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 28 September 2012

28 Sep 2012 – “ After The Rain Has Fallen ” (Sting, 1999)

28 Sep 2012 –  “ After The Rain Has Fallen ” (Sting, 1999)

Bizarrely, and even after slapping my screens several times to make sure things were working, real opening levels in EGBs very quite simply FLAT. All flat! Haven’t seen that in ages!
Bunds unchanged at 1.45% (as were USTs at 1.63%). German curve unchanged. Soft Core, Swaps and Agencies frozen at COB levels. Periphery flat. Italy stuck at 5.17% in 10s and 2.35% in 2s. And the same for Spain, 5.92% in 10s and the 3.30% in 2s from yesterday’s close. Fascinating, Dr. Spock, fascinating.
Sportive start into the European day in equity futures, but eventually settling for a small plus of 0.50%, in line with US futures. Credit tighter though (2-3%) and most Commodities a little better than yesterday evening with the EUR at 1.293 (some 80 pips higher). Eventually all levels seen yesterday in the after-market session in futures, but off the highest levels (as was the close in the US).
Asian picture mixed, mostly better with China much better to close the month and quarter and ahead of the one-week holiday close. Japan an outlier here (closing the fiscal half-year, too), down 1%, but closing slightly off lows on a disappointing data dump (a dozen or so) with PMI about flat at 48 (after 47.7), better retailing figures, but with Industrial Production down 1.3% MoM/4.3% YoY (fcst were -0.5%/-3.4% after -1%/-0.8%).

Light data front to close the week: French Q2 GDP confirmed at flat. German Retail sales a touch better than expected, but with prior revised lower. French Aug PPI overshooting at +1.2% MoM/2.6% YoY (fcst +0.6% after +0.4%), probably on energy costs. Consumer spending undershooting at -0.8% MoM (fcst -0.3% after +0.4%), probably the same reason. Spanish CPI shooting up to +3.5% (fcst 2.8% after +2.7%), which is a) sticky at high levels and b) another prong squeezing Spanish well-being. Likewise Italian PPI overshooting at +0.8% MoM/+3% YoY. Forget any ECB rate cut next week. Transmission might be broken, and energy prices the culprit, but this is fodder for the hawks.
Final squash of any rate cut hope should be the EZ CPI, which clocked in at 2.7% (far over the 2.6% forecasts after 2.6%).

Bizarre catatonic morning with nothing moving. Equities down a little and just slightly positive by mid-morning and Periphery bonds a touch softer, with Spanish 2s adding bp, pushing out Italian and Spanish 10s by 2.
The announcement that the bank stress results would come out only at 18:00 CET, thus after market close in Europe, next to Germany’s re-affirming the joint AAA North Hawks position on ESM bank recaps, gave a little Risk Off shudder, pushing the Periphery a little wider again, Spain tickling the 6% and stocks into the red.
No major reaction to French plans to reduce 2013 debt issuance by about EUR 12bn, with bonds down to EUR 170 from EUR 178bn.

Shudder morphing into real Risk Off at midday with equities down 1% (at the lowest since 07 Sep) and Spain past 6% for good.
Bunds 1,42% (-3), OBLs 0,50% (-2), BKOs 0,023% (-1,3). UST 1,62% (-1)
Spanish 2s 3,38% (+8), 10s 6,02% (+10). Spanish 2-10s 264bp (+3).
Italian 2s 2,41% (+6), 10s 5,23% (+6). Italian 2-10s 283bp (+1).
Credit back to flat after this morning too optimistic start (but outperforming).
EUR out of the equity-correlation loop (for now) and holding above 1.29 (maybe on dashed rate cut fantasy). Commodities still slightly positive.

Post-lunch blues not helped by US Personal Income missing expectations at 0.1% (fcst +0.2% after +0.3%, eventually revised lower to +0.1%) and Spending as foreseen at +0.5% (after +0.4%). Equities down to -1.75%.
Still Risk bottoming out a little with the Periphery eventually paring losses to stabilize around unchanged levels and with US cash opening solely down 0.5%.
Mood soured to close the week by 2 further misses with the Chicago PMI diving to 49.7, hence below the expansion mark, while forecast had seen a small correction from 53 to 52.8 and Michigan Confidence numbers at 78.3 (fcst 79 after 79.2).

Total Risk Off close with a final dump in equities, although the Periphery remained stable ahead of the Spanish Bank numbers (and underlying bail-out hopes?)
Bunds closed at 1,44% (-1), OBLs at 0,51% (-1) and BKOs 0,021% (-1,5) with UST at 1,61% (-2)
Spanish 2s at 3,36% (+6), 10s at 5,91% (-1). Spanish 2-10s 255bp (-6).
Italian 2s at 2,33% (-2), 10s at 5,16% (-1). Italian 2-10s 283bp (+1).
Equities down 2%. Credit remarkably flat. Odd.

Had to slap my screens again tonight, given the tons of “unchanged” data in EGBs. Have decorrelated from equities, as has the USD (closing about unchanged).

No new issues today.

Closing levels:
10 YRS Yields: Germany 1,44% (-1); Luxembourg 1,56% (-1); Finland 1,72% (unch); Netherlands 1,71% (-1); Swaps 1,73% (-1); EU 1,88% (unch), Austria 2,02% (-2); France 2,17% (-3); EIB 2,18% (unch); EFSF 2,37% (unch); Belgium 2,53% (-2); Italy 5,16% (-1); Spain 5,91% (-1).

10 YRS Spreads: Luxembourg 12bp (unch); Finland 28bp (+1); Netherlands 27bp (unch); Swaps 29bp (unch); EU 44bp (+1); Austria 58bp (-1); France 73bp (-2); EIB 74bp (+1); EFSF 93bp (+1); Belgium 109bp (-1); Italy 372bp (unch); Spain 447bp (unch).

EUR swap curve 2-5 YRS 48bp (unch); 5-10 YRS 80bp (+1,0) 10-30 YRS 58bp (+2,0).
2 YRS German BKOs closed 0,021% (-1,5) and 5 YRS OBLs 0,51% (-1).

Main at 136 from 136 (unch); Financials at 204 after 203 (0,5%). SovX at 148 from 149. Cross at 568 from 568.
Stoxx Futures at 2452 / -2,0% (from 2501) with S&P minis at 1431 (-0,1% from 1433, at European close).
VIX index at 15,6 after 16,2 yesterday same time.

Oil 91,8/111,9 (WTI/Brent) from 91,5/111,7 (+0,3%/+0,1%). Gold at 1773 after 1765 (+0,5%). Copper at 376 from 371 (+1,3%). CRB at EU COB 308,0 from 306,0 (+0,7%).
Baltic Dry rebounding 22 (3%) to 766.

EUR 1,285 from 1,284

Greek bonds guesstimates: Greece down 50bp again with 2023s closing 19.25% (20% Friday) and 2042s down to 18% (18.25% Fri). Not sure those hard-fought measures will pass internally and with the Troika.

