06 February 2012 – “ Time Is On My Side ” (The Rolling Stones, 1964)

06 February 2012 – “ Time Is On My Side ” (The Rolling Stones, 1964)

Weaker open on weekend Greece (in) action, as the subject of a default is squarely coming back on the table with the public side / Troika getting itchy to get some real results. PSI discussions ongoing, on and off, about twice a week. Thing is, this starts to become a rather negligible side affair, as deeper haircut after deeper haircut, final results only marginally change life for Greece, while probably seriously upsetting bond holders. If the public side won’t follow either (Wink, wink, Frankfurt), there’ll come a point when the whole thing risks to be shelved, as seen as useless. Further decisions seemingly postponed to tomorrow. No hassle, no hurry. Deadlines are just dead lines, unless you put too much life into them… Whatever…

Weaker open with stocks about 1% down from their 6-month highs and EUR down 100 pips to mid 1.30s. Credit much wider on start, having closed much tighter in the Friday afternoon squeeze, as are spreads to Germany with firmer Bunds. Markets trading up a little throughout the rest of the day. Portugal said to sought advice of restructuring by rather renowned IFR journal, which was duly denied by Portugal in the afternoon. Credit barely wider into the close, as equities barley weaker. Financials still in superb form: Index did spike up by 10 from Friday’s 6-m low at low 190s, but closed about unchanged. LTRO and lots of tender for subordinated. EUR back to 1.31 handle.

Nothing exciting on the sovereign auction front. The Netherlands will sell some new 10 YRS tomorrow, expected spread level of +46/50 over Bunds, which will visually make the 10 YRS spread jump sharply on benchmark roll (from low 30s).

Friday ECB deposits surging for the 3^rd time ever over the half trillion mark to EUR 511bn from EUR 489bn. The EUR 500bn mark has been crossed only twice before with EUR 502bn on 16 Jan and the all-time high of EUR 528bn on 17 Jan. So this makes today a runner-up to second place and might presage that by the end of the reserve period, in ramp up to the next LTRO, we can still hit much higher.

ECB deposits back to LTRO level at EUR 489, after EUR 486 yesterday and EUR 472bn on Wednesday. Talking of the ECB, it settled EUR 124m of bond purchases last week, which is laughable given the number of times any periphery movement, especially on the upside, has been explained as being “ECB buying” related. Ok, it’s double the EUR 63m bought the week before, but it’s really not like we’re talking about “bazookas” being pulled. The ECB is either keeping its powder dry, and last week was rather good for the periphery, so no further need to push it; and/or it really wants to do as little as possible, as long as governance and rules are more lip commitment that signed ad sealed agreements, in order not be dragged into future discussions like the one Greece right now. As a reminder, when the programme was re-launched last August, it was initially at the tune of EUR 14-22bn per week, then down to EUR 3 to 8bn. 2012 saw EUR 1.1bn, 3.8bn, 2.2bn, then the mere EUR 63m and now last week EUR 124m.

Hooray, Cousteau has found some sign of life under the sea: The Baltic Dry is rising again! 648 after 647 on Friday (a 25-year low). First uptick since 12 Dec. It’s alive, it’s alive! Then again, news hit the screens today that Glencore managed to hire a ship for a grain shipment from Oz to Europe and will get paid for doing so (in order to get that boat moving)… Overcapacity and / or lack o freight, whatever reason, international trade doesn’t look like being anywhere near exhaustion, here.

Couple of deals on primary market screens, rushing to get things done despite (or because) renewed Greek jitters. Seeing another Spanish covered bond in LTRO 3-year maturity for decent size with EUR 1.2bn printed for Sabadell. Good to see second-tier names pop up, too. French BPCE delivering a crisp 5 YRS OF, as the (very) short OF has been squeezed tight of late. Still, at 5 YRS we’re still talking about triple-digit spreads over swaps for French covered bonds. AFD for 15 YRS EUR. Some German LRGs in EUR and agencies in USD. Canada heard to issue in 5 YRS USD. Hadn’t issued in foreign currencies since 2010 (EUR 10 YRS) and 2009 (USD 5 YRS).

Spreads to Germany about stable: Netherlands +33 (+1) [46-50 on the new reference, to be sold tomorrow], 10 YRS swaps +43 (+1), Finland +44 (+1), France +107 (+2), Austria +113 (+1), Belgium +161 (+2), Spain+310 (+8) and Italy +372 (-3).Portugal a tick better to unchanged (2 YRS & 5 YRS 17%, 10 YRS 13%).

If not exuberant, it was risk neutral day: Looks like market players still believe the Greek cliff-hanger will be just that – without any banana peel around that could speed up things, like to the downside, Tex Avery-style.