26 Jun 2012 – " Quiet Times " (Dido, 2008)

26 Jun 2012 – " Quiet Times " (Dido, 2008)

http://youtu.be/Ru-i81_5vco

Ended up getting all the nasty news that was priced in, at least for the day: Moody mass downgrade of Spanish banks, Cyprus call for bail-out as well as the resignation of the yet not sworn-in Greek FinMin. As you can only get so much, the confirmation of all this didn’t pile up further. US weak close, but better than Europe. Asia tame close, slightly soft, but no more. Shanghai putting a numerically nice 2222 close on the floor. Talking of floor, Chines equities look a bit breathless at their 5m lows. Chart support here 2132 & then 2093 (so about 4% to 6% lower). 

Bits and pieces on the data front: German Consumer Confidence beating estimates at 5.8 (fcst 5.6 after 5.7), visibly on wage hikes, as was the French equivalent, stable at 90 (fcst was 89). On the Dutch side, final Q1 GDP was a positive surprise, as it eventually grew 0.3% QoQ after initial decline of 0.2% readings. Then again, that is backwards looking and Dutch figures have all been on the sad side lately. But still. Finnish unemployment jumping to 9.5% after 8.4%, which puts an ugly double-digit number in sight. Italian Apr Retail Sales further in decline at -1.6% MoM (fcst -0.6% after -0.2%, revised further to -0.8%), gives an ugly -6.8% YoY reading. Steepest MoM drop since May 2004. Largest YoY drop since the series started in 2001.

Uneven start with Peripherals a bit on the weaker side ahead of auction supply. Equities tentative slightly higher at open. Tick better in Credit. Core EZ initially a tick better, too, but giving back some. Maybe due to Dutch 10 YRS auction hedging, as well as announced EU and Austrian then Finnish New Issues on the long end (7 YRS Austria, 2028 EU, 2044 Austria, 2042 Finland).

Let’s settle for Risk Neutral. RN.

This was seen as being a good day to hammer out billions of auctions and syndicated government / SSA bonds…

The Dutch raised EUR 2.2bn in 10s at 1.995% (from 2.14% last month and a 1.98% close yesterday). Again slightly on the tight side amount-wise (had been announced for up to EUR 3bn), but nicely shot through the 2% mark and a historic low yield.

Spain managed to sell slightly over target EUR 3.1bn bills with EUR 1.6bn 3m at 2.36% (after 0.85%) and EUR 1.5bn 6m at 3.24% (after 1.74%). 15 bp tails in much lower bid to cover. No need for an abacus to see costs soaring 2 to 3 times. Brings us back to Oct 2011 levels seen just before the all-out Dec spikes at 5.11% and 5.23% Ouch!

To round up auction supply, Italy sold EUR 3bn at 4.71% (after 4.04%) and just under EUR 1bn in 2016 and 2026 ILBs.

Italy announced a minimum of EUR 30bn in bonds for Q3, of which EUR 12bn new 10s Nov 2022, EUR 9bn new 3s Jul 2015 and EUR 9bn new 2 YRS zeroes Sep 2014. Plus possible taps in 5s, old 10s and old 2s. Well, that is an ambitious summer programme and might leave some dealers feel a bit alone at times.

Wednesday will get a EUR 9bn chunk of Italian 6m bills (last 2.10%) and readying an equally chunky Thursday sales of up to EUR 2.5bn 5s and EUR 3bn 10s.

For the anecdote, the Swiss issued record low CHF 791m 3m bills at -0.85% (-0.62% one month ago, -0.16% two months ago. Went negative for good Q3/2011… Wonder why… Quick check EURCHF at 1.201. Traded down to 1.2004 yesterday, the lowest since the SNB missed a 1.195 quote on 05 Apr. Ooops!)

Ending the morning session after a slightly negative post-auction ROff loop, before going back to RN. Equities about unchanged, Credit flat to tick better. EGBs soft, all of them. Peripherals settling at +5-8 after the auctions, with Italy back over 6%. Core +3/6, probably on hedging / new issues switching. Austria, Finland and the Netherlands a tick weaker still on supply. Belgium best performer at unch, having digested yesterday’s auction (Has now done about EUR 24.7 from an early June upwards revised EUR 34bn 2012 bond programme, so 72%).