All levels COB 17:30 CET

On the week (compared to Fri 21 Sep COB):

Last week had been a bluesy week, mainly boring and marked by being “No Fun”. It was worth a last-ditch attempt to grab all promises and expectations and "Turn Them Into Gold" (Bunds 1,59% +2; Spain 5,73% -1; Stoxx 2565% +0,5%; EUR 1,299) in a Friday afternoon squeeze attempt. It just didn’t really work out that way… Monday, the Fall having started on time, set the wet and depressing theme of the next couple of days as "Raindrops Keep Fallin’ On My Head" (Bunds 1,56% -3; Spain 5,65% -8; Stoxx 2551% -0,5%; EUR 1,291), although Spain held its own in uncertain environment. To no avail, though, as Tuesday confirmed the season with a shower of "Purple Rain" (Bunds 1,58% +2; Spain 5,71% +6; Stoxx 2563% +0,5%; EUR 1,296) on a mixed set of tension factors. Still, positive US sentiment figures were good for a late equity rally, although the Periphery as well as Credit started to feel quite leaded. Plosser comments after the European close sent US risk, followed by Asia, packing leading to a Risk Off open on Wednesday. Eventually the day ended even worse than it started "Bad Rain" (Bunds 1,46% -12; Spain 6,03% +32; Stoxx 2497% -2,6%; EUR 1,285), weighted down by an equity sell-off and Periphery fears. The fact that the Bund auction failed didn’t hinder the auctioned paper to rally nevertheless. Eventually, Thursday started in milder manner, recouping some of the losses. It just felt like another "The Rain Song" (Bunds 1,45% -1; Spain 5,92% -11; Stoxx 2501% +0,2%; EUR 1,284) with dire US data, but the end of day Spanish budget was taken rather positively on first sight.

We closed last week with a question on everyone’s mind is “What’s next? Where can we move to WITHOUT support?” And this week didn’t really bring the answer. Confirmation that Fall has started, though. Yes, a rainy week it was. No grand announcements (outside the Spanish budget people are still chewing on). Ongoing geo-political and regional tensions. Starting soft anyway, Risk got kicked as Plosser stated an obvious truth, obliterated of late, and the rather global macro environment suddenly came back front-stage. The EGB credit torsion started last week continued with Germany, despite a failed auction on Wednesday, adding another 15 basis points (26 bp tighter in two weeks) to close back below 1.50%. Other Hard Core issuers taken along for the ride. Soft Core and Agencies sharing half that strength. Spain faced with a sell-off over 6%, recovered from the widest levels, but added 18bp on the week. Italy, too a little wider. After having closed the prior week roughly flat, this week’s widening is starting to put a chink into the Draghi put. That is especially the case on the shorter end with Italian 2s adding 15bp to 2.33% and Spanish 29bp to 3.36%. Having flirted with the 400 to Bunds last week, Spanish 10s hit 450.
The EUR swap curve flattened notably with the 2-10 spread down 11bp to 128.
Having outrageously performed 2 weeks ago and starting to correct last week (5-5% wider), Credit remained under pressure with some index post-roll adjustments adding to the malaise. Main widened by 7% and Financials even by 12%, here again victim of the Draghi put value correction. Having outperformed equities in the post-summer squeeze, we are facing the same on the way down, as equities eventually “only” lost 4.4% in Europe, of which half today.  VIX on the rise in the US, but still historically low.
Commodities suffering a little under the ambient blues, but nothing really major. Note Gold crawling higher, little by little, targeting the 1800 12-month high. After an explosive recovery last week, BDY back to sleep.
After the last 2 weeks’ explosive supply (over EUR 50bn), action was much, much tamer this week with a mere 11 (smaller-sized) benchmarks on the chop for a total of EUR 6.8bn. Periphery supply was limited to a EUR 1bn BBVA senior trade. The one trade that stood out was Petrobras’ 2-trancher totalling EUR 2bn for 6.5 and 11 years (plus GBP 400m in 17 YRS).

10 YRS Yields: Germany 1,44% (-15); Luxembourg 1,56% (-7); Finland 1,72% (-16); Netherlands 1,71% (-15); Swaps 1,73% (-9); EU 1,88% (-7); Austria 2,02% (-10); France 2,17% (-10); EIB 2,18% (-6); EFSF 2,37% (-3); Belgium 2,53% (-10); Italy 5,16% (+6); Spain 5,91% (+18).

10 YRS Spreads: Luxembourg 12bp (+8); Finland 28bp (-1); Netherlands 27bp (+0); Swaps 29bp (+6); EU 44bp (+8); Austria 58bp (+5); France 73bp (+5); EIB 74bp (+9); EFSF 93bp (+12); Belgium 109bp (+5); Italy 372bp (+21); Spain 447bp (+33).

EUR swap curve 2-5 YRS 48bp (-4,0); 5-10 YRS 80bp (-7,0) 10-30 YRS 58bp (-3,0).
2 YRS German BKOs closed 0,021% (-1) and 5 YRS OBLs 0,51% (-7), on the week. with UST at 1,61% (-16)
2 Swiss 2-years remarkably stable at -0.16%.

Main at 136 from 127 (7,1%); Financials at 204 after 182 (12,1%). SovX at 148 (+15). Cross at 568 from 521.

Stoxx Futures at 2452 / -4,4% from 2565 with S&P minis at 1431 / -1,8% from 1457, at European COB last week.
VIX index at 15,6 after 14,0 last week.

Oil 91,8/111,9 (WTI/Brent) from 93,1/111,0 (-1,4%/+0,8%). Gold at 1773 after 1773 (+0,0%). Copper at 376 from 380 (-1,1%) . CRB closes 308,0 from 309,0 (-0,3%).

EUR 1,285 after 1,299 last Friday

Greek bonds guesstimates: And another good week with 2023s down to 19.25% from 20% and 2042s a little tighter at 18% from 18.25%.

All levels Friday COB 17:30 CET

Next week:
Hard data lacking in Europe to get things anywhere. Final PMI data on Mon and Wed. German Factory orders at the end of the week. Unemployment figures across Europe. Of course, US NFP on Friday.
ECB next Thursday won’t do much on rates. Difficult to see the input here, unless Mario was to pull yet another rabbit out of his hat, but the mandate is quite stretched by now.
Should remain rather technical, subject to Periphery rumours and jitters. Spanish auction on Thu, as well as a new French 10 YRS.

EZ: CPI fcst 2.4% after 2.6%; Mon Final Mfg PMI 46, EZ unemployment (last 11.3%); Tue EZ PPI (last 1.8% YoY); Wed Final Comp and Serv PMI 45.9 & 46, Retail Sales (last -1.7% YoY); Thu ECB (unchanged)
GE: Mon Final MfG PMI 47.3; Wed Final Serv PMI 50.6; Fri Fact Orders fcst 0% after 0.5%
FR: Mon Final Mfg PMI 42.6; Wed Final Serv PMI 46.1
Italy: Mon Final MfG PMI & Unemployment (last 10.7%); Wed Final Serv PMI
Spain: Mon Mfg PMI; Tue Unemployment (last 38.2k); Wed Serv PMI; Fri Indu Output (last -5.4%)
US: Mon Final PMI ; MfG ISM fcst 50 after 49.6, PX paid fcst 55.1 after 54, Construction Spending fcst 0.5% after -0.9%; Wed ADP, Non-MfG ISM; Thu Claims, Fact Orders, FED minutes; Fri NFP
China closed for the whole of next week.

