17 February 2012 – “Patience” (Guns N’ Roses, 1988)

17 February 2012 – “Patience” (Guns N’ Roses, 1988)

Good initial risk on, following European closing rumours about things to get fixed next week on Greece. ECB bond swap seen as positive by most, although the fact that it is clearly explained that its new holdings will be bare of any CAC implies that the rest will definitively be harnessed with some soon. Helped propelling US and some of Asia up 1% and that’s where we started the morning. Sticking then there for the rest of the morning in static manner. German President resignation (certainly, mostly a protocol function) having no impact, although any stirring of the inner-German political scene could have a negative impact on Germany’s external focus, hardening the fronts. To be followed. Credit mostly better, but it’s mainly banks that keep getting whipsawed wider and today tighter. Markets getting stronger by noon and supported by ok US figures and lots of Greece solution around the corner whispers from the political galaxy.

Contradictory reports on ECB holding exchange and PSI intentions. No need to discuss into the void. Must await Monday.

No auction supply. EFSF has pencilled a EUR 2bn 6m bill auction for Tue 21 Feb (so they obviously expect no malaise during the Eurogroup meeting).

Primary markets even quieter than the rest of the week, as seriously in pre-weekend and “wait-and-see” mode.

ECB deposits back to EUR 417bn from yesterday’s new period starting at a low EUR 392bn. Amazingly pattern replication of the last period (drop of EUR 133bn the first day, recovering of EUR 25bn the very first day).

VIX falling back to sleep yesterday, trading off its late 21.75 spike to close at 19.2 on positive NY close; softer again this afternoon at 18.2 . Yawn! Vol, back to sleep.

Baltic Dry fell for a third day by short 1% to 717, from 723, halting its recovery from its 03 Feb 647 25-year low to Tuesday’s 734. Maybe the first calls after Chinese New Year spurred a rally, but have ceased since? Stalling again. Let’s keep an eye on it.

Spreads to Germany tighter in end of week optimism in Spain and Italy. 10 YRS swaps +41 (-3), Finland +46 (),Netherlands +50 (), Austria +116 (-1) France +117 (-3), Belgium +166 (-1), Spain+330 (-14) and Italy +363 (-19).

DBR 2022 1.93%, up 6bp from yesterday.

On the week:

-          A week totally for nothing!!!

-          10 YRS spreads: 10 YRS swaps +41 (-2), Finland +46 (+2), Netherlands +50 (+3), Austria +116 (+7), France +117 (+8), Belgium +166 (+2), Spain+330 (-5) and Italy +363 (-4). Austria and Franceunderperformer, if you need one.

-          Yield-wise: Germany 1.93% (), Swaps 2.34% (-1), Finland 2.38% (+3 bp), Netherlands 2.43% (+3bp),Austria 3.09% (+7 bp), France 3.10% (+8 bp), Belgium 3.59% (+2bp), Spain 5.23% (-5), Italy 5.56% (-3 bp).

-          European equities +1.7% (from 2480) and the S&P +1.3% (from 1340).

-          EUR 1.315 from 1.318, so unchanged.

-          Credit 137 (from 135 or -1.5%), Financials 224 (from 219 or -2.3%) and Sovereigns 340 (from 329 or -3.3%). Diveregent equity to credit story.

-          Baltic Dry 717 from 715 (stalling). VIX 18.2 from 20.8 (going back to sleep) .Brent from 119.5 from 116.75 onIran.

On Monday’s menu: Eurogroup and, maybe, the beginning of the end of the Greek bailout 2 saga. Or not…

ECO: Getting end of month data fatigue. Nothing major, FR biz confidence, IT Indu orders. US President Day (closed)

Soooooooooooo… A week for nothing with not much new! Just back where we were last week with everyone expecting the Greek delegation to join the Eurogroup meeting next Monday with concrete things in hand. Oh, that’s what everyone was already doing last week? Play it again, Sam!

Let’s acknowledge that the AAA front has been quite rough over the week in its game of chicken and cajoled public and markets in the opinion that any (totally, yes, totally undesired) Grexit contagion risk would be contained. Seems quite optimistic too me. Between perceived or real bond holder subordination, any selective default / EUR exit move would ricochet to hit Southern Europe. So the official word still is that Grexit in not wanted and that pieces will fall together – soon. Then again, voices supporting Grexit start to be louder and louder. The main difference between last week and tonight is that everyone officially acknowledges that we’re far away from some of the most disputed Troika targets (Debt/GDP of 120% by 2020 – 129%, at best, by now) and that someone needs to fill these gaps. Question is who, with how much money.

Need to sit that out and be patient.