23 January 2012 – “It’s Oh So Quiet” (Björk, 1995)

23 January 2012 – “It’s Oh So Quiet” (Björk, 1995)

Keeping the non-pace of last week’s closing with markets enjoying a bit of respite. Greek PSI talks again either on hold or ongoing, to be closed soon, very soon, at some time, hopefully etc. Nothing concrete to chew on, but lots of politician chatting (in pairs) following pre-WEF meetings or on their own (if they didn’t find anyone to hook up with). From the tons of hope expressed, it would seem that nothing is done yet at this stage, which in turn is not the most comforting thing to live with. Somehow, a read between the lines could hint to some eventually non-voluntary cuts to unexpected levels that could hit screens at some time, for the sake of the sustainability of the solution. 2 YRS Greek bonds trading a yet unseen 200% in yield, less than 20 cts of par. Portugal slightly firmer for once.

Still, for the moment tension is not really felt elsewhere at this stage, which could strike as odd. Markets drifting sideways to slightly higher with EUR short-squeezed back over 1.30. Financials still strong, as is credit overall (outperforming cash today, but after having closed slightly underperforming on Friday evening). Nevertheless, the 3m basis has been nudging up for the first time in 10 days to -80 (from -76).

Baltic Dry now at 841 (We did see a 663 low in December 2008). (And it did trade between 550 and 800 before – in 1986…) Explanations of overcapacity abound, probably coupled with the Asian festive season, but merely one month ago that index was still in the 1900s (-56%). Awkward, no?

ECB deposits haven soaring back to EUR 492bn, that is over the first EUR 489 LTRO. So, the whole seasonality thing might either be put to test, as we definitively are not living in a very linear world these days, or, if we keep that pace, we’ll just reach new record very soon, which raises the question about how that money is supposed to seep into the real economy (next to keeping 3 YRS Spanish auction and 3 YRS quality paper in general on its toes).

Primary offering restricted to Spanish government-guaranteed FADE putting a deal on rails and EIB pitching in some flight to quality material.

Spreads to Germany drifting sideways, periphery firmer for choice: Netherlands +28, Finland +37, 10 YRS swaps +44, France +116, Austria +140, Belgium +206, Spain+345 and Italy +411. Italy now nearing the 6% mark (coming from 7.10% on 10 Jan).

Happy New Year to all APAC readers