21 Sep 2012 – “ Turn Them Into Gold " (Ladylike Dragons, 2011)

21 Sep 2012 – “ Turn Them Into Gold " (Ladylike Dragons, 2011)

http://youtu.be/UHQLbAF_LV0

Had a couple of (mixed) late European news living up the US session, which eventually managed to eke out a small gain on the Indu, small loss on the other indices: Revised Italian outlook on growth and deficit (2012 GDP down to -2.4% from Q2 estimates of -1.2% and deficit up to -2.6% from -1.7% with 2013 deficit expectations tripled from -0.5% to -1.8% (Here goes the fiscal consolidation); continuation of the report that the ESM was to be signed by Wed with Spain then potentially able to decide (…) by Thu (seems highly doubtful…) and finally Greece, where a couple of EUR billions are still missing to make ends meet, which seems to put increasing strains on the coalition. S&P up 10 ticks from the opening lows to close less than a point below the previous sessions. Asia heading mixed, but roughly flat into the weekend; China roughly flat but down 5-6% on the week and Japan up some 1.5% after its own QE (but with JPY stubbornly strong at 78.2).

Light Risk On open for a session that won’t see any meaningful macro, so inclined to surf sentiment, rumours and technicals. Still mulling all that PMI data showing a generally softer H2 worldwide.

Bunds morning quotes softer by 2-3 around the 1.60% pivot, UST out by 3 to 1.78%, compared to the European close. Rest of EGB equally softer by 1-2 bp. Periphery about flat to a tick tighter across the curve with Italy still past 5% and Spain a little below 5.75% (after yesterday’s 5.83% high in 10s). Equities up some 0.25-0.50%, trying to match the higher US close. Credit tighter (1.5-2.5%), but still subject to index rolls out / into the new series. Commodities rebound in Oil (+1.5%) after this week’s 7% plus bashing until yesterday. Copper getting some colours back. EUR trying, but failing, to tackle the 1.30 from below.

Spanish July mortgage lending down over 27% YoY. House mortgages down “only” 17.5%. Dutch house prices down 8% YoY, pushing thrifty Consumer Spending down 1.5% YoY.

Uneventful morning, outside a rather short-lived feedback loop between some stops on EUR past the 30-handle, masked as Risk On, pulling equities higher, pulling the EUR higher up to 1.305 – until it ran out of steam and drifted back to opening levels.

Had eventually the EU SPOX spooking the rounds with statements of Spain retaining full structural programmes implementation controls and the Troika taking a one week “break” out of Greece.

Closing the morning  with Bunds 1,59% (+2), OBLs 0,59% (+1), BKOs 0,046% (+0,5) with UST at 1,78% (+3)

Spanish 2s 3,06% (-3) & 10s at 5,73% (-1) a little better. Italian 2s 2,16% (+3) and 10s 5,07% (+4) a little softer. Curves unchanged. Equities flattish to slightly negative after the late morning spike up. EUR right on 1.30.

No meaningful US data until Tuesday’s Housing and Consumer Confidence. Not much to chew on. Quadruple witching on US equities at quarter end.

Hearing from the IMF that Spanish banks could need less than expected. Some unclear / contradictory comments out of Spain on pension reform / freezes (a much probable condition of ESM / ECB support). Seems like markets are readying up for some kind of support negotiations, following next week’s budget cum reforms approvals on Thursday. IBEX up 1.5%. 

Tedious Risk On with the Periphery slipping.

Same EUR pattern as earlier with a squeeze from 1.297 to 1.304, ahead of Wall Street open, before slipping again.

Pump dump pump slump?

Wall street opening about up 0.25%. More for the iPhone-driven NASDAQ. There must be an app for that.

Rumours of behind the scenes haggling to keep the non-used banking bail-out funds to cover other needs seem to be wishful thinking, that I doubt would pass the Northern Front cum ECB spirit of conditionality. Bail-out funds? Turn Them Into Gold? Unlikely.

Closing comments from Schaueble that all is good in Europe, respecting everyone’s efforts. Ok. And “steadfast” Spain doesn’t need a programme. Hum.

Closing the week in uncomfortable expectations. Bit of disconnect between more cautious bonds and more bullish equities.

Bunds closed at 1,59% (+2), OBLs at 0,59% (+1) and BKOs 0,033% (-0,8) with UST at 1,77% (2)

Spanish 2s at 3,07% (-2), 10s at 5,73% (-1). Spanish 2-10s 267bp (+2).

Italian 2s at 2,18% (+5), 10s at 5,10% (+7). Italian 2-10s 292bp (+2).

New Issues on hold after this week’s EUR 26bn of supply, mostly in AAA SSA names, as well as prime name covered bonds and household corporates. Had nevertheless Portuguese toll road operator Brisa selling EUR 300m 5.5 YRS just shy off MS +600.

Closing levels:

10 YRS Yields: Germany 1,59% (+2); Luxembourg 1,63% (+1); Swaps 1,82% (+3); Netherlands 1,86% (+0); Finland 1,88% (+1); EU 1,95% (+1), Austria 2,12% (-1); France 2,27% (+0); EIB 2,24% (+2); EFSF 2,40% (+3); Belgium 2,63% (-2); Italy 5,10% (+7); Spain 5,73% (-1).

10 YRS Spreads: Luxembourg 4bp (-1); Swaps 23bp (+1); Netherlands 27bp (-2); Finland 29bp (-1); EU 36bp (-1); Austria 53bp (-3); France 68bp (-2); EIB 65bp (+0); EFSF 81bp (+1); Belgium 104bp (-4); Italy 351bp (+5); Spain 414bp (-3).

EUR swap curve 2-5 YRS 52bp (+2,0); 5-10 YRS 87bp (+1,0) 10-30 YRS 61bp (+2,0).

2 YRS German BKOs closed 0,033% (-0,8) and 5 YRS OBLs 0,59% (+1).

Main at 124 from 125 (0,8% tighter); Financials at 197 after 202 (2,5% tighter). SovX at 171 from 171. Cross at 458 from 468.

Stoxx Futures at 2565 / +0,9% (from 2541) with S&P minis at 1457 (+0,5% from 1450, at European close).

VIX index at 14,0 after 14,3 yesterday same time.

Oil 93,1/111,0 (WTI/Brent) from 92,3/109,0 (+0,9%/+1,8%). Gold at 1773 after 1763 (+0,6%). Copper at 380 from 378 (+0,5%). CRB at EU COB 309,0 from 308,0 (+0,3%).

Totally and definitively new week, new luck, new trend! Fourth positive session, with the Baltic Dry adding yet another 2.5%, fixing at 774 from 755. Question remains: What is shipped? Ore? iPhones? Xmas toys?

EUR 1,299 from 1,295

Greek bonds guesstimates: 2023s closing the week down to 20% from 20.50% from 20% and 2042s likewise tighter 25bp at 18.25%.

