19 Jul 2012 – " One Bourbon, One Scotch, One Beer " (John Lee Hooker, 1966)

19 Jul 2012 – " One Bourbon, One Scotch, One Beer " (John Lee Hooker, 1966)

http://youtu.be/BIvka3SSv9Y

Mild Risk On mood to open Europe after the last two day of gains. US closed near their highs, Asia eventually succumbed as well to the party mood (which didn’t hinder a new low of 0.74% in JGBs). It’s not like Ben on his second day said much more than on Tuesday, but Risk felt comforted nevertheless.

Equities up another 0.5% by mid-morning. Hard Core a bit softer, Soft Core still squeezing in. Peripherals about put with Italy slightly tighter, but still over 6%, and Spain (ahead of the auction) slightly wider, but still under 7%. EUR, while overshooting at open to 1.2325 back 50 pips lower.

New French 5s trading 0.85% ahead of the auction (and 2s now below 0.10%)

No data to speak off. Action, if any, to come from parliamentary debates in Spain, Germany, Italy and Finland or from the Spanish auction results.

“There’s no money in the public coffers”, as stated by Montoro, probably not the best sales pitch to get an auction going.

Spain sold just under the targeted amount of EUR 3bn in off-the-runs with EUR 1.36bn 2 YRS at 5.20% (up from earlier in the month 3 YRS at 5.09%), EUR 1.07bn 5s at 6.46% (from 5.54% for long 4s 2 weeks ago and 6.07% last month) and EUR 0.55bn 7s at 6.70%, which capped the mood, given the low overall bid to cover and the 10bp tails (stop-out rates were 5.30% 6.54% and 6.80%). Especially the 2 YRS B/C got halved to 1.9.

While no surprise as such, this is a record high for Spanish 5 YRS (Q4/2011 peak had been 5.54%, thereafter the highest paid had been 6.07% end of June). 

Will need a couple of drinks to swallow that one…

Had Bunds immediately shooting up 20 cts on that, Spanish 2-10 flattening 20 bp and 10 YRS BONOs tickling 7%. 

French BTANs fared better with EUR 1.8bn 3 YRS at 0.12% (down from 0.83%), EUR 2.65bn 4 YRS at 0.53% (down from 1.05%) and EUR 4.5bn of new 5 YRS 0.86% (COB yesterday 0.93%). Needless to point out that these are all record lows.

France also sold EUR 1.5bn ILBs, split in 2019, 2022 and 2040s

(Re-leaked) News that the draft bail-out MOU would allow the EFSF to buy Spanish bonds were good for equities, but didn’t impact Spanish bonds, still reeling from the auction. Odd world. Anyhow, the EU later confirmed that actual bail-out funds could only be used for Spanish banks, as requested. That news was either not read, or simply ignored.

Midday picture with Core EGBs wider by a couple of bps, Soft Core tighter by the same. Italy faring ok and back just through 6% in 10s and Spain wider just below the 7% mark, having spiked through for a short while after the auction results (hitting 580 to Bunds, a new high). Equities up 1%. Credit grinding tighter.

Italian Parliament signing off Fiscal Compact and ESM.

Claims came out higher then expected at 386k (fcst 365 after 350, revised to 352) with Continuing Claims now at 3314k (fcst 3300k after 3304, revised 3313). No immediate reaction… Anyhow, the mood is that if figures are bad, Ben will help…

Positive US open. Pretty static markets in EGBs, though. Note a weaker EUR and stronger commodities, especially Oil with Brent at 107 now at EUR 87.5/brl.(94 high was in Mar this year, having bounced off the 72 support of the last18 months). Getting some traction from ME tensions.

The final data round for the week delivered only misses: Philly Fed at -12.9 (fcst -8 after -16.6). Homes sales declining 5.4% (fcst +1.5% after 0% revised to +1.5%) and finally leading indicators dipping to -0.3% (fcst -0.1% after 0.3%, revised 0.4%). Prompting only muted disappointment…

Still the divergent world views between equity and rates as during the last days. EGBs better supported. Equities, too… 

Had Bunds a bit on the softer side throughout the day, but upheld by recurrent shakes. Soft Core still on the mend with Austria at +75 to Bunds and France less than 10 wider, well back through the 100-mark. Italy ok. Question is whether there will be (positive) contagion from the Soft Core for yield hunters and, in the other direction, from Spain. Spain held so so today, did overshoot 7%, but closed back below. The level itself is just symbolic; we all know…Fact is, Spanish funding is a costly thing. Credit feeling slightly heavier than equities.

BKO closing at -0.056%. OBLs at tick softer at 0.28%

No data from nowhere tomorrow (but German PPI). ECOFIN conf call to start at lunchtime.

New Issues on hold in EUR. EIB out for a USD 5 YRS benchmark at MS +40 (from +33 end of March).

