 1434, at European close).
VIX index at 14,2 after 14,8 yesterday same time.

Oil 96,5/114,9 (WTI/Brent) from 95,6/113,6 (+0,9%/+1,1%). Gold at 1732 after 1735 (-0,2%). Copper at 371 from 364 (+1,9%). CRB at EU COB 312,0 from 310,0 (+0,6%).
Baltic Dry down 0.4% to a beastly 666 from 669. Another 2.9% until hitting the Feb low at 647.

EUR 1,280 from 1,279
ECB deposits at EUR 327bn after EUR 342bn.
SMP buying of course unchanged. Outstanding EUR 209bn. Will most probably not increase anymore…

Greek bonds guesstimates: Unchanged in 2023s at 21.50% and a 25bp wider to 18.50% in 2042s. Tame,  given the on-going jitters.

All levels COB 17:30 CET

This Week:
Pretty much a minor macro week. End of week brisker in the US, but anyhow subordinated to the FED decision on Thursday.
No exciting auctions. Will check the Italian 3YRS auction on Thursday to assess the Draghi put after one week.

EZ: Wed Jul IP fcst -3.4% after -2.1%; Fri EZ Aug CPI fcst +2.6% after +2.4%
Germany: Tue Wholesale PX; Wed final CPI 2.2%
France: Wed final CPI +2.3%
Italy: Wed IP fcst -0.5% Mom after -1.4% / -7.6% YoY after -8.2%, Thu final CPI +3.5%, Gov Debt
Spain: Tue Aug House transactions prior -11.4%; Wed final CPI +2.7%; Fri Q2 House prices prior -12.6% YoY
US: Mon cons credits; Tue Trade Balance; Wed Imp Prices, Jul Inventories  fcst +0.3% after -0.2%; Thu PPI fcst +1.7% after +0.5% YoY; Claims fcst +370k after 365k; Fri Aug CPI fcst +1.6% after +1.4%, Retail Sales fcst +0.6% after +0.8%; IP +0.2% after +0.6%, Mich Conf 74 after 74.3
China: New Yuan loans figures this week

Click link on title or below for today’s musical support:
The Number of the Beast is the numerical value of the name of the person symbolised by the Beast from the sea. The Baltic Dry incarnated????

And the cheesy video…The 80s produced great music and ridiculous videos. Oh, and there was that thing about Spandex trousers…