Afternoon session mostly bobbling around. Anyone interested in reading “Towards a Genuine Economic and Monetary Union” (an 8-handed pitch by Van Rompuy, Barroso, Juncker and Draghi? 7 pages, but ends with “Further work is necessary to develop a specific and time-bound road map for the achievement of the genuine Economic and Monetary Union.” Seems to have been cut by 3 pages, covering short term solutions, since first circulating yesterday and meeting very unhappy coughs from over the Rhine. Nice belated rule book. Should have existed before and seems difficult to implement post-ex. Will probably allow telling a common ground on a future vision will have been found at the EU meeting, but there won’t be a short –term fix. So we’re not there yet, solution-wise…

US Case Shiller figures second set of positive housing figures in as many days at 0.67% (fcst 0.3% from 0.09% revised upwards to 0.73%) and Apr Home Price index bottoming out to 135.8 (fcst 134.85 after 134.08 revised).

Very quiet and cosy afternoon session for a while, just trailing sideways on noon levels throughout most asset classes with solely the misses of US Consumer Confidence at 62 (fcst 63 after 64.9 revised 64.4) and Rich Fed Manu Index at -3 (fcst 2 after 4) triggering a short-lived downside hick-up and then a slight ROff bias. Too bad.

Getting pressure on the Periphery again with Spain softly widening past 6.75%, pulling Italy further from the 6% mark. Other EGBs still on the soft side, given the sudden EUR 12bn plus AAA/AA+ long end supply.

Bit of gloom added by the ECB reminding that Cypriot bonds wouldn’t be eligible as collateral anymore. Cyprus bailout numbers not spelled out yet, but EUR 6 to 10bn recurrent (35-59% of 2011 EUR 17bn GDP and 2011 debt at EUR 12bn, 71.6% debt/GDP).

Quiet times, if it wasn’t for the Spanish widening. But, what are 25 bp nowadays (+35 in 2 YRS Spain AND Italy) and 50 bp since Friday???

Only asset classes bottoming out today are commodities (but precious metals). Geopolitical risk under-priced, as seen in Oil, mainly Bent, reacting to Syrian tensions.

Crowded House in SSA (Sovereigns, Supras & Agencies) New Issues: Austria and Finland adding to the EU long end supply, while KfW, CADES and OekB were all working on shorter USD. 

Given the bail-outs lining up, the question whether a gift wrapping is needed for the EU funds is probably unnecessary. No, thanks, it’s for immediate consumption. (cleared for Ireland at noon)

EU EUR 2.3bnbn Apr 2028 at MS +68. Austrian EUR 3bn 7 YRS at MS +42 and EUR 2bn 2044s at MS +100. Finland EUR 1.5bn new 30 YRS at MS +45, plus another EIB increase of an outstanding 9 YRS deal at MS +65.

Must have had at least one bookrunner feeling slightly conflicted at times, as running all 3 x-long deals (Hat off, nevertheless!).

On the covered bond side NZ newcomer ABS Bank raised a debut EUR 500m 5 YRS mortgage-backed CB at MS +68, while Carlsberg offered EUR 500m 7 YRS at MS +112 to quench a EUR 4bn thirst for household name corporate issuers.

CADES USD 3bn 3 YRS MS +105. OeKB USD 1.5bn 3 YRS at MS +53. KfW USD 1bn 4s at MS +5. 

Closing levels:

10 YRS Yields: Germany 1,50% (+4); Luxembourg 1,85% (+4); Swaps 1,93% (+4); Finland 1,98% (+7); Netherlands 2,04% (+5); EU 2,33% (+4), Austria 2,47% (+5); EIB 2,54% (+4); France 2,62% (+5); EFSF 2,68% (+4); Belgium 3,10% (-1); Italy 6,17% (+17); Spain 6,85% (+25).

10 YRS Spreads: Luxembourg 34bp (0); Swaps 43bp (unch); Finland 42bp (-1); Netherlands 53bp (+1); EU 83bp (unch); Austria 97bp (+1); EIB 104bp (unch); France 112bp (+1); EFSF 118bp (unch); Belgium 160bp (-4); Italy 467bp (+14); Spain 535bp (+21).

