08 February 2012 – “Comfortably Numb” (Pink Floyd, 1979)

08 February 2012 – “Comfortably Numb” (Pink Floyd, 1979)

Pfffffffffff…Waiting….for something… Markets still clinging to hopes that things will get settled in Greece (soon) and have gone into low volatility mode. For choice, every night once Europe is gone, US equities trade back higher (with news headlines of “Greek hopes”). Relayed by Asia overnight, with China reversing the previous day’s steep correction on POBC leniency hopes. At open this morning, all positive sentiment on equities, currencies or commodities was headlined as well as being “supported by imminent Greek solution hopes”. As nothing else happened, markets got frozen where they seemingly feel comfortable. No real eco figures to stir things, although German data remains on the weak side (Dec exports and imports - 4.3% and -3.9% respectively)(and Germany is the one expected to pull all along).

Greek political meetings delayed several times, no one cares. Now recurrent deadline date mentioned is 13 Feb, as being the latest date to actually get the PSI into administrative and clearing reality. No stress, no volatility anymore.

Sole hick-up and trigger of late softness (to unchanged) into the close was a leak that the ECB wasn’t yet on the lately widely accepted semi-PSI board. Low Vol.

Credit softer than equities with Financials giving back late gains to hit back over the 200 index mark. Ouch! That’s 5%. Then again squeezed yesterday. Some Vol.

On the sovereign side, we had Spain surprisingly increasing its 10 YRS benchmark in syndicated manner, not via auction, which did cost 17 bp in spread versus the rest of the European curve (knowing that intra-sovereign spreads were stable as seldom before). Size of the tap still unknown at this stage (EUR 2-3bn expected, but not yet confirmed). Books closed over EUR 6bn. Spanish Tesoro not the most forthcoming in investor / market communication (auction sizes, overallotments etc). Some Vol.

German 5 YRS OBL auction uneventful. Rates unchanged to last month. Low Vol.

Monday ECB deposits down to EUR 495bn, somehow we seem to stabilize around that half trillion mark. Research still guesstimating what the next LTRO size could or should be. Baltic Dry rising again to 676 (+2.4%). Maybe now that Chinese New Year is really over, things will improve. Still thinking that should the slump persist, it would point to lack of trade. Reduced Vol.

On the Primary side: One more Spanish Cédulas, one more second tier senior financial. GBP becoming a real alternative for covered bonds. Outside that, it was SSA day. No corporates.

Looking at yesterday’s placement stats on BBVA and Telefonica, the size of the order books and beautiful text-book granular placement would tend to show that top Spanish names have finally managed to outreach internationally, which is good news. Then again, given the late performance of Spain, it maybe a self-fulfilling spin, as in “now that Spain has performed, there must have been a positive reason” and everyone rushed in (late) (at the same time).

Spreads to Germany stable: 10 YRS swaps +41 (-1), Finland +42 (), Netherlands +47 (), France +103 (), Austria +108 (-1),Belgium +159 (+3), Spain+322 (+15) and Italy +360 (-2). No Vol (except for Spain).

Pfffffffffff….Waiting….for something… Greek solution seems rather overpriced by this stage, as in, “even if yes, then what next?”. Middle-East geopolitical risk and tensions seem totally underpriced.