Shuffle Rewind 10-14 Dec
" Lazy Sunday Afternoon " (Small Faces, 1968)
This week in review (compared to Fri 07
Dec COB):
Click
on day for related post, on title for song.
As we ended November, we started December
last week. Quietly. If it hadn’t been for some EUR volatility, a rather botched
Spanish auction, Apple getting peeled and Bunga
Bunga politics that shook Italy,
we would probably have trailed mostly sideways, trying to sleepwalk into the
year-end. And still, if you wanted to sleep tight, you needed to remain both
long Risk AND long bonds.
"Only When I Sleep" (Bunds1,30% -8; Spain 5,51% +21; Stoxx 2599 +0,7%; EUR 1,293 -80). That week ended on Friday
07 Dec with musings about the need to find other ways to kill time until Year
End. Morning highs, lunch time lows and then trailing the US felt
unfulfilling. EGBs remained on the stronger side with augurs seeing a weakening
Germany
and calls for lower rates putting the EUR under pressure. Ok, Germans: “Now
work! Somebody has to pay the bills!” seemed to be the right call to increase "Bruttosozialprodukt"
(Bunds 1,3% +1; Spain 5,45% -1; Stoxx 2597 -0,3%; EUR 1,295 -20). NFP were
strong, hitting USTs, but not enough to persuade US equities to do more than
trade sideways.
Monday 07 Dec
revealed that the Italian crisis seemed to be a real one, as Monti threw in the
towel over the weekend. Still: Surprisingly stable Risk. BTPs were shot down in
style. So, Italy?
Down. Chinese data? Was partially weak. Japan? Confirmed in recession.
French data? Weak. German data? Strong. At least them… Wow! With that it would
be better to have Friday’s PMI numbers look really good (Which eventually
wasn’t really the case…). So once more, analysts were having to reinvent
themselves as political experts to glare into a smoky crystal ball… Italian
contagion remained contained, though. Uh…Uh…! "Uh...Uh - Bingo Bongo " (Bunds 1,30% unch; Spain 5,54% +9;
Stoxx 2598 +0,0%; EUR 1,293 -20). Tuesday
showed markets recovering quite nicely from the Italian shock. Add some better
outlook figures and we were all friends again. The Spanish bill auction was
less punishing than could have been feared. The US were opening stronger.
Everything else was all good again. Greek bonds went stellar. "(Ain't That) Good News"
(Bunds 1,32% +2; Spain
5,45% -9; Stoxx 2623 +1,0%; EUR 1,299 +60). Wednesday was
simply boring and a good day to spend some quality time off the screens, while
markets were digesting Italy further (Bunds 1,34% +2; Spain
5,34% -11; Stoxx 2628 +0,2%; EUR 1,304 +50). The FED announced QE4, which
everybody had expected the day QE3 was announced anyway. So not that a kicker.
That extended into Thursday with
the Periphery still recovering some more, although slightly less as auctions in
Italy and Spain weighted
a little. Equities and Risk oblivious to that anyway and synching with the US until the
European close. It is getting difficult to find something crisp out there with the
reduced news flow and volatility. Excitement solely stemming from the US on FC developments, as Greece, Spain
and Italy
are seemingly off the table and that the FED has moved to QE4. "When It's Sleepy Time Down South" (Bunds 1,35% +1; Spain 5,38% +4; Stoxx 2622 -0,2%;
EUR 1,308 +40). So eventually we closed yet
another Friday with an utterly boring
session, worsened by year end inactivity… PMI figures, which were actually
needed on the more positive side to justify the latest levels in Risk were just
so so in Europe. But, who cares? Periphery recovering further with Spain
actually the best performer on the week (outside the bailed-out gang). US stuck
despite better figures. "Stuck in the Middle with You" (Bunds 1,35% +0; Spain 5,37% -1; Stoxx 2628
+0,2%; EUR 1,314 +60). US equities barely changed on the week. A shade red, to
be exact.
Bingo Bongo, Good News hailing,
Sleepily digesting in the South to end Stuck… What an uninspiring week… Felt
slow as a Sunday Afternoon– for 5 days in a row… The only thing that wasn’t lazy
and laid back was the EUR.
While
last week had been one where you needed to run Bunds (8 bp tighter to end at
1.30%), and especially Soft Core EGBs, all closing by and large on historic
lows, despite Credit tightening in by yet another 3.5% and equities squeezing
out yet another 0.7% in gains, this week saw that bid weakening gradually as
the Periphery recovered. Still, one could barely call this a “correction” with
5bp added to end at 1.35% (Mon unchanged, Tue +2, Wednesday +2, Thursday +1 and
Friday unchanged). And that is with Bunds being among the worst performers in
European bonds… So not much to report. End of year… We remain in the same old 1.13%
- 2.07% range, with retracements levels at 1.35%, 1.49% and 1.60% on the
upside.
UST
wider by 8bp in an auction-laden week at 1.70%.