All levels COB 17:30 CET

On the week (compared to Fri 14 Sep COB):

Closed last Friday with a feeling of "Why Does My Heart Feels So Bad" (Bunds 1,7% +14; Spain 5,76% +16; Stoxx 2592% +1,8%; EUR 1,315), as after the unleashing of OMT and QE, Risk had reached a levels that demanded hard positive data to push on further. A positive close, but off highs. And as it stands, Monday felt like "Every Day I Have the Blues" (Bunds 1,68% -2; Spain 5,96% +20; Stoxx 2586% -0,2%; EUR 1,313). Nothing dramatic. Mostly boring. But ending with Spanish 10s crashing to 6% and Oil just crashing, mysteriously. As nothing lasts forever (but the Blues), stocks retreated further on Tuesday, but Spain bounced off the 6%-mark on a fair bill auction, so we "Still Got The Blues" (Bunds 1,64% -4; Spain 5,86% -10; Stoxx 2561% -1,0%; EUR 1,306). And the bluesy mood prevailed on Wednesday with "The Thrill Is Gone" (Bunds 1,61% -3; Spain 5,67% -19; Stoxx 2569% +0,3%; EUR 1,307). While indicators were slightly divergent, most was done on the back of mildly positive US figures, everyone was ignoring. Spain’s lone squeeze ahead of the auction didn’t trigger real appetite either. So we slipped to Thursday and saw PMI data in China and France disappoint big time, small time in for the EZ and better in Germany. After initially tanking, a fairly correct Spanish auction held stress about ok. At least it didn’t add any. Lacklustre US open, a session marked by "No Fun" (Bunds 1,57% -4; Spain 5,74% +7; Stoxx 2551% -0,7%; EUR 1,295). A bluesy week.

So after 2 hell of positive weeks with fairy dust sprinkled by the CBU (Central Banks United), which saw EStoxx adding over 6%, Spanish 10s tightening some 125bp down to a 5.55% low before drifting back out a little to 5.76% last Friday (and 2s down to as low as 2.70% before snapping back to 3.07%), Credit tightening by over 20% and Financials by 27%, the EUR ripping 550 pips higher and the Risk decompression taking its toll on Bunds (adding 36% to close at 1.70% last week), things seem a little out of breath here. Post-Central Bank intervention depression, so to speak, as the question on everyone’s mind is “What’s next? Where can we move to WITHOUT support?” Add to that soured geopolitics that stirred spirits in Asia, MENA and to some extend in regional Spain.

Hard Core getting some strength back with Bunds back to the 1.60% pivot, tighter by 11 on the week (+18 the week before). EGB credit torsion pivoting around a performing Austria and a heavier France, facing the reality of a growth slump, as confirmed by this week’s PMI. Agencies all in line with swaps around -12, correcting pretty much the previous week widening. Periphery still an uneasy place to be and closing the week roughly unchanged (2 YRS Italy down 5, 10s wider by 3 and Spanish 2s unchanged with 10s tighter by 3).

EUR swap confirming flight into the medium part of the curve, flatter in 2-5 and steeper in 5-10 and longer out.

Credit giving back some of its huge post-QE/ OMT rally gains, as equities ran a little out of steam.

On the commodities front, we note the slump in Oil and relative strength of Gold ($10 off the 2012 highs). We note as well the 17% rebound in the moribund Baltic Dry Index, showing some demand for bulk shipments.

New Issue supply was tamer quality-wise than last week’s explosive EUR 25bn, of which more than half was for Periphery issuers. Actually, size-wise, it was a bigger week, as next to EUR 26bn were issued in benchmark format, but of that amount over the half was done for AAA SSA issuers (EUR 5bn KfW, EUR 3bn CADES and EIB, the rest for German Länder), next to EUR 2bn for prime quality covered bond issuers. Next to EUR 10bn were issued for corporates, however here again, it was concentrated on strong house-hold names with EUR 2.25bn for Anheuser Busch InBev, EUR 2bn for BHP Billiton, EUR 1.5bn for OMV and EUR 1bn GE. Periphery issuers represented only EUR 1bn for three utility issuers, including a retap. So back to caution after last week’s take-all approach.

10 YRS Yields: Germany 1,59% (-11); Luxembourg 1,63% (-13); Swaps 1,82% (-12); Netherlands 1,86% (-8); Finland 1,88% (-6); EU 1,95% (-11); Austria 2,12% (-3); France 2,27% (+2); EIB 2,24% (-9); EFSF 2,40% (-11); Belgium 2,63% (+2); Italy 5,10% (+3); Spain 5,73% (-3).

10 YRS Spreads: Luxembourg 4bp (-2); Swaps 23bp (-1); Netherlands 27bp (+3); Finland 29bp (+5); EU 36bp (unch);  Austria 53bp (+8); France 68bp (+13); EIB 65bp (unch); EFSF 81bp (unch); Belgium 104bp (+13); Italy 351bp (+14); Spain 414bp (+8).

EUR swap curve 2-5 YRS 52bp (-4,0); 5-10 YRS 87bp (+3,0) 10-30 YRS 61bp (+3,0).

2 YRS German BKOs closed 0,033% (-7) and 5 YRS OBLs 0,59% (-12), on the week. with UST at 1,77% (-10)

Swiss 2-years eventually rather stable at -0.16 (up 1bp on the week and from -0.48% 3 weeks ago).

Main at 124 from 118 (5,1% wider); Financials at 197 after 185 (6,5% wider). SovX at 171 from 172. Cross at 458 from 460.

Stoxx Futures at 2565 / -1,0% from 2592 with S&P minis at 1457 / -0,3% from 1461, at European COB last week.

VIX index at 14,0 after 14,3 last week.

Oil 93,1/111,0 (WTI/Brent) from 99,5/117,1 (-6,5%/-5,2%). Gold at 1773 after 1774 (-0,1%). Copper at 380 from 384 (-1,0%) . CRB closes 309,0 from 320,0 (-3,4%).

Having slipped last week from 669 to 662, this week proved a good one. Totally and definitively new week, new luck, new trend! Five positive session, with the Baltic Dry adding 17%, fixing at 774. From 662, the best week since Aug 2010. Question remains: What is shipped? Ore? iPhones? Xmas toys?

Greek bonds guesstimates: And another good week with 2023s down to 20% from 20.5% and 2042s stable at 18.25%.

EUR 1,299 after 1,315 last Friday

All levels Friday COB 17:30 CET

Next week:

Running empty on data flow with next week not offering much more. German IFO on Monday. End of month data publication fatigue, so markets will run on sentiment, technicals and rumours.

Spanish bank audit due on Friday 28 Sep.

Probably uneventful auction supply next week: 10 YRS Bunds on Wed and long Italians to close the month next Fri to focus on. Italian and Spanish bills on Wed and Thu shouldn’t be market-rocking in the current environment.