Click link on title or below for today’s musical support:
I promise I’ll change the theme next week…

Thursday 27 September 2012

27 Sep 2012 – “ The Rain Song ” (Led Zeppelin, 1973)

27 Sep 2012 –  “ The Rain Song ” (Led Zeppelin, 1973)

Rainy week, indeed. Taken lower by the European jitters, following the US sell-off on Tuesday, US equities didn’t make any recovery after the European close. A vague attempt to reach and breach prior closing failed and US indices slumped back to close halfway between prior close and lows of day, on average about a good 0.5% lower. Asian risk a mixed story this morning, having mainly traded lower throughout the session and ripping higher around 7 MA CET as a mix of relaxed IPO rules and substantial POBC injection into the money markets (ahead of next week’s week-long holiday close) lifted Chinese shares up 2.5% (having, as a reminder, ticked and closed on Jan 2009 lows yesterday).

Good for sponsoring a European 0.5% rebound in equities at open. Not a very credible game-changer, though.
Bunds open flat at 1.46%. Most EGBs about unchanged, including the Periphery short end, ahead of today’s Spanish budget and Italian auction (4.12% and 5.26% at open for the 5 and 10 YRS on-the-run). EUR curve about flat. Credit opening quotes a tick or two tighter, after yesterday’s 5-7% sell-out. Light commodities recovery (Oil +1%), but copper just up a tick (so the China story is fast petering out and not seen as that fundamental). EUR caught below 29-handle.

Chinese Industrial profits down 3.1% in Aug after -2.7% in July (nearing this year’s low print of -5.2% after Chinese New Year in Feb). German Import prices higher than expected (on energy, probably) at +1.3% MoM /+3.2% YoY (fcst +0.8%/+2.7% after +0.7%/+1.2%). Ouch! Yesterday’s French unemployment numbers bleak, as leaked, with the 3m-mark broken at 3.001k (up from 2.987k). Highest number in 13 years – and rising. German unemployment stable at 6.8% record low since Dec 2011 (+9k after revised +11k, fcst was +10k after +9k). Interesting to see that German
Spanish Retail sales surprisingly resilient at -2.1% MoM (fcst was only a slight “pick-up” to -6.1% after the prior -7.4%). Housing permits actually rising, but still down -37.1% YoY.
Italian Biz Confidence, as all Italian confidence figures lately, a little over forecast at 88.3 (fcst 87.5 after 87.3). Draghi effect? Might not hold, if the Draghi put keeps running out of steam.
Euro zone M3 development lower than expected at +2.9% (fcst +3.3% after +3.8% revised lower to +3.6%). 3m average eventually unchanged at 3.2%, after revision. Lending is contracting further with Private Sector loans falling 0.6% in Aug (after -0.4% in Jun and Jul).
Final lead shoe of the day was the Biz Climate at -1.34 (fcst unch -1.2), next to Final Confidence data, which confirmed Consumer at -25.9, but lowered Economic, Industrial and Services all by about 1 point in a final read to respectively -85,  -16.1 and  -12. Confirms low PMI reads all around.

Final auction of the month on the modest side with Italy under target with EUR 2.7bn 5 YRS at 4.09% (COB 4.12%, open 4.12%, traded 4.19% ahead of results. Previous auction 3.71% mid-Sep in off-the-run 5s) and EUR 2.9bn 10 YRS at 5.24% (COB 5.27%, traded 5.28% ahead of results. Previous auction 5.82% end of Aug), as EUR 3bn each were planned, next to EUR 1bn in 5 YRS FRN.
B/C around 1.3 pretty much limited service. Good auction price-wise, similar to yesterday’s 10 YRS Bunds.
Wires stating lower borrowing costs in 5s are misleading as, indeed, the last time this very issue was auctioned; it was at 5.33% late August, but ignoring the off-the-run auction at 3.71% on 13 Sep. Fading Draghi-put.
So, no, not a good auction. Paper right away under water…

In absence of really negative news, outside the heavier macro / sentiment data, and ahead of the Spanish budget, markets remained in the morning’s tentative rebound, ignoring as well the lukewarm Italian auction.
Bunds 1,47% (+1), OBLs 0,53% (+1), BKOs 0,039% (+0,5) with UST 1,64% (unch).
Periphery recovering, under Spain’s lead (after yesterday’s 30bp plus bashing) with Spanish 2s at 3,30% (-9), 10s at 5,93% (-10), below the 6%-mark, curve about unchanged, and Italian 2s at 2,40% (-1) and 10s at 5,22% (-5). Italian 2-10s 282bp (-4).
Equities up some 0.5% from yesterday’s -2.6% close and Credit equally better, tighter by 4-7 ticks, so roughly 3%. Oil up about $2.5 (2%), other commodities a tick better from close. EUR about stable at 1.288.

Depressing US data to start the afternoon session, starting with US Q2 GDP revised down to 1.3% QoQ (from 1.7%), on drought impact and lower spending, Personal Consumption to 1.5% from 1.7%. Durable goods for Aug and prior revision are gloomy at -13.2% (fcst -5 after +4.2% revised to 3.3%). Ex Transport tanking, too. Only positives were Claims of 359k (fcst 375k after 382k revised 385k).
Shaved 2 bp off Bunds and UST and 0.25% off equities. Limited immediate non-impact on EUR.

Some re-widening of some 5bp of Spanish bonds from their late morning levels, ahead of the repeatedly delayed budget presentation, knowing as well that Castilla La Mancha is said to become the fifth Spanish region to tap the regional bail-out fund for EUR 800m (next to Catalonia’s EUR 5bn, Andalucia for EUR 4.8bn,  Valencia EUR for 4.5bn as well as Murcia for EUR 300m).
Better be quick for the other regions, if needed, as the EUR 18bn is being drawn dry rapidly. Especially, if Spain’s 2013 budget will hark back monies from them. Yes, it is an eternal, negative, feed-backing loop… Shouldn’t keep one from budgeting nevertheless… 

US cash open lower than European-driven futures, settling in a good +0.25%, ahead of another set of disappointing data with Aug Pending Home Sales down 2.6% MoM (fcst +0.3% after revised +2.6%). Sill up 6.6% YoY (after prior 15.2%).
Drifting lower, thereafter, before bouncing off COB levels ahead of the 17 CET presentation of Spain’s budget, for a rapid 0.50%. ESM signed by the German president. Spanish 10s back below 6% for good.

