27 January 2012 – “ Sirtaki ” ( Míkis Theodorakis, 1964)

27 January 2012 – “ Sirtaki ” ( Míkis Theodorakis, 1964)

Jittery open given uneven to slightly negative US and Asian closes with lack of follow-up driven after yesterday’s mainly FED-induced risk appetite surge. Not much to chew on in the morning, no major figures, although Spanish unemployment at 22.9% is like “Wow, that’s a lot…”, while ECB figures showed a yet unseen decline in loans to the private sector. Markets nevertheless holding up on the usual assertion that a Greek PSI deal is once more “close”, but then again weighted down for the very same reason. Reasonable Italian bill auction with 6m under 2%, but with a rather weak demand, nevertheless good for EUR 11bn.

Lot of WEF talk out of Davos, all positive, but sounding like whistling in the dark. US GDP and consumption figures were disappointing, maybe pointing to an end of the decoupling. Then again, Consumer confidence was better. Obviously, evenUS consumers save elsewhere in order to get their iPad – and are confident to get one…

The risk correction affected mainly, nearly exclusively the equity market, while credit indices remained about stable. EZ sovereigns, on their side, remained in the strong tightening drive, experienced throughout the week, especially on the periphery. Greece and Portugal remain in fado mode.

ECB deposits down to EUR 465bn from 484bn. Baltic Dry down the by now usual 4% to 726 (yes, again). (And , yes) Just another 9% down to the 663 low of December 2008. Before that the level was only briefly broken in summer of 1986.

2 corporate late comers on the primary side, but for huge books, with Italian ENI, printing more than 100 bp tighter than the sovereign and Compass group coming back for the first time in 8 years.

Spreads to Germany initially all tighter, but finally Core outpaced by Bunds and the periphery: Netherlands +32, Finland +41, 10 YRS swaps +49, France +117 (-5), Austria +133 (-7), Belgium +181 (-12), Spain+308 (-23) and Italy +402 (-14).

Note that 10 YRS Spain now trades below 5% and Italy below 6%.

Spreads on the week:

Netherlands +32 (+3), Finland +42 (+8), 10 YRS swaps +49 (+4), France +117 (-11), Austria +133 (+5), Belgium +181 (-55),Spain+308 (-27) and Italy +402 (-49). Pretty much same movement throughout the different curve points.

Yield-wise:

Germany 1.86% (-8 bp) Netherlands 2.18% (-6 bp) Finland 2.27% (-2 bp) Swaps 2.35% (-2) Austria 3.19% (+13) France3.03% (-4) Belgium 3.67% (-38) Spain 4.94% (-48) Italy 5.88% (-49).

Bund future high last Friday 139 area, today 139.26, closing 138.90 tonight, with a lows around 137.25 traded 4 times mid week before the rebound.

European equities eventually only up 0.7% on the week and the S&P 0.50%. Mainly EUR strength, still squeezed in the mid 1.31 (from under 1.30 same time last Fri)

Credit 141 (from 153 or 8%), Financials 210 (from 228 or 8%) and Sovereigns 323 (from 337 or 4%).

Eventually, an okay’ish week, but at the end lots of noise, less successful than the exuberance felt at times and mainly some jumping around. Dance, Zorba, dance! We’ll be getting some serious supply of government auction next week, mostly medium to long end, so one might want to buckle up should PSI jitters continue and/or the mood sour. Especially, Spain on Thursday and Italy on Friday to close the week will be tested on the actual, much tighter levels.