EZ: Fri 27 M3 & Biz Climate + final Sentiment Data

GE: Mon IFO (last 102.3, Current 111.2, Expectations 94.2); Wed CPI; Thu unemployment

FR: Tue Biz Confidence; Wed unemployment

Italy: Tue Con Conf (last 86), Wage data; Wed Retail Sales (last +0.4% MoM); Thu Biz Conf (last 87.2)

Spain: Mon PPI (last +2.6% YoY); Thu Housing Permits (last -32.6% YoY) & Retail Sales. Fri Bank audit.

US: Mon Chicago & Dalles FED; Tue Case-Shiller Home PX, Cons Conf (last 60.6), Rich FED; Wed New Home Sales; Thu GDP revision, Pers Consumption, Durable Goods, Claims, Home Sales

Click link on title or below for today’s musical support:

And why not? Nice band.

http://youtu.be/UHQLbAF_LV0

20 Sep 2012 – “ No Fun " (Sex Pistols, 1977)

20 Sep 2012 – “ No Fun " (Sex Pistols, 1977)

http://youtu.be/xnLjy1Usnug

The Thrill has gone, definitively. The S&P traded another excruciatingly slow 6-tick session, and that’s for the extremes, with most of the afternoon reduced to 2 ticks, before a “sharp sell-off” of 3 points in the close, leaving it still up a small 2 points. So… Weak Asian session on the back of slow Japanese data and yet another disappointing Chinese flash PMI, which, while edging higher to 47.8 after 47.6, showed the fastest drop in output in 10 months. Asian equities closing deep red with Japan down 1.5% and China minus 2% plus. Shanghai now at the lowest since early Feb 2009.

Risk Off backdrop for opening Europe. Equities gapping down 1%. Bund futures up 50 ticks. Bunds back through the 1.60% level, down 4 bp to 1.57%. Periphery in Pavlovian torsion out by 4-5, ahead of this morning’s EUR 4.5bn 3 and 10 YRS auction (opening levels of the bonds 3.90% and 5.70%, after closing 3.86% and 5.67%). Italy symbolically past the 5%-mark again, broken yesterday. UST down 6 bp to 1.72%. Credit wider, although Itraxx half-yearly index rolls make the reading a little blurred. Commodities generally weaker with Copper losing its late resilience. EUR down 100 pips from Asian trading, down to 1.295.

PMI disappointment round starting (Consensus was mostly for a bit of a rebound to show a bottoming out) with French Manufacturing down to 42.6 (fcst 46.4 after 46) and, more important, Services down to 46.1 (fcst 49.5 after 49.2). Late SPMI lows had been 45.1, 45.2 and 44.6 in May and April 2012 and before in Oct 2011. Before that Jul 2009 (…). Mfg PMI shows sharpest output fall since Apr 2009. Composite PMI down to 44.1 after 48.

At least German data had the decency to abide to (and overshoot) expectations with Services up over the 50-mark at 50.6 (fcst 48.5 after 48.3) and Mfg at 47.3 (fcst 45.2 after 44.7). German Comp PMI at 49.7, a 5-month high, after 47. Just below expansion mark. But then, it’s Germany. And it remains below 50… German PPI a tick over consensus at +0.5%/ +1.6% YoY (after +0% / +0.9%). Helped stabilize equities from the opening sell-off to around -0.75%.

PMI data was rounded up by EZ Comp at 45.9, missing the 46.6 consensus after 46.3, split into better Mfg at 46.0 (fcst 45.5 after 45.1) and worse Serv at 46.0 (fcst 47.5 after 47.2). Hadn’t had Comp below 46 since June 2009. Given, the high correlation, EZ 2012 GDP might end up in the -1% territory. Still, stabilized equities by another 0.25%. EUR sent spinning lower to 1.294.

This week’s most focused-on auction with EUR 4.5bn of Spanish new 3 YRS 3.75% Oct 2015 ES00000123P9 (opening 3.90% after COB 3.86%) and 10 YRS Jan 2022 (opening 5.70% after COB 5.67%) on the chop. Size amount was eventually beaten with a combined EUR 4.8bn, split into a large chunk of new 3s with EUR 3.9bn sold at average 3.845% (but with a stop-out rate of 3.92%) and EUR 860m 10s at 5.666% (stop-out 5.70%), meaning tails of 21.5 cts and 24 cts (7.4 and 3.4bp, respectively). Bid to cover in 3s at 1.6 and in 10s at 2.9, which is poor for the first, especially with the Draghi put, and looks rather fair for the later. Obviously, funding costs ARE lower than in the summer, down from off the run 3s at 5.09% in July, but up from early Sep’s 3.68%, and 10s at 6.65% early Aug.

10 YRS now back to Apr auction levels (5.74%). Lowest levels since 2011 were 5.16-20% in Feb/Mar and Sep 11.

Quotes in the immediate aftermath about stable 3.87% and 5.70% mid. 82% of planned 2012- mid- /long-term debt issuance now done. Glass was half-full until now, might turn half empty. Or just half…

French auction for a combined BTAN supply of EUR 7.97bn with EUR 3.2bn Sep 2014 at 0.20%,  EUR 1.3nn Feb 2016 at 0.53% and EUR 3.5bn Jul 2017 at 0.98% (COB 0.21%, 0.53% and 0.99%, from 0.12% in Jul and 0.86% in July in 2s and 5s). In line with yesterday’s close and Risk Off open. Had a 6 cts tail in 5s (1.3bp), though.

Funding costs higher than in Summer (Duh!). Given today’s PMI numbers and growth outlook, the French government will need to be furthermore creative to remain on target, especially with the Fiscal Compact / Golden rules passing government approval yesterday (Still needs to pass Parliament).

Closes auction supply for the week. 10 YRS Bunds next Wed and long Italians to close the month next Fri to focus on. Italian and Spanish bills next Wed and Thu shouldn’t be market-rocking in the current environment.

Had the EU on the ticker still pushing for Banking Union to start early 2013, which is unrealistic. First steering committees, maybe. ECB Coeuré repeating all that has been said before in defence of the OMT. That Central Banks have an unlimited capacity to create money is an illusion, though. As shown by the last few weeks of QE or similar announcements… 

Thus this mean they only have an unlimited capacity to buy bonds? Ok, that’s mean. Message goes to the governments in charge (US fiscal cliff, EU union, reforms etc etc.).  What is right is that all that money can’t buy you peace of mind, if markets are unconvinced (see fading Draghi put or the JPY at 78.2, stronger than before the latest Japanese QE announcement).

Midday levels slightly more relaxed, off lows, but still down, ahead of US data.

Bunds1,60% (-1), OBLs 0,60% (-3); BKOs 0,048% (-1,3) with UST at 1,74% (-4). Bunds 3bp off tightest levels, as are UST, but still better bid.