Budget news: 58% spending cuts, 42% revenue increase, with pensions, scholarships and interests costs (…) on the rise. Agency to monitor Spain's compliance with deficit targets, as well regional budget targets (see above). 43 new laws to bolster economy & Labour Reforms. Agreement on use of Pension Reserve Fund as well as a decree on wage bargaining to break deadlocks, and the 20% gambling tax and the end of a mortgage tax-break, won’t go down well with the Street. Plus a Capital Gain tax.
Hmm, and in how much time can all that be passed - if at all???
Deficit targets all unchanged: 6.3% in 2012. 4.5% in 2013, 2,8% in 2014 and 1.9% in 2015. 2013 to be the last year of recession….

First markets reactions: Good enough to maintain the latest levels in equities and Spanish bonds, but no fire works here (especially because publishing into the market close) and with a bit of a slide as budget details emerge. Will need to await further details, overnight analysis and tomorrow’s reaction.

Bunds closed at 1,45% (-1), OBLs at 0,52% (+1) and BKOs 0,036% (+0,3) with UST at 1,63% (-1)
Spanish 2s at 3,30% (-9), 10s at 5,92% (-11). Spanish 2-10s 261bp (-3).
Italian 2s at 2,35% (-6), 10s at 5,17% (-10). Italian 2-10s 282bp (-4). Italy mainly tracking Spain here. Auction paper positive at close.
Equities just positive. Credit, as usual lately, exaggerating the move and closing about 3% tighter.

Some very light New Issues traffic with Deutsche Börse for EUR 600m 10 YRS at MS +73, Ford with EUR 500m 5 YRS at +195 and another smaller Nordic corporate offering with Finnish Metso raising EUR 400m 7 YRS at  MS+155.

Closing levels:
10 YRS Yields: Germany 1,45% (-1); Luxembourg 1,57% (-2); Finland 1,72% (unch); Netherlands 1,72% (-2); Swaps 1,74% (-1); EU 1,88% (-2), Austria 2,04% (unch); France 2,20% (unch); EIB 2,18% (-2); EFSF 2,37% (+1); Belgium 2,55% (unch); Italy 5,17% (-10); Spain 5,92% (-11).

10 YRS Spreads: Luxembourg 12bp (-1); Finland 27bp (+1); Netherlands 27bp (-1); Swaps 29bp (unch); EU 43bp (-1); Austria 59bp (+1); France 75bp (+1); EIB 73bp (-1); EFSF 92bp (+2); Belgium 110bp (+1); Italy 372bp (-9); Spain 447bp (-10).

EUR swap curve 2-5 YRS 48bp (+1,0); 5-10 YRS 79bp (-1,0) 10-30 YRS 56bp (-1,0).
2 YRS German BKOs closed 0,036% (+0,3) and 5 YRS OBLs 0,52% (+1).
Main at 136 from 141 (3,5% tighter); Financials at 203 after 209 (2,9% tighter). SovX at 149 unch. Cross at 568 from 581.

Stoxx Futures at 2501 / +0,2% (from 2497) with S&P minis at 1433 (+0,3% from 1429, at European close).
VIX index at 16,2 after 16,7 yesterday same time.

Oil 91,5/111,7 (WTI/Brent) from 89,3/108,6 (+2,5%/+2,8%). Gold at 1765 after 1747 (+1,0%). Copper at 371 from 371 (unch). CRB at EU COB 306,0 from 303,0 (+1,0%).
Yes, last week was just an illusion. Baltic Dry again down 8 to 744 (-1.1%). Up 12.5% from the 662 low 10 days ago.

EUR 1,284 from 1,285

Greek bonds guesstimates: Greece widening 25bp again with 2023s closing 19.75% (20% Friday) and 2042s back to 18.25% (18.25% Fri). Not sure those hard-fought measures will pass internally and with the Troika.

All levels COB 17:30 CET

Tomorrow and next week:
Hard data lacking in Europe to get things anywhere. Final PMI data on Mon and Wed. German Factory orders at the end of the week. Unemployment figures across Europe. Of course, US NFP on Friday.
ECB next Thursday won’t do much on rates. Difficult to see the input here, unless Mario was to pull yet another rabbit out of his hat, but the mandate is quite stretched by now.
Should remain rather technical, subject to Periphery rumours and jitters.

EZ: CPI fcst 2.4% after 2.6%; Mon Final Mfg PMI 46, EZ unemployment (last 11.3%); Tue EZ PPI (last 1.8% YoY); Wed Final Comp and Serv PMI 45.9 & 46, Retail Sales (last -1.7% YoY); Thu ECB (unchanged)
GE: Retails Sales fcst -0.9% YoY (after -1%). Mon Final MfG PMI 47.3; Wed Final Serv PMI 50.6; Fri Fact Orders fcst 0% after 0.5%
FR: final Q2 GDP 0.3% YoY,  Aug PPI fcst +2% YoY, Consumer Spending fcst -0.7% YoY; Mon Finam Mfg PMI 42.6; Wed Final Serv PMI 46.1
Italy: PPI fcst +2.5% after 2.4% YoY, CPI fcst 2.7% after 3.3%; Mon Final MfG PMI & Unemployment (last 10.7%); Wed Final Serv PMI
Spain: CPI fcst 2.8% after 2.7%; Mon Mfg PMI; Tue Unemployment (last 38.2k); Wed Serv PMI; Fri Indu Output (last -5.4%)
US: Pers Income and Spending (fcst +0.2% and +0.5% after +0.3% and +0.4%), Chicago Purchasing fcst 53 unch, UoM Conf final 79; Mon Final PMI ; MfG ISM fcst 50 after 49.6, PX paid fcst 55.1 after 54, Construction Spending fcst 0.5% after -0.9%; Wed ADP, Non-MfG ISM; Thu Claims, Fact Orders, FED minutes; Fri NFP
China closed for the whole of next week.

Click link on title or below for today’s musical support:
I've felt the coldness of my winter 
I never thought it would ever go
I cursed the gloom that set upon us.

Wednesday 26 September 2012

26 Sep 2012 – “ Bad Rain " (Slash & The Conspirators, 2012)

26 Sep 2012 – " Bad Rain" (Slash & The Conspirators, 2012)

Yes, it did feel kinda rainy already yesterday at market close, but the “Purple Rain” quickly transformed into a sea of red, as the market digested (non-voting) FED’s Plosser comments on his doubts on QE. Not that there was much in revelations in what he said, but somehow, it confirmed what everybody seems to fear deep inside. In any case, a good reason for a “sell-off” (It might have been the biggest drop in the S&P in a month, but, hey, we’re talking about just over 1% in the close, so hardly world-shattering for the moment).

Asia caught in the movement, with Japan particularly hit (-2%), having outperformed yesterday. China hitting a new low, closing just above 2.000, back to late Jan 2009 levels. Beware of further acceleration with China be closed for holiday during the whole of next week
Sprinkle on that belated mulling on the Spanish situation, BuBa’s Weidman renewed hard-line stance (and, btw, 7% is NOT outworldish, as having been tested in the past by some)(although at that time with higher growth and inflation figures against that) as well as conditioning on bank-aid and renewed legal checking (although rather rumoured than confirmed) on the ECB buying (not the ESM), as well as no ex-post ESM bank bailout, and you have a perfect mix to kick-start another day to hang out there to dry – under the rain. Bad Rain.

