24 January 2012 – “(Sittin' On) The Dock of the Bay” (Otis Redding , 1968)

24 January 2012 – “(Sittin' On) The Dock of the Bay” (Otis Redding , 1968) Ok, normality has been kicking in today, although the decline triggered by, o surprise, stalled Greek PSI talks and bickering around it was neither highly distressing nor hysterical for the moment. Asian markets even managed to closed on the mildly positive side, as had the US before, although the stance of EU finance ministers expressing actually discussed cuts were not yet deep enough, came out overnight. EUR holding mostly well, even squeezed back to 1.3060 in late European morning, despite slowly sliding stocks. (Record shorts accounted for). More a slow-mow correction than a fierce RISK OFF. Otherwise few figures to chew on, but EZ PMI better than expected and printing over 50. Comes in handy to lazily wait for something else to fall prey to gravity and drop, while awaiting the FED to start publishing its rates forecasts. With the FED still running “twist”, this might be a little circular exercise. Quis custodiet ipsos custodes? IMF on the cautious side on Europe. Still, like yesterday, tension is not yet really felt, which still strikes as odd. Credit giving back yesterday’s strong gains, but still only at hallway between Thursday’s close and this week’s lows.  3m basis back to -76 (from -80), square 1. Baltic Dry now at 807 (-4%). ECB deposits a touch lower at over EUR 490bn, down from EUR 492bn. Still over LTRO amount. Talking of Spanish LTRO ware, Spanish government guaranteed FADE eventually pulled its 4-year project, which would have come on the heels of last week’s impressive, although 92% domestically-placed ICO. Might have been one too many. Certainly worth a try after the last 2 weeks’ impressive Spanish intake by market players, but since flooding the market around 3% 10 days ago, 3 YRS SPGB have been drifting wider, widening out to 3.60% before trailing back to the recent 3.40% area. The Netherlands raised a smaller than targeted EUR 1.8bn via auctions in 2s and 30s, but EZ auctions not the easiest thing at current levels, when RISK is not clearly yet OFF. Same goes for tomorrow’s 30 YRS BUND auction, if the mood is not panicky enough, it won’t be the easiest sell (hence it’s weakness today, but back to early Dec 2011 levels). All this not really inspiring and primary markets remain honestly on the lethargic side after the initial strong weeks. Key mandates are out of the way, Asia is off, risk awareness is high… EIB and KfW main risk-free suppliers. Another Norwegian EUR covered bond taken up. Spreads to Germany drifting sideways, periphery firmer for choice: Netherlands +28, Finland +41 (+4), 10 YRS swaps +45, France +116, Austria +139, Belgium +200 (-6), Spain+342 and Italy +414. Look like nothing's gonna change, Everything still remains the same…