Spanish 2s at 3,03% (-1), 10s at 5,72% (+5). Spanish 2-10s 269bp (+6). Italian 2s at 2,11% (unch), 10s at 5,04% (+6). Italian 2-10s 293bp (+6). Spain holding ok after the supply. Italy in line. Auction supply a bit off at 3.89% and 5.72%.

Equities down 0.75% to a small percent.  EUR heavy on 1.296. Commodities down 0.75%-1%. Copper down 1.5%.

US data : Claims at 382k (fcst 375k after 382k, revised 385k), Continuous Claims at 3272k (fcst 3300k after 3283k, revised sharply up to 3304k). Revisions eventually give a rather flat picture. 4w average crawling up.

US Flash PMI at 51.5 (fcst unch from Aug 51.5) right on consensus. Output down to Sep 2009 levels, New Orders up, Employment slightly up. Nothing to brag about expansion-wise. Closing US data supply for the week with Philly Fed at better than expected -1.2 (fcst -4.6 after -7.1) and Leading Indicators in line at -0.1% (fcst -0.1% after +0.4%, revised +0.5%). No US data tomorrow. Not much Monday either.

Afternoon titbits: Talks on tax revenue sharing between Rajoy and Catalan leader Mas, which the latter described as “having not gone go well”. Catalonia will have to reflect deeply (…). Sounds familiar. Early elections obviously dynamite, as debates would certainly resolve around independency and /or sense of EUR-membership et al. Talking of Spain, press reports of ESM signing coming Wed.

EU-China meeting not yielding anymore than standard pep talk and the joy of cooperation from all sides.

Greek collation tensions on Troika demands.

S&P warning Finland on its AAA in case of slippage (see Monday’s comment: Revised budget and deficit outlooks now show 3.4% deficit this year (after 3.3% last year) and 2.8% next year (revised from 1%). To hell with austerity… Slippery road.)

EZ Consumer confidence at -25.9 (fcst -24 after the August 3-year low -24.6). June 2009 levels. Draghi effect, someone? No rebound.

Lame US start, opening down 0.50%, in line with futures and ambient mood, propped up a little (+0.25%) by the latest US data set.

It’s not like anvils are flying low, nor shoes dropping. No major news, but jittery here. No fun.

US equities don’t like the slide and are trying to crawl back to closing levels.

Bunds closed at 1,57% (-4), OBLs at 0,58% (-5) and BKOs 0,041% (-2) with UST at 1,75% (-3)

Spanish 2s at 3,09% (+5), 10s at 5,74% (+7). Spanish 2-10s 265bp (+2). Italian 2s at 2,13% (+2), 10s at 5,03% (+5). Italian 2-10s 290bp (+3).

Why do Spanish bonds always rally like hell AHEAD of the auctions? So often ends up in bruises: Spanish auction supply closing in the red at 3.92% and 5.74% (from 3.845%, stop-out 3.92%, respectively 5.666%, stop-out 5.70%). Bonds closed nevertheless off lows, as 10s spiked out to 5.83%.

Risk Off day closing with typical credit torsion around Austria / France. Good 5 YRS performance.

New Issues running a bit out of steam: Sampo Bank raised EUR 1bn 7 YRS at MS +37 in covered bond format. In corporates, Met Life ran a double-trancher with EUR 500m 7 YRS at MS +108 and GBP 500m 14 YRS at UKT +155, joined by Mondi Finance for EUR 500m 8 YRS at MS +185 and Spanish gas-utility Enagas with EUR 500m 5 YRS at MS +335, some 35 bp through the sovereign.

SSA EUR traffic was reduced to a EUR 500m 7 YRS FRN at 3mE +5for the German City-State of Bremen.

Had Dutch agency BNG successfully raise USD 2.25bn 5 YRS at MS +58.

Closing levels:

10 YRS Yields: Germany 1,57% (-4); Luxembourg 1,62% (-6); Swaps 1,79% (-5); Netherlands 1,86% (-2); Finland 1,87% (-3); EU 1,94% (-4), Austria 2,13% (-1); France 2,27% (+0); EIB 2,22% (-5); EFSF 2,37% (-4); Belgium 2,65% (+1); Italy 5,03% (+5); Spain 5,74% (+7).

10 YRS Spreads: Luxembourg 5bp (-2); Swaps 22bp (-1); Netherlands 29bp (+2); Finland 30bp (+1); EU 37bp (unch); Austria 56bp (+3); France 70bp (+4); EIB 65bp (-1); EFSF 80bp (unch); Belgium 108bp (+5); Italy 346bp (+9); Spain 417bp (+11).

EUR swap curve 2-5 YRS 50bp (-3,0); 5-10 YRS 86bp (+2,0) 10-30 YRS 59bp (unch).

2 YRS German BKOs closed 0,041% (-2) and 5 YRS OBLs 0,58% (-5).

Main at 125 from 121 (3,3% wider); Financials at 202 after 191 (5,8% wider). SovX unch at 171. Cross at 468 from 464.

Stoxx Futures at 2551 / -0,7% (from 2569) with S&P minis at 1450 (-0,4% from 1456, at European close).

VIX index at 14,3 after 13,8 yesterday same time.

Oil 92,3/109,0 (WTI/Brent) from 92,2/108,4 (+0,1%/+0,6%). Gold at 1763 after 1773 (-0,6%). Copper at 378 from 382 (-1,0%). CRB at EU COB 308,0 from 309,0 (-0,3%).

Definitively new week, new luck, new trend! Fourth positive session, with the Baltic Dry adding yet another 4.6%, fixing at 755 from 722. Question is what is shipped? Ore? iPhones? Xmas toys?

EUR 1,295 from 1,307

Greek bonds guesstimates: Everything still stable here with 2023s back to 20.50% from 20% with 2042s likewise out 25bp at 18.50%.

All levels COB 17:30 CET

Tomorrow and next week:

Running empty on data flow for the rest of the week, knowing that next week doesn’t offer much more either. German IFO on Monday. End of month data publication fatigue, so markets will run on sentiment.

Spanish bank audit due on Friday 28 Sep.

Closes auction supply for the week. 10 YRS Bunds newt Wed and long Italians to close the month next Fri to focus on. Italian and Spanish bills next Wed and Thu shouldn’t be market-rocking in the current environment.

EZ: Fri 27 M3 & Biz Climate + final Sentiment Data

GE: Mon IFO (last 102.3, Current 111.2, Expectations 94.2); Wed CPI; Thu unemployment

FR: Tue Biz Confidence; Wed unemployment

Italy: Tue Con Conf (last 86), Wage data; Wed Retail Sales (last +0.4% MoM); Thu Biz Conf (last 87.2)

Spain: Fri Mortgages; Mon PPI (last +2.6% YoY); Thu Housing Permits (last -32.6% YoY) & Retail Sales. Fri Bank audit.