Total Risk Off start with Bunds down 6bp to 1.52% (ahead of the auction). Periphery kicked down the road in short and longs (2 YRS Italy +10 to 2.38%, Spain +11 to 3.20%, Italian 10s +8 to 5.24% and Spain thrown back to 5.84%, which is damn near to the symbolic 6%).

European equities down 1% plus. Credit still in massive correction phase after rolling out the new series with the Main wider by 4.5% and Financials out by 3%. Commodities downed with Brent off by over 2%. Gold stable (something needs to be) and EUR at 1.287.
(Light) Data front in line with mood with French Consumer Confidence down to 85 (fcst 86 unch), coupled with leaks confirming that tonight’s jobless claims with print way past the 3m-mark. Italian retail sales down 3.2% YoY (fcst -0.8% after -0.5%). Bank of Spain still seeing Q3 GDP falling at a “significant” pace. German CPI as expected +2.1% after 2.2% YoY.

Less comfortable day for a Periphery sales: Italy sold EUR 9bn 6m bills at 1.503% (last 1.59% end of Aug), Mediocre bid to cover of 1.4 and obviously with a tail up to 1.547%. Seemed to have been quoted 20 bp tighter yesterday.

Will be selling EUR 3bn each of on-the-run 5s (COB 4.12%, last 3.71% mid-Sep on off-the-run 5s) and 10s (COB 5.27%, last 5.82% end of Aug) tomorrow (next to EUR 1bn FRN).
Seemed like great back-drop for the German auction in full ROff mode: EUR 5bn 10 YRS sold at 1.52%, barely a concession to this morning’s lows (COB had been 1.58%, last 1.42% early Sep and early Aug), but with the BuBa loading up on EUR 1.8bn of paper, as there were only bids for EUR 3.9bn in total, of which EUR 3.2bn were allocated. 3 cts tail. Good result price-wise, but a fail nevertheless…
Spanish bonds wider by 25bp in2s to 3.34% and 24bp to 5.95% were shaky enough to actually support Bunds nevertheless and the immediate reaction after the auction result was about 1 bp widening in German 10s and then back to the day’s lows. Odd world.

Bunds hitting 1.50% (-8bp) as appetizer ahead of lunch, with Spain printing 6.000% (+29bp) (Spread, easy to guess, out by 37bp and hitting a round +450) and equities down 2% / Credit 6% wider.

Midday levels: Bunds 1,51% (-7), OBLs 0,56% (-5), BKOs 0,049% (-1,5) with UST 1,66% (-6)
Spanish 2s 3,31% (+22), 10s 5,98% (+27). Spanish 2-10s 267bp (+5). Hit 6% in 10s for the first time since 18 Sep.
Italian 2s 2,38% (+10), 10s 5,23% (+7). Italian 2-10s 285bp (-2).
1.286. Oil & Copper -1.75%.

Drifting sideways until US open (flat / slightly negative) and ahead of the sole US data set of the day. New Home Sales for Aug at 373k (fcst 380k after revised +2 to 374k) / -0.3% MoM (fcst +2.2% after +3.6%) not helping to lift spirits any higher…

10 YRS Bunds and UST back to 05 Sep, respectively 07 Sep levels… Ok, the Bund auction was a fail, but who cares? On the contrary, these amounts are missing now…
Oil inventories eventually of no interest, price action just depleted.

Yes, it did feel rainy yesterday… Total Risk Off close. Bad Rain.

Credit still mega-sluggish side (5-7% wider), back to early Sep levels. Equities (-2.6%) pretty much evenly and straight down the chart, no rebound really worth more than 0.25%.
Bunds closed at 1,46% (-12), OBLs at 0,52% (-9) and BKOs 0,033% (-3,1) with UST at 1,64% (-8)
Spanish 2s at 3,39% (+30), 10s at 6,03% (+32). Spanish 2-10s 264bp (+2).
Italian 2s at 2,41% (+13), 10s at 5,27% (+11). Italian 2-10s 286bp (-1).
Closing pretty on LOD (1.45%) in Bunds, HOD 6.03% in BONOs. Spain’s budget presentation will need to be quite convincing to turn around the mood.
EUR at 1.285 no more entangled in 50d, 100d & 200d MOV at 1.293 / 1.294 / 1.297
Commodities crashing.
Bad Rain, really Bad Rain!

New Issues side-lined on Risk Off and widening spreads. Lone appearance of the day was unrated Austrian steel-maker Voestalpine with EUR 500m 6 YRS at MS +295.

Closing levels:

10 YRS Yields: Germany 1,46% (-12); Luxembourg 1,59% (-4); Finland 1,72% (-13); Netherlands 1,74% (-11); Swaps 1,75% (-6); EU 1,90% (-6), Austria 2,04% (-7); France 2,20% (-8); EIB 2,20% (-5); EFSF 2,36% (-6); Belgium 2,55% (-5); Italy 5,27% (+11); Spain 6,03% (+32).

10 YRS Spreads: Luxembourg 13bp (+8); Finland 26bp (-1); Netherlands 28bp (+1); Swaps 29bp (+6); EU 44bp (+6); Austria 58bp (+5); France 74bp (+4); EIB 74bp (+7); EFSF 90bp (+6); Belgium 109bp (+7); Italy 381bp (+23); Spain 457bp (+44).

EUR swap curve 2-5 YRS 47bp (-4,0); 5-10 YRS 80bp (-2,0) 10-30 YRS 57bp (-2,0).

2 YRS German BKOs closed 0,033% (-3,1) and 5 YRS OBLs 0,52% (-9).
Main at 141 from 134 (5,2% wider); Financials at 209 after 194 (7,7% wider). SovX at 149 from 137. Cross at 581 from 547.

Stoxx Futures at 2497 / -2,6% (from 2563) with S&P minis at 1429 (-1,9% from 1456, at European close).
VIX index at 16,7 after 14,1 yesterday same time.

Oil 89,3/108,6 (WTI/Brent) from 92,8/110,9 (-3,8%/-2,1%). Gold at 1747 after 1772 (-1,4%). Copper at 371 from 380 (-2,4%). CRB at EU COB 303,0 from 308,0 (-1,6%).

Baltic Dry again down 1.5% to 752 from 763. Still up 13.6% from the 662 low 10 days ago. Maybe it’s just like catching a cab when it rains.  And someone really wanted to ship least week (iPhones?)

EUR 1,285 from 1,296

Greek bonds guesstimates: Unsurprising 25bp widening, Greece 2023s closing back to 19.5% (20% Friday) and 2042s back to 18% (18.25% Fri).

All levels COB 17:30 CET

Rest of this week:

Spanish budget tomorrow and bank audit due on Friday 28 Sep. Italian auction tomorrow.