Schätze
gave back 4 bp after last week’s 9bp gain, deep into negative territory, and
ended at -0,043% (+4) with 5 YRS OBLs at 0,33% (+4).
NB:
End of July closing lows for 2 YRS were -0.095%, 5 YRS 0.24% and 10 YRS further
away at 1.17%.
Not
much to say about the rest of the EGB curve. Most sovereigns sluggishly
tightened in just a little on Germany’s (limited) widening, especially during
the re-normalization at the end of the week. Soft Core subject to accordion
movements with the Periphery wagging them all, to a certain extent.
The
Bunga thing last week took some time
to digest, although last week’s sleepy environment had the whole thing watered
down (with Italy ending 4 wider and Spain 15 against Bunds tightening 8? BRING
10 YRS to 4.53% / 323 to Bunds, respectively 5.45% / 415 to Bunds). Monday was bunga-ed some more after Monti threw the
towel over the weekend with Italy widening sharply by 28, dragging Spain 9
wider as well, as players realized it wasn’t just a blimp on the Italian
political landscape. 2 YRS fared even worse, widening by 34 (and 12 for Spain).
But by Tuesday the view became more sanguine with hopes of Monti positioning himself
on some sort of centre / centrist platform and both Italian and Spanish curves
tightened back some 10bp, followed by some more normalization on Wednesday
(Italian 2s -14, back through 2%, and 10s -8 with Spanish 2s -14 and 10s -8),
as the Italian 1 YR bill sales went through smoothly. Thursday a bit wobbly on
auction-supply both in Italy as well as Spain (-1 in Italy, +4 in Spain) with
the end of the week showing a lenient -3 and -1.
Italy
ending the week at 4,60% (+7) / 325 (+2) to Bunds and Spain at 5,37% (-8) / 402
(-13) to Bunds, eventually the best performing bonds (outside the bailed-out
countries, which went ripping, led by Greece). Italian 2s at 1.87% (+3 on the
week) and Spanish one at 2.83% (-10).
So,
things about digested.
If
we felt that the Greek buy-back prices were generous, it didn’t keep the Greek
bonds from seriously overshooting them already before the (extended by 2 days) cut-off
date and even more thereafter. Greek bonds closing at their (initial)
highs on the closing of the buy-back with 2023s at 43.50 (13.28%) and 2042s at
34.0 (10.90) to then end the week for the 2023s at 45.0 (12.83%) and 2042s at
34.0 (10.90%), having closed last Friday at 40.75 (14.15%) and at 31.0
(11.71%). As a reminder, buy-back price proposals were 38.1-40.1 & 30.2-32.2.
The Greece buy-back went through for EUR
31.9bn and the ensuing rally is certainly good for the OSI end of year
mark-to-market. Details here.
Swaps again totally in line with EGBs,
after closing last week at historic lows (up to 11 YRS). 2-10s barely wider at 127
(+1), with 2-5s at 45 (+1) and 5-10s unchanged at 82. 10-30 YRS, which steepening
was surprising us over the last weeks, finally flattened back to 66 from 70. As for the last weeks (+7 to 70 and before
that +2 to 63), I would expect X-longs to tighten in an increased low-inflation
cum Risk On scenario.
2 YRS 0.345% (+3.5) 5 YRS 0.795% (+4.5) 10
YRS 1.620% (+4) 30 YRS 2.280% (unch).
As last week, Credit indices still seem to
attempt taking out new lows for the year (Main 112 in March, ; Financials hitting 146 past the Oct 153 point; Cross low 462 mid
Sep, 468 today). Some light outperformance of equities, especially for the
Crossover.
Highs were respectively 208 & 184 in Nov
2011 and then May 2012 in the Main, 355 & 309 for Financials and 842 &
753 for the Crossover. So we’ve come some way here, too.
Main down to 116 (-2,5% tighter);
Financials at 152 after 153; Cross at 463 from 480 (-3,5% tighter).
European
equities finally, tick by tick by tick by tick, managing to take out new 2012
highs (2638 on Thursday for the EStoxx), but mostly in limited volatility and
running a bit out of steam, paced as well by the US. Monday ended unchanged to
the tick, Tue saw eventually a 1% sprint, followed by additional +0.2% on Wed
and the slightest of correction on Thu with -0.2% and ending Friday +0.2%, nonetheless up +1.2% on the week.
European
50 & 100d averages: EStoxx 2527/2497, DAX 7306/7201, CAC 3480/3462, MIB
15591/15372, IBEX 7824/7663.
US
50, 100 & 200d averages: INDU 13126/13169/13003, S&P 1416/1415/1387,
NASDAQ 2997/3027/2989 with AAPL at 589/620/602.
The
only thing that wasn’t lazy this week, again. Last week was pogo time in
EUR/USD (+50 +20 -10 -100 -20) after having added 310 pips in the prior weeks
and been kicked in the chin by Bunga
Square. Eventually things mellowed out here, too, initially, but Risk, for
choice, is back in the European camp: Mon -20 Tue +60 Wed +50 Thu +40 Fri +60.