EUR swap curve 2-5 YRS 44bp (+1,0); 5-10 YRS 65bp (+1,0) 10-30 YRS 27bp (unch).

2 YRS German BKOs closed 0,090% (+2,1) and 5 YRS OBLs 0,56% (+3).

Main at 179 from 178. Financials at 291 after 290. SovX at 300 from 298. Cross at 714 from 703.

Stoxx Futures at 2123 / -0,2% (from 2127) with S&P minis at 1306 (-0,2% from 1308, at European close).

VIX index at 20,0 after 18,1 yesterday same time. Finally waking up to sliding markets.

Oil 78,6/91,5 (WTI/Brent) from 78,5/89,9 (+0,2%/+1,8%). Gold at 1571 after 1575 (-0,2%). Copper at 330 from 329 (+0,3%). CRB closes 271,0 from 269,0 (+0,7%). Finally waking up to geo-political risk.

Baltic Dry rising to 981 after being stuck for 3 days at fixed unchanged at 978.

EUR 1,246 from 1,248

ECB deposits at EUR 750bn after EUR 775bn.

Greek bonds guesstimates: Greece sideways with 2023s at 26.75% and 2042s at 22.50%.

(20.25% and 16.75% before the first election round).

All levels COB 17:30 CET

This Week:

Germany: Wed Imp Px fcst 2.3% unch YoY & CPI fcst 2.1% after 2.2 % YoY Thu Unemployment Fri Retails Sales fcst 2.3% after -3.8% YoY

France: Tue evening Jobs Fri PPI fcst 2.7% unch YoY Cons Spending Fcst 0.1% after 0.4% YoY Final Q1 GDP 0.3%

EZ: Thu Biz Climate fcst -0.81 after -0.77, Final Cons Conf, M3 fcst 2.2% after 2.5% and CPI 2.4% unch YoY

Periphery: IT Wed Biz Conf fcst 85.5 after 86.2 Thu PPI & CPI SP Wed Retail Sales fcst -7.9% after -9.8% Thu Housing permits & CPI

US: Tue Case Shiller Cons Conf fcst 64 after 64.9 Wed Durable Goods fcst 0.5% after 0% Thu GDP & Claims Fri Pers. Income & Spending Chicago PMI Michigan Conf

Asia: China leading indicators Japan Thu PMI & Retailers

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

http://youtu.be/Ru-i81_5vco

 (Can’t always be Rock’ N Roll… Need to relax once in a while)

25 Jun 2012 – " Catch My Fall " (Billy Idol, 1983)

25 Jun 2012 – " Catch My Fall " (Billy Idol, 1983)

http://youtu.be/EiMFvx43vpw

Sooo… Let’s get started for another week of… waiting for THE solution, knowing that chances are there won’t be one. Asian close slightly in the negative, more for China catching up on Thursday’s sell off (and now back to mid Jan levels). US close on Friday was near highs, but far from making back Thursday losses.

Weekend titbits scarce outside confirmation that the leading Greek government tandem was skipping out on the Brussels bash on Thursday and Friday. And delaying the next Troika visit. Given the stern calls echoing their opening gambit about softening the terms and weekend reports how many civil servants had been hired over the last 2 years, instead of being dismissed, it might just be as well.

Why the ECB hails the soccer semi-finalists in a nightly tweet is a mystery to me. The FIFA doesn’t hail ECB decisions either, does it? 

Finally some federal issuance agreed to in… Germany. In a bizarre twist, the Federal government has finally given in to long lasting calls from the German Länder to be able to profit from its better funding terms, in exchange for ESM support. The whole solidarity against living by the same rules that is so forcefully pushed by Germany upon the EZ might finally yield common domestic issuance after 60 years. And we’re talking about a federal state that has had the strongest horizontal and vertical equalization for decades. And still, we’re talking about mean bickering and support being traded against sending some spending costs back to the Bund etc… So one has to see Germany’s stance in that light: it’s already a nightmare on a small, national scale, hence they DO know what this would give on a broader basis.