EZ: Thu M3 & Biz Climate fcst -1.2 unch, final Sentiment Data -25.9, Fri CPI fcst 2.4% after 2.6%
GE: Thu unemployment fcst 6.8% unch, Fri Retails Sales fcst -0.9% YoY (after -1%)
FR: Fri final Q2 GDP 0.3% YoY,  Aug PPI fcst +2% YoY, Consumer Spending fcst -0.7% YoY
Italy: Thu Sep Biz Conf fcst 87.5 (last 87.2), Fri PPI fcst +2.5% after 2.4% YoY, CPI fcst 2.7% after 3.3%
Spain: Thu Housing Permits (last -32.6% YoY) & Retail Sales fcst -6.1% after -7.3%, CPI fcst 2.8% after 2.7%
US: Thu GDP revision, Personal Consumption, Durable Goods, Claims, Home Sales


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

Released this very afternoon. Hot off the press, as so much these days - so to speak

Tuesday 25 September 2012

25 Sep 2012 – “ Purple Rain " (Prince, 1984)

25 Sep 2012 – “ Purple Rain " (Prince, 1984)

We remain caught in what seems to be a slow-motion corrective movement after the last weeks of exuberance. Nothing dramatic. But the market feels like a rain-drenched rag, heavy and wet. Had a final attempt by US equities to tickle out Friday’s (lower) closing levels, but that again failed in the last 45 minutes and ended in a broadly 0.5% loss.  UST have corrected their post-QE trauma and are back to 1.70% in 10s. Asia has been duly following suit, off 0.25-0.5% with exception of Japan closing up a wee-bit. Not much of hard data.
European open in line with the gloomier ambiance: Bunds opening 3 tighter at 1.53% with EGBs pivoting around unchanged Soft Core and widening out 3-5 in the Periphery (with Italy once more a little softer than Spain). Italian short end softer ahead of the 2 YRS Zero auction. Equities down a small 0.25%. Credit is drifting wider by 2%. EUR stuck on the 29-handle and Commodities unchanged to 0.5% firmer. Unexciting.

French data mixed to morose with own-company outlook at -6 (from prior -6 revised -7), Consumer Confidence taking an austerity-announcement-driven dip (and late post-summer realisation that things ARE messy out there ) to -52 from a -44 unchanged forecast, although Biz Climate remained unchanged at 90 (fcst 89). Consumer Conf at May 2009 level. Spanish Producer Prices wider at +1% MoM / +4.1% YoY (after +0.8 / +2.6%), confirming fears voiced by ECB’s Coeuré over the weekend that Inflation, although seemingly in check, had to remain contained, as this is the ECB’s main mandate. Nowotny reapeating Coeuré weekend comments on improbable negative rates.

Italy about hitting the EUR 4bn target with EUR 3.94bn 2 YRS Zeros issued at 2.532% (3.064% end of Aug, 4.86% end of Jul). Spain out with EUR 1.4bn 6m bills at 1.203% (after 0.946%) and EUR 2.6bn 6m at 2.213% (after 2.026%), the latter with a rather low B/C for bills of 1.8.
Back to Earth for both short ends of the curve… Draghi promise a little breathless.
On the opposite end of the curve, the Dutch rapidly issued EUR 1.9bn 2033s on tap at 2.497% (COB was 2.52%). Last sold that maturity mid- June, showing how the curve steepened in the meantime (+20) for Hard Core curves.
EUR 5bn German 10 YRS tomorrow (COB 1.58%, last 1.42% early Sep and early Aug) and Italy targeting EUR 9bn 6m bills sale tomorrow (last 1.59%), before selling EUR 6bn of on-the-run 5s and 10s on Thursday (next to EUR 1bn FRN).

In absence of data, some political and data noise:
Spain still playing coy on bail-out, now asking how much the ECB would buy, while protesters are in the streets and the Catalans start a three-day debate on secession, seeking advice from Brussels on the matter. Spanish Foreign Minister not amused and threatening an indefinite Spanish veto of a Catalan EU membership. Will have the Spanish 2013 budget proposal on Thursday and bank liquidity needs by Friday (although they already seem massaged down).
ESM investment / liquidity guidelines circulating with 15% to be kept in AA assets. Great! We certainly needed another asset-manager chasing Soft and Hard Core debt (next to the SNB, which has amassed EUR 80bn in EUR EGBs up to July).
Greece pushing for a roll-over of its ECB /NCB debt, while the IMF is pushing for write-downs. Should the latter happen, I doubt it would go down well with the major contributor nations’ electorate, once presented with a hard bill. Even the French might suddenly wake up and realize how much they’re on the hook.
S&P updating and lowering its 2012-2013 outlook of EZ growth to -0.8% / zero from +-0.7%/ +0.3%. Tracks latest PMI data sets, all drifting lower.

Midday light ROff market picture. Periphery softer in unison. Equities down 0.25%, after bouncing off lows. Credit maintains its morning weakness at 3% wider.
Bunds 1,52% (-4), OBLs 0,55% (-2); BKOs 0,041% (unch). UST 1,69% (-2)
Spanish 2s at 3,07% (+8), 10s at 5,70% (+5). Spanish 2-10s 263bp (-4).
Italian 2s at 2,30% (+8), 10s at 5,16% (+6). Italian 2-10s 286bp (-3).
Commodities unchanged, except Oil up 1%. EUR unchanged. Boring.

Pre-US open EUR bounce to 1.295 pulling stocks higher (or vice versa?) and pushing Bunds (and UST) to closing levels. Not much of an impact on the softer Periphery (+8-11 on the short end, +5-6 in 10s).
Split Case-Shiller data with MoM increase of +0.44 (fcst +0.75% after revised lower 0.91%), but higher YoY at +1.20% (fcst +1.05% after revised higher 0.59%).

Draghi press conference only repeating latest mantras. Nothing new.
Flattish positive US open on the 13.600 / 1.460-mark (yesterday’s high & Friday’s close).
Wow, strong jump in US Consumer Confidence at 70.3 (fcst 63.2 after 60.6, revised 61.3), as well as positive Richmond FED at +4 (fcst -6after -9). Just held down a little by House Prices solely rising +0.2% (fcst +0.6% after +0.7%, revised +0.6%). Good for 0.2% in equities. Ok, people were just confident to get a new iPhone. I get it.

Eventually Catalan early elections confirmed for 25 Nov or 02 Dec. Ah… Seems we’ll be treated to some serious sideshow on Spain / EU / EZ inner workings. Andalucia confirming “studying” EUR 4.9bn of bail-out needs (but no fresh news).
NB: 16% of Spain’s population and 18.5% of GDP.
Talking of which: Spain’s deficit through Aug rose to 4.8% (compared to 3.8% same time last year) on 8.9% higher government spending (explained as transfers to the regions) and Tax receipts down 4.6%. Need to see what Thu 2013 budget will reveal. That Rajoy has “communication issues”, as said by Schäuble today, must have been a slip of a tongue in a like-minded FM round (meeting Austria, Finland and the Netherlands).