Flirting with that 1.315 just around Friday close.
Resistance
1.315-1.317 area.
EUR:
50d 1.291, 100d 1.270 & 200d 1.279.
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 .
Not
much to say about Commodities. Brent up 2% against WTI’s +0.5% and Gold weakish
and held below the 1700-mark (-0.3%).
Baltic
Dry crashed, though, showing some fundamental lack of transportation needs. To
be watched. The Chinese New Year starting only on 10 Feb 2013, that excuse
won’t make it.
Seriously
nearing the end of the year in New Issues with a week that only yielded
slightly over EUR 4bn in 7 deals (versus EUR 14bn last week and EUR 27bn during
the last November week), of which 3 EUR 1bn benchmarks (Carrefour, AT&T,
Telecom Italia), although one would note that the remaining deals were more on
the venturous side with non-IG Nexans, BoI’s Tier 2 deal or unrated forest-manager
Tornator.
Outlook:
Same
on the menu, just the same: Broadly sideways, unless a shoe drops. If the sun
shines, test the upside. Fiscal Cliff uncertainty remains on the menu. Periphery
woes seemingly digested. Will once and for all drift into holidays catatonia.
On the week (compared to Fri 07 Dec
COB):
10 YRS Yields: Germany 1,35% (+5); Luxembourg
1,42% (+4); Netherlands 1,55% (+3); Finland 1,57% (+2); EU 1,61% (+3); Swaps
1,62% (+4); Austria 1,73% (+4); EIB 1,77% (+2); EFSF 1,87% (+1); France 1,98%
(+3); Belgium 2,11% (+2); Italy 4,60% (+7); Spain 5,37% (-8).
10 YRS Spreads: Luxembourg 7bp (-1);
Netherlands 20bp (-2); Finland 22bp (-3); EU 26bp (-2); Swaps 27bp (-1);
Austria 38bp (-1); EIB 42bp (-3); EFSF 52bp (-4); France 63bp (-2); Belgium
76bp (-3); Italy 325bp (+2); Spain 402bp (-13).
EUR swap curve 2-5 YRS 45bp (+1,0); 5-10
YRS 82bp (+0,0) 10-30 YRS 66bp (-4,0).
2
YRS German BKOs closed -0,043% (+4) and 5 YRS OBLs 0,33% (+4), on the week.
with UST at 1,70% (+8). Swiss 2 YRS back up to -0.240 from last week’s -0.295%,
in line with Schätze.
Main at 116 from 119 (-2,5% tighter);
Financials at 152 after 153 (-0,7% tighter); Cross at 463 from 480 (-3,5%
tighter).
Stoxx Futures at 2628 / +1,2% from 2597
with S&P minis at 1411 / -0,1% from 1413, at European COB last week.
VIX index at 16,7 after 16,5 last week.
Oil 86,6/109,1 (WTI/Brent) from 86,2/107,0
(+0,5%/+2,0%). Gold at 1696 after 1701 (-0,3%). Copper at 366 from 365 (+0,3%)
. CRB closes 293,0 from 296,0 (-1,0%).
A
real beating for the Baltic Dry after last week’s 11% slide. Things just got
worst by the day, peaking with an 8% plunge on Wednesday. BDIY sunk yet again on
Friday to end the week at 784, down nearly 19% this week and over 27% during
the last fortnight.
The
latest dip from the post-Summer high of 1109 in Oct had been halted at 916,
before that we slipped from 1162 in July to 661 mid-September. Upcoming Chinese New Year (10 Feb 2013)…
EUR 1,314 after 1,295 last Friday
All levels Friday COB 17:30 CET
Fast-forward
Macro and Events:
Preciously
few things…
Dragging
into Year End, unless next Friday proves the Mayan right.
US
housing back into focus next week. Big Friday US data dump.
Pretty
empty government supply slate with Spanish and Greek bills on Tuesday
EC:
Mon 17 Trade Balance; Wed 19 Construction; Thu 20 Cons Confidence
GE:
Wed 19 IFO fcst 102.3 after 101.4; Thu 20 PPI; Fr 21 Cons Confidence
FR:
Fri 21 BIZ Confidence
Italy:
Wed 19 Industrial Orders and Sales; Thu 20 Retail Sales; Fri 21 Consumer Conf
Spain:
Thu 20 Housing Permits, Fri 21 PPI
US:
Mon 17 Empire Manu fcst 0 after -5.22; Tue 18 NAHB Housing; Wed 19 Housing
Starts fcst 873k after 894k, Permits fcst 870k after 868k; Thu 20 Existing
Homes Sales fcst 4.85m after 4.79m;Claims and yet another Q3 GDP revision; Big
Friday with Chicago FED, Pers Income & Spending, Durable Goods;, Michigan
Conf.
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