22 February 2012 – “Lowdown in the Street” (ZZ Top, 1979)

22 February 2012 – “Lowdown in the Street” (ZZ Top, 1979)

Again an undecided, slightly weakish open in Europe. Yes, NY did have a short-lived flirt with the lucky 13 on the Dow, but traction was not there and the close was about unchanged. Overnight Asia a tad better, but here as well no traction to pull the bulls any further. Chinese Flash PMI under 50 for the 4^th time in a row, while a tick better than before (Best in 4 months, if you need a half-full glass), exports and imports components are further down (Baltic Dry, do you see me?).

European mood still seemingly feeling the hair of the dog, faced with a long list of open questions on Greece. German Feb PMI lower than expected, edging just on 50.1 after having crossed that mark from Dec’s 48.4 to Jan’s 51 reading. France again surprisingly better with PMI readings above 50, higher then expected in Manufacturing (first time since July), lower in Services. European Composite PMI at 49.7 from 50.4 (48.3 in Dec). Then again, with 5 EZ countries officially in recession at the latest count, you can’t expect any miracles.

Credit weaker, too, and periphery widening, as not following stronger Bunds to the upside, and later actually dropping.

Fitch downgrade of Greece greeted by a general shrug.

Credit again much softer and diverging from more resilient equities. Main about ok, but financials (10 points wider, searching for 25 Nov 11 - 02 Feb 12 retracement at +230) and sovereigns weak (going back to +350, both 50% high - late low and average since Nov).

Low volatility day. People still chewing on Greek salvation plans, while awaiting concrete details. Post-announcement political spin rather low key everywhere - and it’s known why. General view seems to be that the general relief of not having to face an imminent default shouldn’t be mistaken with being certain that the can that just got kicked further down the road might ricochet from somewhere and hit back.

The revenge of the can, so to say. Poor thing has been abused by all and everyone over the last 3 years…

German 2 YRS auction faring well in the moody context. EUR 5bn issued, EUR 720m retained. BC of 1.8; half of bids at market price; tail of 1 ct; yield of 0.25%.  Yield 8 bp higher than in Jan, but it’s a new bond maturing 3m later in a steep curve. Nothing to say.

Still some activity in corporate new issues with EUR 500m 7s for Metro and EUR 750m 10s for KPN. Decent prices. German premium on Metro. Sub-jumbo activity in financials with DB increasing a 2 YRS FRN and a 2 YRS Cédulas for Bankia. EIB USD 3.5bn 3 YRS most notable SSA deal, along with a EUR 1bn 30 YRS.

All in all, okay, but somehow sluggish. Speed of corporate books still shows where people put their monies in preferred manner. Mainstream covered bonds taking a week off. Have some GBP instead, as well as a non-AAA Spaniard.

ECB deposits down, for once, to EUR 15bn to EUR 449bn.

VIX closed at 18.2, down from yesterday afternoon’s 18.5, slightly up from the previous session, and now back to 18.5 .

Brent 122.8/ WTI 106.0, crawling higher on Iran nuclear stance. Highest since Aug 2008 for Brent and May 11 for WTI. Watch the growth break, here! Gold pretty much unchanged from yesterday afternoon. It did take out at new 2012 high at 1760 in Asian trading and at European markets open, before being dragged back.

Baltic Dry down again to 2 ticks to 704 from 706. Overcapacities or not in shipping, all international trade stats are now confirming that the last couple of weeks where low. Worth keeping as trade canary in the coalmine indicator.

Spreads to Germany wider, mainly in the periphery, giving back last day’s performance.

10 YRS swaps +42 (+2), Finland +44 (), Netherlands +47 (), Austria +112 (+4) France +116 (+5), EFSF +130 (+4),Belgium +171 (+7), Spain+316 (+6) and Italy +359 (+15). DBR 2022 1.90%, down 7bp. Accelerating into the close.

Italy underperformer of the day. Portugal softer, especially on the short end, but within reasonable limits. All things relative…

Tomorrow: German IFO, European Commission growth outlook. US jobless. Dearth of figures to end the month… No supply.

Everything a little low, everything a little down - and trying to get on bottom of things.