Will it impact Bund spreads? This seems doubtful to me at this stage, knowing that details have not been hammered out yet and that Deutschland Bonds will first see the light in 2013.

2011 bond funding for German Länder were about respectable EUR 60bn last year in over 200 deals, led by North Rhine-Westphalia for about a third, followed by Rhineland-Palatinate, Berlin, Lower-Saxony and Hessen for about 10% each. Average maturity was 5.5 years. Länder benchmarks trade roughly about mid-60s over 5 YRS OBLs, as do joint Länder deals, which is about flat to swaps (OBL thus swaps -65). Being stuck around swaps has always been tearful for Länder treasuries, as they rightly see themselves as Bund risk, as the Länder ARE the Bund (Hence Fitch’s all-around AAA for the Länder). So we are roughly speaking of EUR 200m of potential savings if half was raised by the Bund for the Länder.

2012 Finanzagentur funding is pencilled at EUR 252bn (down from EUR 283bn last year), of which EUR 172bn in bonds (after EUR 181bn). As such EUR 30bn (17%) doesn’t seem like a huge dilution, knowing that the Länder supply would be halved as well and that scarcity would lead to tighter prices, too. Might have a bit of a knock-on effect on KfW bonds (trading swaps -25 / OBL +45) and make insurers and German real money buyer whine, where yield ought to come from.

But, by and large, this shouldn’t change the way Bunds trade. Nicht die Welt…

ROff open, given the prospects of the week with the Core rapidly tighter by 5 basis points, Spain wider by 15 and with Italy out by 10. Italy is in for some chunky 14bn of auctions between tomorrow and Thursday to close the quarter. Equities down 1%. Credit equally wider. EUR through 25 handle. ROff.

No hard European data to speak off. Spanish PPI surprisingly 3.2% YoY after 3.0% (fcst was 2.8% after 3.1%). Dutch depressive Producer Confidence bottoming out at -4.8 after -5.

Excitement of the day: the official confirmation of Spain sending a formal request for bank aid to the Eurogroup. Then again. No. Not exciting.

Gloom increasing a little, surprisingly, as Fitch joined its peers in putting Cyprus non-IG, which probably will speed up the next bail out demand.

Government supply out of Germany with EUR 3bn 12m bills sold at 0.019% (after 0.026%), of which EUR 955m retained. Belgium, as lone bond issuer of the day, raised EUR 0.8bn 5 YRS at 2.13 % (after 2.38% last month), EUR 1.3bn 10 YRS at 3.22% (after 3.45%) and EUR 0.7bn 20 YRS at 3.77%, hence profiting nicely from the flight into bonds. France’s weekly bill auction raised EUR 4.7bn 1m at 0.056% (after 0.058%), EUR 1.5bn 3m at 0.104% (0.094%) and EUR 2.2bn 12m at 0.177% (0.19%), so about unchanged on average.

That was the easy part of the week. Will have the Netherlands issue EUR 3bn 10s tomorrow (2.14% last month), which, as of today, shouldn’t be a challenge, but then lining up EUR 3bn 3 and 6m Spanish bills (last 0.85% and 1.74%) and EUR 3bn 2 YRS Italian Zeroes (last 4.04%), as well as EUR 1bn Italian ILBs. Wednesday will get a EUR 9bn chunk of Italian 6m bills (last 2.10%) and Thursday EUR 4bn BTPs.

Morning session in ROff mode, lunch in ROff, pre-US open in ROff… Spain back to 6.50% with Bunds down through 1.50%, so clocking in at 500 over again. Equities down by about 2% and credit wider. Chicago FED activity at -0.45 (fcst -0.3 after revised +0.08) as pre-open downer.

Not much else to chew on… Moody’s rumoured to get medieval on Spanish banks tonight. The Greek pair’s strategy of sitting out the next confrontation confirmed and the Troika visit postponed. Merkel worried that, o surprise, people would likely spend time again discussing Eurobonds, bills or any other attempt to pull support and liquidity out of Germany. The Spanish MOU to be defined by 09 July, which means about when people will flee on holiday… ECB still not adding bonds under the SMP with Nowotny later explicitly stating it rather would have the EFSF do that anyway. Cyprus bail-out seemingly now imminent.

