13 February 2012 – “Still Haven’t Found What I’m Looking For” (U2, 1987)

13 February 2012 – “Still Haven’t Found What I’m Looking For” (U2, 1987)

Greece managed to agree on austerity measures last night, albeit at growing political (and seemingly serious material) costs. Given the fact that next to a quarter of the MPs got kicked out for voting against (or for) the package, agreed 199 to 74 (on 300), questions will remain as to its realistic implementation – or potential repudiation after April elections. Feels like last week: Muted praise from Europe. Somehow, things haven’t changed much, although formally the Troika can’t expect more than parliamentary backing. Germany would probably love to have that written into the constitution, but that won’t be possible. Still, expect the Troika to second-guess, and others from the AAA-front to triple-guess, the Greek willingness to act on the promised measures - after the looming elections. Well, first calls to renegotiate after the elections have already been heard…

Japanese GDP growth at -2.3% much lower than expected (-1.3%). China still trying to balance bringing down housing, while propping up commerce. Greek vote good enough for an uptick in Asia anyway, following a slight recovery of US equities into the close on Friday.

Initial +0.5 to 1% uptick in Europe and going for a touch firmer, but then loosing steam, given the blatant “And now?” in the room (next Greece-Troika meeting is only Wednesday). Likewise for the currency at high then mid then low .32s. Credit faring better than equities for most of the day, as it had hit a wall on Friday into the close, but all gains were given back later. Lack of impetus in absence of major EZ or US figures nor fresh news. Pretty much back to square 1, namely Friday’s close.

Had some EUR 12bn in Italian 6 and 12m bills auctioned, but nothing crisp here, although the dismal 1.09 BC on 1-year bill has been blamed on technical problems, which lowered demand. 12m 50 bp lower than at the last auction, in line with the general performance. Still, that’s 1.55% and 2.23% respectively. Compared to the 0.07% paid this morning by Germany for 6m (Remember, these were the ones auctioned on a negative -0.01% rate in January) or by France’s 0.14%, 0.23%, 0.41% in 3, 6 and 12m of today.

Primary markets off to rather good start with some corporate supply, of which some further periphery ones, next to AAA Sweden in EUR. BP making as EUR 2.5bn double-tranche splash. Oil still does its trick. Dollar segment getting crowded by SSAs lining up trades, but none issued today.

As was to be expected, given the jitters on Greece, ECB deposits flared up on Friday, adding EUR 12bn to EUR 508bn. Third highest level ever, after a EUR 511bn on 03 Feb and an all-time high of EUR 528bn on 17 Jan.

VIX up again on Friday to 20.8 (+11.6%, albeit from a very low basis) in the close, from 17.10 low on 03 Feb, although falling again tonight.  Baltic Dry again up 2% to 729. End of drought? Need to check those Asian eco figures.

Spreads to Germany a tick tighter in the morning, recovering about half the ground lost Friday: 10 YRS swaps +41 (-2), Finland +43 (+1), Netherlands +47 (), Austria +104 (-5) France +108 (-1), Belgium +158 (-6), Spain+331 (-4) andItaly +366 (-1). 10s DBR 1.93%.

Not much to chew on while drifting. Haven’t checked the augurs for a while… Charts, please!

Main                         93  126  147  171  181 ……………………….average since Sep peak 175,   200d MAV 152

Financials               189 230 256 277 298     ………………………average since Nov peak 265,   200d MAV 231

SovX                       274  303  338  394  ……………………………average since Nov peak 350,   200d MAV 302

Euro Stoxx             2205  2288  2311  2400 2507 2543  264...……average since Sep low 2285,   200d MAV 2437

2 YRS swaps         1.10%  1.41%  1.61%  1.77% …………….…..average since May 11 high 1.64%, 200d MAV 1.63%

10 YRS swaps       2.19%  2.34%  2.57%  2.68%  2.80% ……......average since Apr11 high 2.93%, 200d MAV 2.80%

EUR                       1.262  1.317 1.351 1.378 1.405……….…….....average since May 11 high 1.379, 200d MAV 1.378

Hmmm… Can’t read much in there. Near the lows in yield. Highs in risk perception. Will need some real positive news to justify these levels at some time, instead of the mere absence of really bad news. Just can’t find anything catchy.

Tomorrow: Italian bonds to test LTRO appetite & Spanish and Greek bills tomorrow. Dutch 5s. We get Greek Q4/GDP tomorrow and EZ GDP on Wednesday, right for the Eurogroup meeting. Anyone, some growth? Japanese IP & US retail sales, as well on the eco front. Haven’t heard back from the PSI today. Oh, and there’s Valentine’s Day :)