US: Nothing on Friday. Mon Chicago & Dalles FED; Tue Case-Shiller Home PX, Cons Conf (last 60.6), Rich FED; Wed New Home Sales; Thu GDP revision, Pers Consumption, Durable Goods, Claims, Home Sales

Click link on title or below for today’s musical support:

No fun to hang around / Feeling that same old way

No fun to hang around / Freaked out for another day

Hat off to The Stooges (1969) for the original, but, hey nothing beats the SP cover…

http://youtu.be/xnLjy1Usnug

For the purists: The Stooges eventually covering the Sex Pistols covering The Stooges

http://youtu.be/WZYPriCxvoI

19 Sep 2012 – “ The Thrill Is Gone " (BB King, 1969)

19 Sep 2012 – “ The Thrill Is Gone " (BB King, 1969)

http://youtu.be/_XAZOSrHo-c

So Japan, too, has succumbed to the song “Gimeeee, QEeeeee, for Eterni-tyyyyyy”, announcing additional buying of JPY 10trn, propping up Japanese stocks by 1% (but closing off highs) with the rest of Asia duly following (up some 0.5%). If that was an attempt to fight the currency war as well, response was not really impressive with the JPY reacting a mere 60 pips, before giving back a third back to 79 (since Jan 2011, we had 2 peaks at 85 and 84 and 2 lows in Q4/2011 and Q1/2012 around 76. Average was 79.60. And we are up a small 2% from the latest low of about 77.20 last week). Hmmm, if that is all what JPY 10trn can buy…

US equities closed about flat on average, probably thanks to the fruit shop (Apple closed on a new high, up 2% above $ 700). Excruciating and intolerably nerve-wracking 5-tick range in the S&P, but mostly trading between 1457 and 1459 (0.14%)… YAWN!

Light Risk On rebound with equities up 0.25-0.5%. Bunds wider by 2 (UST by 3), ahead of the 2 YRS auction. Swaps and agencies unchanged. Soft Core a little softer. Periphery on the go with the Italian curve tighter by 5 and especially 2 YRS Spain down 22 bp to 3.04%. Spanish 10 YRS down 8 to 5.78%, continuing the push away from the 6% mark. Credit about unchanged. Energy commodities still on the softer side. Metals a tick better. EUR unchanged from last night.

Usual Spanish “need to see details” comments with the EFSF naming former a IMF deputy director of the Western Hemisphere (former Spanish eco state secretary at the FM and chairman of a Spanish brokerage) as “senior adviser”. Must be a coincidence.

Not much in terms of data. EZ Construction output has improved in July to -0.3% MoM / -4.7% YoY, but with June revised lower to -0.6%.

PMI round tomorrow. With pretty much nothing on Friday and nothing either in the US

Quite a healthy German 2 YRS auction with EUR 5bn issued at 0.060% (COB was 0.076%), of which about EUR 900m retained for market interventions. Bid to cover of 2.1, best since January. Tail of 0.002cts (…). Last auction results were 0.000%, -0.060% (historic low and sole negative yield auction), +0.10% and +0.070%, respectively for Aug, Jul, Jun and May. In range.

Portuguese bill auction over target of EUR 1.75bn, split in EUR 709m 6m at 1.70% (down from 2.292% in July) and EUR 1.29bn 18m at 2.967% (down from 4.537% - in April. 12m were sold at 3.51% at the July auction). Bid to covers slightly lower, given lower yields, but still healthy at 3.1 (from 3.8) and 2.4 (from 2.6 in April). Compares to yesterday’s Spanish bill sales of 1 YRS at 2.835% and 18m at 3.072%. Nevertheless Portuguese 2 YRS still quote around 4.75% mid (compared to 3.07% for similar BONOs). Probably less reluctant than Spain to get OMT support, I’d see some value there.

Yesterday’s EIB EUR 3bn 10 YRS benchmark has come in nicely against the former Sep 2022 reference from +8 to +2.5. 

Risk Off environment obviously helpful, as for today’s KfW 5 YRS and French CADES 10 YRS deals.

Getting ready for this week’s most focused-on auction with EUR 4.5bn of Spanish new 3 YRS 3.75% Oct 2015  ES00000123P9 (COB 3.86%) and 10 YRS Jan 2022 (COB 5.67%) on the chop.

Will have as well up to EUR 8bn Sep 2014, Feb 2016 and Jul 2017 BTANs (COB 0.21%, 0.53% and 0.99%, from 0.12% in Jul and 0.86% in July in 2s and 5s).

Midday levels in unconvinced mode. Spain firm with the short end squeezed (with no obvious reason in sight).

Bunds 1,61% (-3), OBLs 0,62% (-3), BKOs 0,052% (-2,4). UST unch 1.79%

Spanish 2s down 25 bp to 3,01% and 10 YRS BONOs at 5,76% (-10). Spanish 2-10s 275bp (+15), finally steepening again.

Italian 2-10s 290bp (+5).

Equities hovering on the slightly depleted morning levels of -0.4%. Credit mixed, but about on last night’s levels.

EUR on 30-handle with commodities still on the heavy side.

Waiting for US input – then again given the excruciating lack of volatility and direction yesterday… Where’s the thrill?

Post-lunch / Pre-US open S&P announced it wouldn’t junk Spain in the near future gave risk a leg up, but didn’t have any effect on Spanish bonds, knowing that at Baa3 / BBB + / BBB / AL (from Moody’s / S&P / Fitch and DBRS, all with negative outlook) the one rating that counts is the Canadian one to keep Spain falling into a higher haircut bucket on ECB repos. At BBB+, S&P still has a couple of notches compared to Moody’s anyway and already said last month that a bailout request wouldn’t necessarily impact the rating.

US housing starts on the weaker side, after already MBA mortgage applications falling 0.2%, with 750k Permits (fcst was 767k after 746k, revised lower to 7.33k), MoM up 2.3% after -2.8%, but with Permits crawling higher to 803k (fcst 769k after 812k, revised 811k).

Afternoon titbits: In seemingly yet another attempt of making sure that Spain would rather not bail-in to a bail-out, EU SPOX stressed the strict conditionality of any aid programme. Between too much and too little German-sounding catch phrases, there ought to be a middle-ground.

Italian banks’ domestic deposits on the rise (+3.5% YoY), as are, however non-performing loans rising to 5.7% (+15% MoM. 5% a year ago) with foreign deposits down 17%, for the 13th month.

Pretty lame US start, reminiscent of yesterday. Where’s the thrill?

Final data set of the day with Existing Home Sales in Aug rising much higher than expected to 4.82m (fcst 4.56m after 4.47m), so 7.8% MoM (fcst 2% after 2.3%). Immediate reaction? Barely any. +0.20% in equities.

Claims and PMI tomorrow. Nothing on Friday.

Rest of afternoon close to home, but Risk drifting in higher in absence of negative news. European equities squeezing out a quarter percentage point.

Oil trashed another 2.5% after higher than expected inventory data, now down 7.5% from Fri evening. Metals stable.