Closing levels:

10 YRS Yields: Germany 1,22% (+2); Finland 1,57% (unch); Luxembourg 1,61% (+1); Netherlands 1,64% (unch); Swaps 1,76% (-2); Austria 1,97% (-2), EU 1,99% (-1); France 2,06% (-4); EIB 2,21% (+1); EFSF 2,28% (-1); Belgium 2,44% (-4); Italy 5,99% (-7); Spain 6,97% (+5).

10 YRS Spreads: Finland 53bp (unch); Luxembourg 39bp (-1); Netherlands 42bp (-2); Swaps 54bp (-4); Austria 75bp (-4); EU 77bp (-3); France 84bp (-6); EIB 99bp (-1); EFSF 106bp (-3); Belgium 122bp (-6); Italy 477bp (-9); Spain 575bp (+3).

EUR swap curve 2-5 YRS 39bp (+3,0); 5-10 YRS 70bp (-4,0) 10-30 YRS 43bp (+0,0).

2 YRS German BKOs closed -0,056% (+0,8) and 5 YRS OBLs 0,28% (+1).

Main at 162 from 164 (1,2% tighter); Financials at 272 after 273 (-0,4%). SovX at 262 from 264. Cross at 644 from 654.

Stoxx Futures at 2299 / +0,8% (from 2281) with S&P minis at 1371 (+0,4% from 1365, at European close).

VIX index at 16,1 after 17,0 yesterday same time.

Oil 91,8/107,3 (WTI/Brent) from 89,6/104,9 (+2,5%/+2,3%). Gold at 1588 after 1580 (+0,6%). Copper at 353 from 346 (+2,0%). CRB at EU COB 302,0 from 297,0 (+1,7%). Brent in EUR now at 87.50.

Baltic Dry down for the 8th day in a row, down 2% to 1053 from 1074.

EUR 1,226 from 1,226

ECB deposits at EUR 360bn after EUR 382bn.

Greek bonds guesstimates: Still, no one speaks about Greece anymore… 2023s back to 24.50% from 24.25% and 2042s unchanged at 21%.

All levels COB 17:30 CET

Tomorrow:

Germany: PPI fcst 1.8% YoY from 2.1%

Next Week:

Not much outside the global PMI data round on Tuesday, IFO on Wed in Germany. New Homes in the US on Wed, Durable Goods and Claims on Thu, Pending Home Sales Fri.

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

http://youtu.be/BIvka3SSv9Y

From Gin to Gin to Bommerlunder. Round up with the above mentioned combination…

18 Jul 2012 – " Eisgekühlter Bommerlunder " (Die Toten Hosen, 1983)

18 Jul 2012 – " Eisgekühlter Bommerlunder " (Die Toten Hosen, 1983)

http://youtu.be/FWXDxVhLjNE

It’s always a pain when the mood shifts 5 minutes after sending out a daily close, which was the case yesterday. Had the markets been initially disappointed because Bernanke didn’t spontaneously pull a rabbit out of his hat during the testimony, instead pointing out what everyone knew about sluggish growth and downside risk, they performed a sharp U-turn just after the European close, as he mulled again that the FED could act, if things were to go awry. While this was already said in the opening remarks, a second interpretation validated some hope rally.

Hence, the visual Risk On open in Europe, at least in equities (+0.5-0.75%), ignoring as well a dismal Asian session, further weighted down by Wen comments. 10 YRS JGB at record 0.76%. Not much else. EGBs about flat. Peripherals initially some 5 bp tighter, with Italy visually just under 6%, on ROn sentiment. Credit a couple of ticks tighter. EUR hovering below the 23 mark. German 2 YRS a touch softer at -0.04% ahead of its auction.

No data to speak off, outside Spanish Q2 housing prices remaining on a historic slide at -8.3% YoY (after -7.2%) and Bank of Spain statistics of bad loans now at 8.95% (from 8.72%) or EUR 156bn.

EGB strengthened a little, as soon as equities and EUR came down from their highs.

The German 2 YRS auction was a success, despite (because?) of its negative yield: EUR 5bn sold at -0.06%, of which EUR 827m retained for market interventions. Bids for EUR 8.3bn, of which EUR 3.4bn at market price. A tail of a 10th of a cent. One of the highest bid to cover in a year. Having closed at -0.053% yesterday and trading up to 1bp wider in the morning, the final price was aggressive, too. Previous low had been +0.07% in May, then 0.10% in June. The Rolls-Royce of bonds: everyone thinks it’s too expensive, but wants some nevertheless. Cool. Eiskalt!

Portugal sold its targeted EUR 2bn with EUR 750m 6m at 2.29% (after 2.65%) and EUR 1.25bn 12m at 3.51% (down from 3.83% in June). Slightly decreased B/C in a probably mostly domestic driven auction. Decent result for a bailed-out country under Troika steering. As said yesterday, thoughts are given to extend maturities in the future; even to go as far as to sell notes again (same goes for Ireland).

