28 Nov 2012 – “ I Thank You ” (ZZ Top, 1979)
Once more, not much own stuff to chew on Europe’s own. Drifting. EGBs very strong on
(relative) equity weakness. Periphery starting to glow like the ZZ Top Eliminator. In absence of
any strong lead, need to start thanking everyone for input and support (Mario, Ben, Angie, Chrissie… Anyone working
on the Fiscal Cliff. Mariano & Mario. Wolfie...). New paradigm put into
practice: nothing will ever be weak again, nothing. And watch out for FC Ping-Pong!
And I Thank You!
"I Thank You" (Bunds 1,37% -6;
Spain 5,31% -20; Stoxx 2547 +0,4%; EUR 1,293 unch)
---
Yeah,
that Fiscal Cliff-thing was bound to pop up, in absence of anything else out
there and so it did yesterday, once Europe
well home. Markets were in corrective mood anyway and once the lack of advance
bemoaned by the Senate majority leader, we witnessed a 0.5% drop, 0.3% rebound
and final 0.4% drop with the INDU closing weakest (-0.7% against S&P’s
-0.5%, but back below the 1400-mark, and the NASDAQ a mere -0.3%). Nothing life
threatening eventually and a fall-out much more limited than the 2.9% drop on
07 Nov, which was then followed by a further 3% decline before bottoming out
and the rebounding on 16 Nov.
Asia
subsequently lower with Japan
down 1.3% (on a Yen that finally stopped weakening), China
still drifting lower (1% in Shanghai, but with
Shenzhen getting slammed ever stronger) and the rest of Asia
merely giving back yesterday’s gains.
Up
to here, nothing seems to burn too much (although Mainland China looks
definitively bleak, chart-wise, the larger CSI being now on right on 38.2%-mark
of the Nov 2008 low – Aug 2009 high. A break would then take us back the Aug
2008 lows at 1607, for Fibonacci fans. That’s a 25%-slide…
Spanish
Retail Oct still depressed at -9.7% MoM sa / 8.4% YoY (from rev. -11% /
-12.7%). Slightly better, but off such lows, who would care?
Yesterday
evening saw the publication of French Unemployment figures above forecast with
now over 3.1m jobseekers, a net change of over 45k (fcst +28.6k). Never had
that many since April 1998… Up from a low point of 1.98m in Feb 2008.
Bit
of a Risk Off start into the day, shown mainly by EGBs performing against
equities and a weaker EUR.
Bunds
1.40% (-3), alongside USTs at 1.62 (-3, as well). 5 YRS OBLs likewise 3 tighter
to 0.42%, ahead of the (smaller) auction later in the morning with Schätze back
to the ZIRP-mark of 0.000%. Not adverse spill-over into the Periphery with Italy flat and Spain managing to squeeze through
the 5.50%-mark at 5.49% (-2).
Credit
the one tick or two wider it gained yesterday (against equities 0.2% correction).
Equities down 0.2%, outperforming slightly the US close, bouncing off on about
yesterday’s lows and Friday morning levels. Fiscal
Cliff? Bah. I saw you comin’.
Commodities
just a tad lighter with the EUR unchanged at 1.293.
EZ
M3, and who would care normally, surging (and there goes your rate cut) 3.9%
YoY (fcst 2.8% after rev. 2.6%). Bit of a shocker! Oct Private Sector Loan
production still dipping on all counts, but for Home Purchases.
Still,
a hiccup that pushed equities down to -0.5% and, in turn, EGBs further tighter.
Additional EUR 3bn were sold in German 5
YRS at 0.41% (COB 0.45%. Last auctions were at 0.42% early Nov and 0.53% mid
Oct). Short of EUR 500m retained for market intervention. B/C on the higher
side, knowing that never such a small auction size had been targeted before.
EUR 7.5bn in Italian 6m bills sold at
0.919% (last 1.347% one month ago). This is the first time Italian 6m bills
were sold below 1% since Aug 2010. All is
good! All time lows were around 0.55% between Jul 2009 and Mar 2010. All is good!
We will close government supply for
November tomorrow with EUR 3bn each of on-the-run 5 YRS (COB 3.385%, last 3.80%
last month) and 10 YRS (COB 4.585%, last 4.81% - for off-the-runs - mid Nov and
4.92% one month ago). Last month’s on-the-run auction had been for EUR 7bn.
Too
bad the market squeezed over 10bp tighter during the afternoon. Won’t help
Primary Dealers, but, hey…
German CPI as expected at +2.0% YoY / -0.1%
MoM (after +2.1% / +0.1%), EU harmonized.