Will mainly have to check PMI data all around tomorrow.

Bunds closed at 1,61% (-3), OBLs at 0,63% (-2) and BKOs 0,061% (-1,5). UST 1.78 (-1).

Spanish 2s closed at 3,04% (-22) and 10 YRS BONOs at 5,67% (-19). Spanish 2-10s 263bp (+3). 10 YRS spread closing in on 400-mark.

Italy riding on Spain’s tail with 10s tighter by 12bp and through 5% again (4.98%). Italian 2s back to 2.11% (-14). Italian 2-10s 287bp (+2).

Why do Spanish bonds always rally like hell AHEAD of the auctions? So often ends up in bruises. Ok, that will be tomorrow’s thrill.

New Issues still active, although in less explosive manner. After yesterday’s EIB 10 YRS, KfW and CADES split the SSA stage with the first issuing EUR 5bn 5 YRS at MS -11 (OBL +28) and the second EUR 3bn 10 YRS at MS +66 (OAT curve +18). EUR 500m 7 YRS for Land Niedersachsen at MS +5.

BHP Billiton unearthed cheap gold with EUR- and GBP double-tranchers with EUR 1.25bn 8 YRS at MS +72, EUR 750m 12 YRS at MS +112, GBP 750m 12 YRS at UKT +120 and GBP 1bn 30 YRS at UKT +115. Another EUR double-trancher was issued by Austrian Oil OMV with EUR 750m 10 YRS at MS +93 and EUR 750m 15 YRS at MS +135. Finally, Hammerson issued EUR 500m 7 YRS at MS +145.

Closing levels:

New EIB Ref Oct 2022 (came at Sep 202 + 7, is now +2.5)

10 YRS Yields: Germany 1,61% (-3); Luxembourg 1,68% (-3); Swaps 1,84% (-3); Netherlands 1,88% (-1); Finland 1,90% (+1); EU 1,98% (-3), Austria 2,14% (+1); France 2,27% (+1); EIB 2,27% (-1); EFSF 2,41% (-3); Belgium 2,64% (+2); Italy 4,98% (-12); Spain 5,67% (-19).

10 YRS Spreads: Luxembourg 7bp (unch); Swaps 23bp (unch); Netherlands 27bp (+2); Finland 29bp (+4); EU 37bp (unch); Austria 53bp (+4); France 66bp (+4); EIB 66bp (+2); EFSF 80bp (unch); Belgium 103bp (+5); Italy 337bp (-9); Spain 406bp (-16).

EUR swap curve 2-5 YRS 53bp (unch); 5-10 YRS 84bp (unch) 10-30 YRS 59bp (+2,0).

2 YRS German BKOs closed 0,061% (-1,5) and 5 YRS OBLs 0,63% (-2).

Main at 121 from 122 (0,8% tighter); Financials at 191 after 194 (1,5% tighter). SovX at 171 from 176. Cross at 464 from 471.

Stoxx Futures at 2569 / +0,3% (from 2561) with S&P minis at 1456 (+0,1% from 1454, at European close).

VIX index at 13,8 after 14,4 yesterday same time.

Oil 92,2/108,4 (WTI/Brent) from 96,5/113,6 (-4,5%/-4,6%). Gold at 1773 after 1772 (+0,1%). Copper at 382 from 381 (+0,3%). CRB at EU COB 309,0 from 314,0 (-1,6%).

Definitively new week, new luck! Third up session .BDI adding another 3.2%, after yesterday’s +5.2% and fixed up 25 ticks to 722.

EUR 1,307 from 1,306

Greek bonds guesstimates: Everything still stable here with 2023s down to 20% from 20.50% with 2042s stable at 18.25%.

All levels COB 17:30 CET

Rest of the week:

Light on data. Flash PMIs on Thursday are all expected a tick better.

The Spanish EUR 4.5bn 3 and 10 YRS auction on Thursday is rather on the mighty side. The last auctions were for EUR 3.5bn on 06 Sep, before that EUR 3.1bn on 02 Aug, just under EUR 3bn on 19 Jul and EUR 3bn on 05 Jul.

So EUR 4.5bn is chunky.

EZ: Thu Advanced PMI Comp fcst 46.6 from 46.3, Manu 45.5 from 45.1, Services 47.5 from 47.2, EZ Confidence fcst -24 after -24.6

GE: Thu PPI fcst +1.5% after 0.9% YoY, PMI Manu fcst 45.2 after 44.7, Services fcst 48.5 after 48.3

FR: Thu PMI Manu fcst 46.5 after 46, Services 49.4 after 49.2

Italy: Thu Indu Orders prior -9.4% YoY, Sales prior +2.7% YoY Spain: Fri Mortgages

US: Thu Claims fcst 375k after 382k, PMI 51.3 after 51.9, Philly Fed fcst -4.6 after -7.1, Leading Ind fcst -0.1% after +0.4%. Nothing on Friday.

China: Flash PMI (prior 47.6)

Click link on title or below for today’s musical support:

Probably one of the best versions out there, played together with Gary Moore.

http://youtu.be/_XAZOSrHo-c

18 Sep 2012 – “ Still Got The Blues " (Gary Moore, 1990)

18 Sep 2012 – “ Still Got The Blues " (Gary Moore, 1990)

http://youtu.be/lbJI1y0i1mk

Bluesy it felt, bluesy it ended. Let’s not too much delve in the sudden 5% oil flash crash of yesterday. It’s has now become commonplace that every 3 months someone spills his coffee on the keyboard, triggering algorithmic bubbles, with hindsight explanations of correlated rumours (SPR sales, in this case), leaving what’s left of flesh traders what to do next. Generally, and in absence of the next central bank stabilizer, you don’t want to catch a falling knife, so procrastinating seems a good option. US close soft, and would have been even softer, if it hadn’t been for the last 30 minutes algorithmic 0.25% rebound. Asia in the red for 0.50-1%; and hence a weaker European open, pretty much in the continuity of yesterday’s bluesy theme.

MENA and Sino-Japanese tensions still flaring.

Equities off some 0.50% and markets starting in “classical” Risk Off manner. Hadn’t had that for a while, but it’s like riding a bike, you don’t forget. You know the drill: slightly softer credit and ROff torsion in EGBs. Hard Core 1-2 tighter, long Periphery 4 wider, double that on the short end. Soft Core stable and acting as pivot.

Had down-to-earth comments from outspoken Austrian and Belgian ECB members Nowotny (Crisis to be over by 2020) and Coene (Of course markets will force Spain to seek a bail-out, if Madrid doesn’t volunteer for it soon). And oops… I still have the Blues.

Having merely caressed the 6%-mark yesterday, Spanish 10s hurdled into 6%-plus territory at the open.

Commodities soft across the board after last night’s bashing (Oil still down 3%). EUR right on the 31-handle (given that we were trading 1.26 two weeks ago, I haven’t yet seen the comments that the 8% rise from the July lows and after final QE debasement announcements would hurt European exporters, the Germans in front, but that cannot but pop-up soon).