ROn, following the US lead.  Another fairly uninspiring day. In absence of hard data, subject to rumours and sentiment, as well as sudden “squeezes” or “sell-offs”, albeit in very tight ranges. Mood maybe less rainy then yesterday, but, call me a bear, it doesn’t feel very convincing out there.
Bunds sold ahead of tomorrow’s auction. Credit still on the sluggish side (3%-plus wider), despite equities +0.5%.
Bunds closed at 1,58% (+2), OBLs at 0,60% (+4) and BKOs 0,064% (+2,3) with UST at 1,72% (+1)
Spanish 2s at 3,09% (+10), 10s at 5,71% (+6). Spanish 2-10s 262bp (-5).
Italian 2s at 2,28% (+6), 10s at 5,16% (+6). Italian 2-10s 287bp (-2).
Giving back most of yesterday’s tightening in Spain. Closing just off wides, but certainly not any tighter.
EUR at 1.296 entangled in 50d, 100d & 200d MOV at 1.293 / 1.294 / 1.297. Choose your preferred level.
Nice commodities performance across the board, led by Oil and Copper (+1.5% and +1.3%).

Low and cautious New Issues traffic with Deutsche Hypo EUR 500m7 YRS Pfandbriefe (covered bonds) at MS +4 and 2 smaller corporate offerings with Finnish TelCo Elisa EUR 300m7 YRS MS +105 and a EUR 250m increase of a 2020 deal at MS +155 from French chemists Arkema.

Closing levels:
10 YRS Yields: Germany 1,58% (+2); Luxembourg 1,63% (+2); Swaps 1,81% (+4); Finland 1,85% (+1); Netherlands 1,85% (+2); EU 1,96% (+4), Austria 2,11% (unch); EIB 2,25% (+4); France 2,28% (+3); EFSF 2,42% (+5); Belgium 2,60% (+1); Italy 5,16% (+6); Spain 5,71% (+6).

10 YRS Spreads: Luxembourg 5bp (unch); Swaps 23bp (+2); Finland 27bp (-1); Netherlands 27bp (+0); EU 38bp (+2); Austria 53bp (-2); EIB 67bp (+2); France 70bp (+1); EFSF 84bp (+3); Belgium 102bp (-1); Italy 358bp (+4); Spain 413bp (+4).

EUR swap curve 2-5 YRS 51bp (+2,0); 5-10 YRS 82bp (-3,0) 10-30 YRS 59bp (-4,0).
2 YRS German BKOs closed 0,064% (+2,3) and 5 YRS OBLs 0,60% (+4).

Main at 134 from 130 (3,1% wider ); Financials at 194 after 187 (3,7% wider). SovX at 137 (+2). Cross at 547 from 531.
Stoxx Futures at 2563 / +0,5% (from 2551) with S&P minis at 1456 (+0,4% from 1450, at European close).
VIX index at 14,1 after 14,4 yesterday same time.

Oil 92,8/110,9 (WTI/Brent) from 91,6/109,4 (+1,4%/+1,4%). Gold at 1772 after 1763 (+0,5%). Copper at 380 from 375 (+1,3%). CRB at EU COB 308,0 from 306,0 (+0,7%).
Baltic Dry back into reverse, down 9 tick to 763 (-1.2%). Still up 15% from the 662 low 10 days ago.

EUR 1,296 from 1,291

Greek bonds guesstimates: Regardless of rumours and strikes in Athens, Greece keeps crawling tighter with 2023s closing at 19.25% from 19.50% (20% Friday) and 2042s at 17.75% from 18% (18.25% Fri).

All levels COB 17:30 CET

This week:
Running empty on data flow. End of month data publication fatigue, so markets will run on sentiment, technicals and rumours. Merkel / Draghi & Merkel / Lagarde meeting in the coming 2 days.
Spanish budget on Thu and bank audit due on Friday 28 Sep.
Probably uneventful auction supply next week: 10 YRS Bunds on Wed and long Italians to close the month next Fri to focus on.

EZ: Fri 27 M3 & Biz Climate + final Sentiment Data
GE: Wed CPI fcst 2.1% after 2.2%; Thu unemployment
FR: Wed Cons Conf fcst 86 after 87 and unemployment
Italy: Wed Retail Sales (fcst 0% after +0.4% MoM); Thu Biz Conf (last 87.2)
Spain: Thu Housing Permits (last -32.6% YoY) & Retail Sales. Fri Bank audit.
US: Wed New Home Sales; Thu GDP revision, Personal Consumption, Durable Goods, Claims, Home Sales

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

If you have 20 minutes to spare…Ultra-long Monster version

Monday 24 September 2012

24 Sep 2012 – “ Raindrops Keep Fallin’ On My Head " (BJ Thomas, 1969)

24 Sep 2012 – “ Raindrops Keep Fallin’ On My Head " (BJ Thomas, 1969)

When fall comes, the clouds, the rain, the falling leaves… Wet and cold markets… Softer US close, after quadruple witching. Nothing bad, but down in the last 45 minutes, after drifting lower throughout the afternoon, once the pro-Europe rush started to fade. Split Asia after some initial all-around weakness with Japan down a little, China (for once) up a little, by and large on helicopter view. Soft backdrop for the European open on visible Franco-German spats on where and how to go, renewed Greece jitters avec the Troika taking a break and real deficit numbers touted as being rather North of EUR 20bn, so twice the saving amounts that have been haggled about throughout the last weeks. Spanish (and Italian) bail-out tango ongoing. Yes. No. Not needed, Right now. Conditions. Falling leaves.

Light Risk Off open for a session that won’t see any meaningful macro outside German’s IFO.
Bunds morning flat to a little tighter just under the 1.60% pivot, UST tighter by 3 to 1.75%, compared to Friday’s European close. Rest of EGBs in line. Periphery a little softer tighter across the curve with Italy unable to make up for Friday’s drift wider. Curves unchanged. Equities down 0.50%, matching the softer US close. Credit wider by 1.5-2.5%). Commodities reversing Friday’s upwards correction with Oil and Copper -1%.EUR caught between 1.295 and 1.30
In a nutshell, it’s just the mirror open of Friday.

German IFO data  disappointing on all accounts (Headline Biz Climate 101.4 fcst 102.5 after 102.3, Current 110.3 fcst 111 after a tick lower revised 111.1 and Expectations down to 93.2 fcst 95 after 94.2, a levels last seen in 2009). So, as for the PMI figures, the expected rebound after OMT and QE announcements has not taken place. Good for an additional touch of ROff across asset classes.