Spanish Bank Bailout on its way with EUR
37bn needed, next to some private / retail burden-sharing, asset-shedding,
branch-shedding, job-shedding… Bad Bank still seemingly state-owned, as private
interests stepping up (on their own) seem rather light. Still, Spain muddling
through for the moment, good back-wind, and not even “OMT? We’re still
thinking…” mumbled lately and obviously not asked anymore. For the moment. Thanks who? Thanks Mario!
Midday picture still showing a strong EGB backdrop,
through the curve, with Spain
especially strong.
Bunds 1,39% (-4), OBLs 0,41% (-4), BKOs
-0,007% (-2). UST at 1,62% (-3) COB.
Spanish 2s at 2,76% (-12), 10s at 5,42%
(-9). 2-10 YRS spread 266bp (+3). Italian 2s at 1,74% (-4), 10s at 4,66% (-6).
2-10 YRS spread 292bp (-2).
Equities down a quarter. Credit +2/4
(1.6-2.5%). Commodities down a small 0.5%. EUR 1.29 figure. And now?
Not much going on. Drifting.
Noting the increasingly strong bids for
bonds, nearing once more historic lows for swaps printed 2 weeks ago (14 Nov). Belgium hitting
new lows at 2.20%. France
(Downgrade? What downgrade?) on its
lows at 2.055%. 10 YRS EFSF quoted below 2%. Austria at 1.75%...
Spain
re-entering the rarely broken 5.00-5.50%-area, as Italy is in the similarly symbolic
4.50-4.75% area, that is Spring 2011 levels. Likewise with Italian 5s now
around 3.50% with the historic (short-lived) low just above 2.50%, but with 3%
rather a floor and a 5-year average at 3.90%. Thanks who? Thanks Mario!
All
is Good!
Some wild activity in Precious Metals with Gold down 2% since the arrival of US
accounts, Silver and Platinum following, weighting on Oil and Copper.
US cash open down 0.5% from US close,
-0.75% from European COB, pulling European Risk lower and confirming EGB
action. Not that very specific reasons seem to abound here.
New Home Sales missing (Thank you, Sandy) 390k estimates with
368k after 389k revised lower to 369k, -03% after revised +0.8% MoM. Eventually
static.
Had a nice round of Fiscal Cliff Ping-Pong,
just right in time to keep the US from sinking too low, triggering a rebound to
about closing levels in Europe – and supporting the ROn mood in the Periphery.
Good old classic. If there’s nothing to break the squeeze, step aside: awesome
parallel shift in both curves.
Baroso and Co. trying to gate-crash Nordic
willingness to help out Greece to re-re-re-pitch Common Bonds (Nein!), at least Bills (Nein! Nein! Nein!) (Germany is already to forego
some EUR 730m million in ”revenues” next year on Greece. Note the elegant way avoiding
the “haircut” word…) under the moniker of “Launching a debate on a deep and genuine Economic and Monetary Union”. Ok, before Treaty
changes go through, there will be plenty of time to finish the EU budget
discussion… Not tomorrow’s business.
Never mind the 1% equity rebound in an hour
to close up over a quarter (fickle shorts), EGBs steaming ahead (outperforming UST with a 5 YRS auction later) and
barely correcting in the close. That is for ALL. Soft Core compressed to historic lows.
Bunds closed at 1,37% (-6), OBLs at 0,39%
(-6) and BKOs -0,012% (-2,5). UST at 1,62% (-3) COB.
Spanish 2s at 2,69% (-19), 10s at 5,31% (-20).
2-10 YRS spread 263bp (unch). Italian 2s at 1,66% (-12), 10s at 4,59% (-13).
2-10 YRS spread 292bp (-2).
Nearly unchanged curves in the Periphery.
Note Spain back through 400 to Bunds! And nearing its late lows around 5.25% of
19 Oct.
EUR closing unchanged, in absence of a
better idea. Commodities still shaken by Precious Metals (Gold down $25,
-1.6%), but recovering from their LOD.
Take-away: Once more, not much own stuff to
chew on Europe’s own.
Drifting. EGBs very strong on (relative) equity weakness. Periphery starting to
glow like the ZZ Top Eliminator. In
absence of any strong lead, need to start thanking everyone for input and
support (Mario, Ben, Angie, Chrissie…
Anyone working on the Fiscal Cliff. Mariano & Mario. Wolfie...). New
paradigm put into practice: nothing will ever be weak again, nothing. And watch
out for FC Ping-Pong! And I Thank You!
Outlook: Drifting and thankful for anything
happening. EZ Confidence numbers tomorrow. German Unemployment (fcst unchanged
6.9%). Italian auction at latest lows. US Q3 GDP revision, Claims fcst +390k
after 410k, Pending Home Sales fcst +1% MoM after +0.3%. Any shifts to be
blamed on Sandy (Thanks) and everyone
would be thankful for Fiscal Cliff
resolution.