Had now usual Spanish comments from DPM Saenz on fact and conditions checking. Pension reform (IMF pet-project) still a no-go. Spreads not Spain’s fault. Catalans should stop moaning and pay up. Nothing new, but somehow reigned in the widening. Spanish banks’ bad loans rose to 9.9% in July (from 9.4% in June) in the meantime.

The Spanish bill auction came out well and raised a little over target, without flooding, with slightly over EUR 3.5bn 1 YR paper at 2.835% (after 3.07%) and a touch over EUR 1 18m paper at 3.072% (after 3.335%). Bid-to-cover coming down on the longer tranche, which is normal given the falling yield level, although it wasn’t that much lower. 12m B/C better.

Levels spiked at 5.07% in June and 3.92% in July, respectively 5.11% and 4.24%. Home, ok, Draghi put value, 200bp from the top and 100bp since “Believe me”. A good 25bp lower since 21 Aug and ahead of the OMT clarification. Ball is now in Spain’s camp.

In any case, the auction was good for a turnaround in sentiment, if not in equities, at least in Spanish (longer) bonds. While the short end remained a little weaker than COB, 10 YRS managed to turn around from the 6.02% spike (+6), down 13bp to 5.89%.

Core EGBs still better bid on equity weakness and general shaken sentiment.

The European Investment Bank launched a new 10 YRS benchmark of EUR 3bn at MS +49 / Bund +76 / 2.38% (old ref +8, curve worth a small bp) 2.25% Oct 2022 XS0832628423.

Greece closed EUR 1.3bn (EUR 1bn auctioned, EUR 300m in comp bids) 3m at 4.31% (from prior 4.43%). Stable bill prices for Belgium, split into EUR 1.4bn 3m at -0.023% (from -0.021%) and EUR 1.5bn 0.095% (from 0.093%). EFSF for a short EUR 2bn 6m at -0.018% (after -0.018% end of Aug).

EUR 5bn German 2 YRS increase tomorrow COB 0.076% (last 0.00% on 22 Aug, after -0.6% sole negative auction and historic low on 18 Jul), as well as Portugal  EUR 1.75bn bills in 6 and 12m (last 2.29% and 3.51% mid July)

German ZEW figures were muted as some higher rebound was expected, post Central Bank announcements, with Current Sentiment down to 12.6 (from 18.2, fcst was 18) and Eco Sentiment muted to -18.2 (fcst was -20 after -25.5), the first rise in 5 months. Current at the lowest since Jul 2010. Big German depression. 5 YRS low was -93 in May 2009, peak was 92 in May 2011.

EZ Eco Sentiment did, on the other hand, rebound to -3.8 (from -21.2). Car component weak, as shown as well with the sa EZ car sales down 10.3% YoY (-5.2% from 3m average). Who needs a car with recession looming and near peak oil (in EUR terms in August).

Midday levels in ROff mode, although the Spanish discomfort waned a little.

Bunds1,64% (-4), OBLs 0,65% (-2); BKOs 0,073% (-1). Most EGBs in line, slightly wider to Bunds. EUR swap curve unchanged.

Spanish 2s 3,30% (+3), while 10s recovered to 5,91% (-5), 10 tighter from the morning high prints. Spanish 2-10s 261bp (-8). Italian 2-10s 281bp (-3) on slightly wider 2s and slightly tighter 10s. Note the decorrelation between IT & SP and Risk in general. 

Equities down 1.25%. Credit wider by 2.5% to 3.75% on Main and Financials. Crossover actually tame at +6 (+1.3%).

EUR at 1.306, having bounced slightly off 1.305 support levels. Commodities in the same sorry state they opened in Europe.

Post-lunch / Pre-US open levels all a little more upbeat, risk-wise.

Lot of noon / afternoon official chatter on the wires (Finland, Weidman, other ECB members, FED members, Greece, even the Dutch Queen) but eventually nothing highly conclusive. Had Juncker ask for Germany not to be overburdened and speaking of tough demands towards Spain, in case of support. Wasn’t that just the one thing that everyone seemed eager to avoid speaking about lately? Similar in support for Banking Union. Very German-sounding. In another German-leaning call, Portugal’s FM talked about his admiration for the German social-market economy. Uh, new trend?

US data once more on the restricted side. Q2 Current account deficit of USD 117bn better than the expected USD 125bn and down from Q1’s USD revised 134bn. 3% of GDP, down from 3.5%. Imports down 0.5%, Exports up 1.4% (How many Apple products?). 

US open -0.25% and UST at 1.79% (-5) pushing European risk back lower with the Periphery actually holding its stand.

NAHB Housing Market index at 40 (fcst 38 after 37), a 6-year high, providing a temporary solace and pushing US equities in slightly positive territory, taking Europe along.

Kept bouncing on the US closing line for the rest of the afternoon with EZ equities 1% lower (That is 2.5% lower for Milan).

Bunds closed at 1,64% (-4), OBLs at 0,65% (-2) and BKOs 0,076% (-0,7).

Spanish 2s closed at 3,26% (-1) and 10 YRS BONOs at 5,86% (-10). Spanish 2-10s 260bp (-9). Italian 2s and 10s down 5 bp to 2.25%, respectively 5.10%.

10 YRS Bunds still trading in that 1.13%-2.07% movement ( 1.49% 1.60% 1.71% points). UST 1.79%, down 4 like Bunds.

Commodities not rebounding much. Gold & Copper resilient, though.

Mixed bag of New Issues with the EIB printing EUR 3bn new 10 YRS at MS +49 and City-State Hamburg EUR 500m 10s at MS +11 for the SSA side. BPCE issued EUR 1bn long 5 YRS French covered bonds at MS +40. Corporate thirst quenched with an Anheuser Bush InBev 3-pack with EUR 750m long 4 YRS at MS +40, EUR 750m long 7 YRS at MS +60 and EUR 750m 30 YRS at MS +90. GE Capital for EUR 1bn 3 YRS at MS +67, French construction company Bouygues for EUR 700m long 10 YRS at MS +175 and Carrefour for EUR 600m 3 YRS at MS +230.

Closing levels:

10 YRS Yields: Germany 1,64% (-4); Luxembourg 1,71% (-4); Swaps 1,87% (-4); Netherlands 1,89% (-3); Finland 1,89% (-3); EU 2,01% (-2), Austria 2,13% (-3); France 2,26% (-2); EIB 2,28% (-2); EFSF 2,44% (-3); Belgium 2,62% (-3); Italy 5,10% (-5); Spain 5,86% (-10).

10 YRS Spreads: Luxembourg 7bp (+0); Swaps 23bp (unch); Netherlands 25bp (+1); Finland 25bp (+1); EU 37bp (+2); Austria 49bp (+1); France 62bp (+2); EIB 64bp (+2); EFSF 80bp (+1); Belgium 98bp (+1); Italy 346bp (-1); Spain 422bp (-6).

