On the week (compared to Fri 28 Sep COB):
Click on day for related post, on title for song.
We spent the week ending the quarter mostly in the rain, in a wet and autumnally environment. Sad and heavy and closing Friday with a hopeful "After The Rain Has Fallen" (Bunds 1,44% -1; Spain 5,91% -1; Stoxx 2452% -2,0%; EUR 1,285). That was some foresight given that Monday hailed in more upbeat mood "Here Comes The Sun" (Bunds 1,46% +2; Spain 5,84% -7; Stoxx 2496% +1,8%; EUR 1,291). Still, things remained jumpy and nervous amid Spain, yes , no, bail-out hopes and Tuesday was more in a spirit of "Jump, Jive N' Wail" (Bunds 1,46% +0; Spain 5,72% -12; Stoxx 2490% -0,2%; EUR 1,295). Similar to the Chinese water torture, Wednesday was more a case of "Hit Me With Your Rhythm Stick" (Bunds 1,44% -2; Spain 5,79% +7; Stoxx 2485% -0,2%; EUR 1,291), while what could have been the big day with a Super Mario show on the screens on Thursday ended with an uninspiring "So What?" (Bunds 1,44% unch; Spain 5,88% +9; Stoxx 2479% -0,2%; EUR 1,299). Off to a positive European start on Friday, which was further enhanced by amazing NFP. "Let's Work Together" (Bunds 1,52% +8; Spain 5,67% -21; Stoxx 2525% +1,9%; EUR
1,305), although the US close was a drag. To be followed...
Eventually the week wasn’t that bad for Risk, so the change in song material was on spot. After the Rain. Here comes the Sun.
Once more we closed a trading week with the recurrent question “What’s next? Where can we move to WITHOUT support?” And this week brought not much more. OMT, QE, Spanish budget and Stress test figures are all out. Even the iPhone 5 is available. China was closed the whole week for traffic jams, hence less spending. The ECB meeting was mainly dull. Geopolitical risk seemed to have abated a little. Oil crashed, on US supply, but maybe also because tensions have cooled off. Or a mix of both. Gold is shining.
Good recovery of the Periphery after the armour provided by Draghi started to show some chinks with Spain widening 29bp in 2s to hit 3.36% and 18bp to flirt with the 6% at 5.91% to close last week. Italian 2s had widened 15bp to 2.33% and 10 YRS BTP 6bp to 5.16%. So things are better on paper this week, although most of the recovery is Friday action in an empty market. Having tightened down to 400 to Bunds 2 weeks ago, Spain had ticked 450 last week and eventually closes again near the lows at 415.
Hard and Soft Core EGBs roughly range-bound. Soft this afternoon. Not much to delve about. Note the good Belgium performance, cutting through and closing well below 100 to Bunds.
EUR swap curve roughly stable, until steepening today (2-10 133 after 128, 10-30 YRS 2 wider).
Having lost about 4.5% last week, European equities made back half of that, closing the week up 3%. Credit fared well after 2 weeks of purgatory (7% to 12% wider last week, 5% the week before) and managed to claw back at least some of last week’s losses with the Main over 7% tighter (from +7%) and Financials 13% tighter (from +12%), bringing us pretty much back to closing levels around 2 weeks ago (126 & 178, from 127 and 182 on21 Sep)
Commodities about flat on the week, notwithstanding the fact that Oil suffered some serious swings, trading off and than back up. Gold crawling higher. BDY on the rise.
New issue activity to start the quarter was appallingly uninspiring, compared to mid-Sep weeks of EUR 25bn and tons of Periphery supply. After last week's EUR 11bn, this week only showed shy of EUR 7.5bn, of which EUR 2.5bn for the Czech Republic and Poland, as well as EUR 1bn of a German Joint-Länder deal. Rest scattered. Friday supply Periphery-heavy with Telefonica’s EUR 1.2bn
10 YRS Yields: Germany 1,52% (+8); Luxembourg 1,64% (+8); Netherlands 1,78% (+7); Swaps 1,80% (+7); Finland 1,81% (+9); EU 1,96% (+8); Austria 2,04% (+2); EIB 2,24% (+6); France 2,28% (+0); EFSF 2,40% (+3); Belgium 2,46% (-7); Italy 5,04% (-12); Spain 5,67% (-24).
10 YRS Spreads: Luxembourg 12bp (0); Netherlands 26bp (-1); Swaps 28bp (-1); Finland 29bp (+1); EU 44bp (+0); Austria 52bp (-6); EIB 72bp (+7); France 76bp (-8); EFSF 88bp (-5); Belgium 94bp (-15); Italy 352bp (-20); Spain 415bp (-32).
EUR swap curve 2-5 YRS 50bp (+2,0); 5-10 YRS 83bp (+3,0) 10-30 YRS 60bp (+2,0).
2 YRS German BKOs closed 0,055% (+3) and 5 YRS OBLs 0,57% (+5), on the week. with UST at 1,71% (+10)
Swiss 2-years ticking tighter to -0.18% (from -0.16%).
Main at 126 from 136 (7,4% tighter); Financials at 178 after 204 (12,7% tighter). SovX at 138 (-10). Cross at 531 from 568.
Stoxx Futures at 2525 / +3,0% from 2452 with S&P minis at 1463 / +2,2% from 1431, at European COB last week.
VIX index at 14,3 after 15,6 last week.
Oil 90,2/111,8 (WTI/Brent) from 91,8/111,9 (-1,8%/unch). Gold at 1782 after 1773 (+0,5%). Copper at 379 from 376 (+0,8%) . CRB closes 310,0 from 308,0 (+0,6%).
BDY up from last Friday to 875 from 766 (+14.2%). Summer rebound peak had been 1162 early July (33% away). Feb low of 647 26% away. Sep low was 661.
Greek bonds guesstimates: And another good week with 2023 yields tumbling down to 18% (from 19.25% last week and 20% the week before) and 2042s now at 16.5% (from 18%).
EUR 1,305 after 1,285 last Friday
All levels Friday COB 17:30 CET
Next Week:
Next week will be once more appallingly empty on hard data.
Trading will remain rather technical, subject to Periphery rumours and jitters. Italian BTP auction Thu.
EZ: Mon Sentix Inv Confidence (last -23.2); Thu 11 ECB monthly; Fri 12 EZ IP (last +0.6 MoM)
GE: Mon German trade (last Ex +0.4%, Imp +0.7%), IP (last +1.3% MoM), Thu Final CPI
FR: Mon Biz Sent (last 93); Wed IP (last +0.2% MoM); Fri CPI
Italy: Tue Q2 Deficit; Wed IP (last -0.2%); Fri Final CPI
Spain: Tue House Transactions; Fri Final CPI
US: Mon nothing. Tue not much. Wed Wholesale Inventories fcst +0.4% after +0.7%, Beige Book Thu Import Prices, Claims, Fri PPI, U Michigan Confidence
China : Mon Serv PMI (last 52)
Click link under title or below for today’s musical support:
Fair enough week. Not sure data fits the performance, but if it's good enough...
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