European 50 & 100d averages: EStoxx
2509/2453, DAX 7272/7087, CAC 3446/3411, MIB 15563/15082, IBEX 7833/7486.
US 50, 100 & 200d averages: INDU
13232/13131/12993, S&P 1424/1408/1384, NASDAQ 3034/3018/2986 with AAPL
100/200d at 626/599.
EUR: 50d 1.290, 100d 1.269 & 200d
1.280. Fibo retracement (of May 2011 1.494 & Jul 2012 1.204 down-leg) at
1.273& 1.315, then 1.349 (50%).Jul 2012 to Sep rebound levels: 1.231 –
1.247 – 1.261 – 1.274 – 1.291 -1.317 .
The New Issues activity remained sustained,
as well as diversified, with AT&T raising EUR 1bn 8 YRS at MS +80, Italians
Lottomatica EUR 500m March 2020s at MS +235 and Finmeccanica EUR 600m 5 YRS at
MS +365, Allied Irish for an Irish-jurisdiction 3 YRS covered bond of EUR 500m
at MS +270. Swedbank with EUR 500m 10YRS nc5 LT2 at MS +215 on the financial
sub side. Land Hessen-guaranteed WIBank sold an inaugural EUR 500 10 YRS
benchmark at MS +17.
Forgot to mention yesterday’s IPIC (International
Petroleum Investment Co) 3-tranche deal with, next to USD 750m 3 YRS at MS
+135, saw EUR 800m May 2018 sold at MS+145 and EUR 850m May 2023s at MS +195.
Closing
levels:
10 YRS Yields: Germany 1,37% (-6);
Luxembourg 1,49% (-6); Netherlands 1,60% (-7); Finland 1,60% (-7); Swaps 1,68%
(-5); EU 1,71% (-6), Austria 1,74% (-6); EIB 1,88% (-6); EFSF 2,00% (-6);
France 2,05% (-7); Belgium 2,20% (-5); Italy 4,59% (-13); Spain 5,31% (-20).
10 YRS Spreads: Luxembourg 12bp (unch);
Netherlands 23bp (-1); Finland 23bp (-1); Swaps 31bp (+1); EU 34bp (unch); Austria
37bp (unch); EIB 51bp (unch); EFSF 63bp (unch); France 68bp (-1); Belgium 83bp
(+1); Italy 322bp (-7); Spain 394bp (-14).
EUR swap curve 2-5 YRS 45bp (-2,0); 5-10
YRS 82bp (-1,0) 10-30 YRS 63bp (+1,0).
2 YRS German BKOs closed -0,012% (-2,5) and
5 YRS OBLs 0,39% (-6).
Main +1 to 125 (0,8% wider); Financials +3
to 166 (1,8% wider); Cross +5 to 508 (1,0% wider).
Stoxx Futures at 2547 / +0,4% (from 2538)
with S&P minis at 1399 (-0,2% from 1402, at European close).
VIX index at 16,1 after 15,3 yesterday same
time.
Oil 86,4/109,1 (WTI/Brent) from 87,1/109,6
(-0,8%/-0,5%). Gold at 1717 after 1745 (-1,6%). Copper eventually unchanged at
353. CRB at EU COB unchanged at 298.
BDIY, still on the rise, slowly but
steadily, up 7 ticks to 1104. Target 1162-high seen in July, post-Chinese New Year
slide (5.25% away).
EUR 1,293 from 1,293
Greek guesstimate:
Greek bonds closing unchanged in 2023s at 16.25% and 12.75% (-25) for 2042s.
Twisted. Where Friday closing prices meant to be the bid, the offer or the mid
in a lately- EUR 1m-a-day-average-turnover
market???
All levels COB 17:30 CET
Fast-forward
Macro and Events:
European end of month data drought.
Need to see whether housing will really
turn around the economy.
Govie supply: Thu Italian bonds.
US Thu $29bn 7 YRS
EC: Thu Biz Climate and Consumer Conf; Fri
CPI
GE: Thu Unemployment; Fri Retail Sales
FR: Fri PPI and Consumer Spending
Italy: Thu Biz Conf; Fri Unemployment, CPI
& PPI
Spain: Thu Housing Permits; Fri CPI
US: Thu Q3 GDP revision 2,
Claims, Pending Home Sales; Fri Personal Income & Spending, NAPM and
Chicago PM.
Click
link under title or below for today’s musical support:
You
didn't have to squeeze me but you did
But
you did but you did
And
I thank you.
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