Better than expected US home sales at 369k (fcst 347k after 343k) looked for a short while like putting a floor under equities – but then, after all, no…  ROff


Oh, had Cyprus bailout and Greek FinMin resignation confirmed just after COB... 

New Issues on uneasy ROff Monday action, hence nothing outside a domestic EUR 250m short 5 YRS FRN at 3m flat for NRW.Bank. EU readying a 2028 benchmark for tomorrow on IPTs of MS +70 (Issued 10s at MS +56 and 2032s at +78 in Apr).

Closing levels:

10 YRS Yields: Germany 1,46% (-12); Luxembourg 1,81% (-9); Swaps 1,89% (-9); Finland 1,91% (-11); Netherlands 1,98% (-11); EU 2,29% (-8), Austria 2,42% (+2); EIB 2,51% (-7); France 2,58% (-2); EFSF 2,64% (-8); Belgium 3,11% (-4); Italy 5,99% (+22); Spain 6,59% (+29).

Well. Looks like a reversal from the last movement. Spain especially weak, but had gone solo on Friday afternoon, but dragging Italy all the way back to the 6% mark.

10 YRS Spreads: Luxembourg 35bp (+2); Swaps 43bp (+3); Finland 42bp (+5); Netherlands 52bp (+1); EU 83bp (+3); Austria 96bp (+13); EIB 105bp (+4); France 111bp (+10); EFSF 118bp (+4); Belgium 164bp (+7); Italy 453bp (+34); Spain 513bp (+40).

EUR swap curve 2-5 YRS 43bp (-5,0); 5-10 YRS 64bp (+0,0) 10-30 YRS 27bp (+1,0).

2 YRS German BKOs closed 0,070% (-5,6) and 5 YRS OBLs 0,53% (-11).

Main at 178 from 170 (4,7% wider); Financials at 290 after 276 (5,1% wider). SovX at 298 from 295. Cross at 703 from 680.

Stoxx Futures at 2127 / -2,5% (from 2181) with S&P minis at 1308 (-1,2% from 1324, at European close).

VIX index at 18,1 after 19,2 yesterday same time. Hmmm, can’t explain why that one stays so low. Hammered?

Oil 78,5/89,9 (WTI/Brent) from 79,2/90,6 (-1,0%/-0,8%). Gold at 1575 after 1562 (+0,8%). Copper at 329 from 330 (-0,3%). CRB closes 269,0 from 268,0 (+0,4%). Somehow stable…

Baltic Dry fixed unchanged at 978 for the third time in a row.

EUR 1,248 from 1,253

ECB deposits at EUR 775bn after EUR 769bn.

Greek bonds guesstimates: Greece somewhat weaker with 2023s at 26.75% from 26.50% and 2042s at 22.50% after 22.25% 

(20.25% and 16.75% before the first election round).

All levels COB 17:30 CET

This Week:

Germany: Tue Cons Conf fcst 5.6 after 5.7 Wed Imp Px fcst 2.3% unch YoY & CPI fcst 2.1% after 2.2 % YoY Thu Unemployment Fri Retails Sales fcst 2.3% after -3.8% YoY

France: Tue Cons Conf fcst 89 after 90 & Jobs Fri PPI fcst 2.7% unch YoY Cons Spending Fcst 0.1% after 0.4% YoY Final Q1 GDP 0.3%

EZ: Thu Biz Climate fcst -0.81 after -0.77, Final Cons Conf, M3 fcst 2.2% after 2.5% and CPI 2.4% unch YoY

Periphery: IT Tue Retail Sales Wed Biz Conf fcst 85.5 after 86.2 Thu PPI & CPI SP Mon PPI Tue Budget Wed Retail Sales fcst -7.9% after -9.8% Thu Housing permits & CPI

US: Tue Case Shiller Cons Conf fcst 64 after 64.9 Wed Durable Goods fcst 0.5% after 

0% Thu GDP & Claims Fri Pers. Income & Spending Chicago PMI Michigan Conf

Asia: China leading indicators Japan Thu PMI & Retailers

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

http://youtu.be/EiMFvx43vpw

 (Agreed. Rebel Yell was way better, but it wouldn’t fit…)