Uneventful morning, otherwise. Questions spreading on possible ESM leverage – or not…

The Belgian auction raised EUR 785m at 1.241% (after 1.34% in Jul), EUR 500m 2019 at 1.997% (after 2.004% in Sep), EUR 784m 2021 at 2.389% and EUR 945m 2022 at 2.609% (after 2.584% early Sep), hence a total amount of slightly over EUR 3bn, as targeted. Better on the shorter end, wider on the longer end.
Germany sold EUR 3bn 1 YR bills at -0.0184% (after -0.025%), knowing that the BuBa retained far more than half for market interventions, keeping EUR 1.8bn for itself, despite over EUR 6bn in bids. High B/C ratio and tail too small to mention.
French bills out for EUR 3.8bn 3m at -0.016%, EUR 1.7bn 6m at -0.006% and EUR 1.27bn 12m at +0.006% (after -0.012%, -0.004% and 0.029%). Nothing special.
French government coalition squabbles on EU Fiscal Pact signing. Sticking to 3% 2013 deficit target down from reiterated 4.5% for 2012 (on additional EUR 30bn of savings / new taxes…, of which no VAT hike. So elsewhere…).
Will have Dutch 20 YRS 2033 (COB 2.52%) and Spanish 3 and 6m (0.946% and 2.026% end of Aug), as well as Italian 2 YRS Zeroes (3.064% end of Aug, 4.86% end of Jul) tomorrow.

Lunch with Hard Core, swaps and Agency about ok. Soft Core softer by 2. Italy persistently softer.
Bunds at 1,57% (-2); OBLs 0,57% (-1); BKOs 0,041% (+0,8) with UST 1,72% (-5)
Spanish 2s 2,99% (-8), 10s 5,74% (+1). Spanish 2-10s 274bp (+7). Italian 2s 2,25% (+7), 10s 5,15% (+5).
Credit softer (+3%), still swinging wider than equities, down 1%. Commodities softer by % with EUR at 1,291 from 1,299.

Good Spanish performance, although rumours surfaced that real estate assets would be transferred to the bad bank at “only” 45-50% discount, which in turn explains the rumours confirming no more than EUR 60bn would be needed for the Baking bail-out – but would make one expect that the bad bank might be under water right off inception and htus remain solely in state property, which wouldn’t be good for Spain. Need confirmation. Won’t delve into what “Lottery Bonds” might be that ought to help fund the Regional Bail-out.

US equity open in line with future, down 0.4%, with Apple down over 2% for having sold “only” 5m iPhones this weekend. Some light upwards correction thereafter, putting a floor on European risk adverseness.
Minor data with Chicago and Dallas Fed at -0.87 after -0.12 and -0.9 after -1.6 (fcst -2.7).

Merkel to meet Draghi and Lagarde in closed meetings in the coming 2 days.
Rest of afternoon pretty much on stand-still.

Uninspiring day. Light ROff, but nothing major. In absence of hard data, subject to rumours and sentiment. Rainy.
Bunds closed at 1,56% (-3), OBLs at 0,57% (-2) and BKOs 0,041% (+0,8) with UST at 1,71% (-6)
Spanish 2s at 2,99% (-8), 10s at 5,65% (-8). Spanish 2-10s 267bp (unch).
Italian 2s at 2,22% (+4), 10s at 5,10% (unch). Italian 2-10s 289bp (-3). Some recovery into the close, led by stronger Spain. Feels odd.
Spanish 10s holding near the 50bp resistance to Italy in place since May (Had been -200 last Dec and turned flat in March)

Rather low New Issues traffic with BBVA returning for EUR 1bn 2 YRS senior at MS +325 (Spain +45-50), BASF printing EUR 750m 6 YRS at MS +45 and a star offering of the day Petrobras raising a 3-trancher with EUR 1.3bn Long 6 YRS at MS +212.5, EUR 700m11 YRS at MS +257.5, as well as GBP 400m17 YRS at UKT +320.

Closing levels:
10 YRS Yields: Germany 1,56% (-3); Luxembourg 1,61% (-2); Swaps 1,77% (-5); Netherlands 1,83% (-3); Finland 1,84% (-4); EU 1,92% (-3), Austria 2,11% (-1); France 2,25% (-2); EIB 2,21% (-3); EFSF 2,37% (-3); Belgium 2,59% (-4); Italy 5,10% (unch); Spain 5,65% (-8).

10 YRS Spreads: Luxembourg 5bp (+1); Swaps 21bp (-2); Netherlands 27bp (+0); Finland 28bp (-1); EU 36bp (unch); Austria 55bp (+2); France 69bp (+1); EIB 65bp (unch); EFSF 81bp (unch); Belgium 103bp (-1); Italy 354bp (+3); Spain 409bp (-5).

EUR swap curve 2-5 YRS 49bp (-3,0); 5-10 YRS 85bp (-2,0) 10-30 YRS 63bp (+2,0).
2 YRS German BKOs closed 0,041% (+0,8) and 5 YRS OBLs 0,57% (-2).

Main at 130 from 127 (2,4% wider); Financials at 187 after 182 (2,7% wider). SovX at 135 (+2). Cross at 531 (+10).
Note that Cyprus CDS have been taken out of the latest SovX.
Stoxx Futures at 2551 / -0,5% (from 2565) with S&P minis at 1450 (-0,5% from 1457, at European close).
VIX index at 14,4 after 14,0 yesterday same time.

Oil 91,6/109,4 (WTI/Brent) from 93,1/111,0 (-1,6%/-1,4%). Gold at 1763 after 1773 (-0,5%). Copper at 375 from 380 (-1,3%). CRB at EU COB 306,0 from 309,0 (-1,0%).
Boo!! New week, new luck didn’t work out this time, with the Baltic Dry ticking a little lower to 772 (-0.25%). Then again last week saw a 17% surge from 662 up to 774

EUR 1,291 from 1,299

Greek bonds guesstimates: Regardless of rumours, Greece has fallen below the 20% for good today with 2023s closing at 19.50% from 20% and 2042s likewise tighter at 18% from 18.25%.

All levels COB 17:30 CET

This week:
Running empty on data flow. End of month data publication fatigue, so markets will run on sentiment, technicals and rumours. Merkel / Draghi & Merkel / Lagarde meeting in the coming 2 days. Spanish budget and bank audit due on Friday 28 Sep.
Probably uneventful auction supply next week: 10 YRS Bunds on Wed and long Italians to close the month next Fri to focus on. Italian and Spanish bills on Wed and Thu shouldn’t be market-rocking in the current environment.

EZ: Fri 27 M3 & Biz Climate + final Sentiment Data
GE: Wed CPI fcst 2.1% after 2.2%; Thu unemployment
FR: Tue Biz Confidence fcst 89 after 90; Wed Cons Conf fcst 86 after 87 and unemployment
Italy: Tue Con Conf fcst unch 86, Wage data; Wed Retail Sales (last +0.4% MoM); Thu Biz Conf (last 87.2)
Spain: Mon PPI (last +2.6% YoY); Thu Housing Permits (last -32.6% YoY) & Retail Sales. Fri Bank audit.
US: Tue Case-Shiller Home PX, Cons Conf fcst 63.2 (last 60.6), Rich FED fcst -6 (after -9); Wed New Home Sales; Thu GDP revision, Pers Consumption, Durable Goods, Claims, Home Sales

Click link on title or below for today’s musical support:
And why not? Wet call for the week…