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…
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