Will close the week tomorrow with Spain’s (rather large) EUR 3bn auction in 2014 (last 5.09%), 2017 (last 5.54%) & 2019 bonds, as well as French BTANs in 3, 4 and a new 5 YRS (COB 0.93%).

Midday situation with EGBs outside the periphery all 3 to 6 bp firmer and the Periphery struggling. Italy, which 10s had tightened by up to 10bp during the ROn euphoria in the morning, gave back most of these gains, and drifted back above 6%, as Spain went into reverse and drifting out to 6.90%, on above mentioned figures, as well as repeated German calls and doubts about the ESM. Harking back to yesterday’s news about Bavaria challenging the long-lasting inner-German vertical and horizontal equalization. Germans know how a federal state works and know how much even that can be a pain. Hence the strict stance on rules and conditions. That won’t change. Eiskalt!

Was a bit of refresher on Risk and on the EUR.

That Greek bridge loan story is still around with Greece seeking EUR 3.8bn for payment of bonds maturing in August (mostly held by the ECB).

US figures consumption, all pre-open: Mortgage Applications on the rise of refinancing. Mixed then with Housing Starts at 760k (fcst 745k after 708k) & Building permits at 755k (fcst 765k after 784k) .

Ben on the screens later again and Beige Book tonight, knowing that most has probably been spelled out over the two testimonies anyway.

Middle East situation not really in the prices, as the tension in Syria is growing to new heights.

IMF annual review of EZ policies pitches a lot of already pitched ideas (QE, etc etc). No news.

Nothing crisp from Ben – outside comments that “Europe is not close to having a long term solution”… Thanks for the thumb up!

Same divergence between equity and rates as yesterday. EGB well supported. Equities, too… Different worlds…

Hard Core grinding ever tighter (–3 bp), but Soft Core a bit out of steam (+2). Italy stuck above 6% and Spain certainly on its way to re-test 7%, if the auction feels heavy. Near the 575 wides to Germany. European agencies playing catch-up with Soft Core. Credit in line with equities.

EUR undecided at taken the middle way.

BKO closing on yet another historic -0.063% low, as are OBLs at 0.26%

New Issue supply restricted to a EUR 250m increase of an outstanding 2027 issue at MS +51 by Dutch agency NWB.

Closing levels:

10 YRS Yields: Germany 1,20% (-3); Finland 1,57% (-2); Luxembourg 1,60% (-5); Netherlands 1,64% (-1); Swaps 1,78% (unch); Austria 1,99% (unch), EU 2,00% (-6); France 2,10% (+2); EIB 2,20% (-7); EFSF 2,29% (-6); Belgium 2,48% (+3); Italy 6,06% (+3); Spain 6,92% (+15).

10 YRS Spreads: Finland 52bp (-1); Luxembourg 40bp (-2); Netherlands 44bp (+2); Swaps 58bp (+3); Austria 79bp (+3); EU 80bp (-3); France 90bp (+5); EIB 100bp (-4); EFSF 109bp (-3); Belgium 128bp (+6); Italy 486bp (+6); Spain 572bp (+18).

EUR swap curve 2-5 YRS 36bp (-2,0); 5-10 YRS 74bp (+4,0) 10-30 YRS 43bp (+unch).

2 YRS German BKOs closed -0,063% (-1,1) and 5 YRS OBLs 0,26% (-2).

Main at 164 from 167 (1,8% tighter); Financials at 273 after 277 (1,4% tighter). SovX at 264 from 259. Cross at 654 from 665.

Stoxx Futures at 2281 / +1,5% (from 2247) with S&P minis at 1365 (+1,5% from 1345, at European close).

VIX index at 17,0 after 17,0 yesterday same time.

Oil 89,6/104,9 (WTI/Brent) from 88,1/103,6 (+1,7%/+1,2%). Gold at 1580 after 1577 (+0,1%). Copper at 346 from 345 (+0,3%). CRB at EU COB 297,0 from 294,0 (+1,0%). CRB up on Energy and Live Stocks.

Brent in EUR nearing 86.

Baltic Dry down again 1.7% to 1074 from 1093. And it’s not because of falling Commodity prices…

EUR 1,226 from 1,222

ECB deposits at EUR 382bn after EUR 404bn.

Greek bonds guesstimates: Still, no one speaks about Greece anymore… 2023s at 24.25% after 24.5% and 2042s unchanged at 21%.

All levels COB 17:30 CET

Rest of the week:

Germany: Fri PPI fcst 1.8% YoY from 2.1%

Periphery: IT Thu Indu Orders fcst +1.7% after -1.9% MoM / -12.3% YoY

US: Thu Claims fcst 365k after 350k, Ex Home Sales fcst 4.62m after 4.55m, Leading indicators fcst -0.1% after 0.3% & nothing on Friday

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

http://youtu.be/FWXDxVhLjNE

From Gin to Gin to Bommerlunder. A refresher. And R ’n R!