EUR swap curve 2-5 YRS 53bp (-2,0); 5-10 YRS 84bp (unch) 10-30 YRS 57bp (+1,0).

2 YRS German BKOs closed 0,076% (-0,7) and 5 YRS OBLs 0,65% (-2).

Main at 122 from 120 (1,7% wider); Financials at 194 after 189 (2,6% wider). SovX at 176 from 172. Cross at 471 from 469.

Stoxx Futures at 2561 / -1,0% (from 2586) with S&P minis at 1454 (-0,2% from 1457, at European close).

VIX index at 14,4 after 14,8 yesterday same time.

Oil 96,5/113,6 (WTI/Brent) from 99,3/116,2 (-2,8%/-2,2%). Gold at 1772 after 1770 (+0,1%). Copper at 381 from 381 (unch). CRB at EU COB 314,0 from 319,0 (-1,6%).

Wow! BDI has gone up a over 5.1%, hitting 697 from 663. New week, new luck! Second up session.

EUR 1,306 from 1,313 

Greek bonds guesstimates: Everything still stable here with 2023s at 20.50% and 2042s 18.25%.

All levels COB 17:30 CET

This week:

Light on data. US housing on Wed. Flash PMIs on Thursday are all expected a tick better.

The Spanish EUR 4.5bn 3 and 10 YRS auction on Thursday is rather on the mighty side. The last auctions were for EUR 3.5bn on 06 Sep, before that EUR 3.1bn on 02 Aug, just under EUR 3bn on 19 Jul and EUR 3bn on 05 Jul.

So EUR 4.5bn is chunky. Might weight further on performance until Thursday.

EZ: Wed Construction, Thu Advanced PMI Comp fcst 46.6 from 46.3, Manu 45.5 from 45.1, Services 47.5 from 47.2, EZ Confidence fcst -24 after -24.6

GE: Thu PPI fcst +1.5% after 0.9% YoY, PMI Manu fcst 45.2 after 44.7, Services fcst 48.5 after 48.3

FR: Thu PMI Manu fcst 46.5 after 46, Services 49.4 after 49.2

Italy: Thu Indu Orders prior -9.4% YoY, Sales prior +2.7% YoY Spain: Fri Mortgages

US: Wed Housing Starts fcst 767k after 746k, Build Permits fcst 796k after 811k, Home Sales fcst 4.56m after 4.47m; Claims fcst 375k after 382k, PMI 51.3 after 51.9, Philly Fed fcst -4.6 after -7.1, Leading Ind fcst -0.1% after +0.4%

Click link on title or below for today’s musical support:

RIP

http://youtu.be/lbJI1y0i1mk

The Blues Is Alright…

http://youtu.be/AuG0vySIA5s

17 Sep 2012 – “ Every Day I Have The Blues " (Memphis Slim, 1949)

17 Sep 2012 – “ Every Day I Have The Blues " (Memphis Slim, 1949)

http://youtu.be/qy_H-1J4xWs

Another week starts and not much hard data to bite one’s teeth into in the coming days.  Having had the last 2 weeks propped up by Ben and Jerry, oops, Mario, who delivered the f(l)avours that had been expected throughout the summer, markets will be in need for some concrete impulses to push further. Still, action in the coming days will mainly be dominated by sentiment, knowing that most indicators later in the week will be sentiment indicators, too, starting with ZEW tomorrow for Germany and the EZ and flash PMIs all around on Thursday. A sentimental journey, so to speak.

Probable driver still to be found with the Spanish bail-out question or Greek Troika worries. 

The Friday meetings in Cyprus didn’t yield much concrete and didn’t seem to have been a huge love fest, either. Haggling and bickering. So Banking Union is not for tomorrow at this stage.

While still positive, the US closing levels were well off highs and propped up by a quarter percentage point squeeze in the closing minutes.  Asia mainly in the red to start week. Weekend geopolitics dominated by tensions all around the ME, and spreading, as well as in Asia, and anti-austerity rallies in Southern Europe. 

Opening quotes in Europe softer on profit taking / risk aversion, although all in controlled manner.

Bunds about unchanged to a tick firmer on the shorter end. EGBs about flat. EUR swap curve a bit steeper. Periphery again off to a softer session, following the Friday slide, with bot Italian and Spanish 2s softer by 8 and the 10s by 4.

Equities about 0.5% weaker and Credit giving back a tick or two.

EUR opening in the low 31 (1.305 key level on the downside) and commodities a little below Friday levels.

For those who didn’t delve on Friday’s message, a repeat of the latest Periphery numbers: Spain Q2 debt to GDP has risen 3% to 75.9% with the regional debt to GDP up to 14.2% from 13.8% in Q1 (12.8% in Q2/2011) with Catalonia leading the pack with 22% (EUR 44bn, up 10% from a year earlier), 29% of the total regional debt.. Total regional debt now stands at over EUR150bn. Spanish Aug ECB bank borrowing rose to 389bn from 376bn. Spanish Q2 house prices down a record 14.4% YoY.

Italian July debt figures published Thursday were showing in contrast that Italian local debt had diminished 2% YoY. Break-down of the (historical second highest number after June) of the EUR 1.968bn in Italian debt (down EUR 4bn from June) in terms of maturity unsurprisingly confirms a funding shift to the short end. Debt up to 1 YR rose to EUR 525bn from EUR 501bn a year ago, 1-5 YRS at EUR 574bn from EUR 533bn and over 5 YRS down to EUR 869bn from EUR 877bn.

Funding mix is now 26.7% up to 1 year, 29.2% in 1-5 YRS and 44.2% in longer than 5s (from a year ago 26.2%, 27.9% and 45.9%). Amounts due within 5 YRS hence now EUR 1.098bn from EUR 1.034bn, 85% of that in government bills and bonds due out to 2017 EUR 937bn. EUR 148bn still to redeem in 2012, EUR 250bn in 2013, EUR 160bn in 2014 and EUR 165bn in 2015. 57% of total bonds and bills.

Spain in comparison has EUR 487bn due until 2017 included (2012 EUR 554bn, 2013 EUR 127bn, 2014 EUR 90bn, 2015 EUR 71bn, 2016 EUR 71bn, 2017 EUR 72bn. 66% of total bonds and bills).  OMG! OMT fodder?

Germany up to 5 YRS vs. total 60.1%. France 57.5%.

EGB supply limited to bills. Combined EUR 2.48bn of Dutch 3m at -0.073% (from -0.063% 2 weeks ago) and 6m at -0.013% (from -0.023%).

France sold a combined EUR 3.8bn of 3m bills at -0.012% (from -0.021% last week), EUR 1.6bn 6m at -0.004% (from -0.008%) and EUR 1.4bn 12m at 0.029% (from 0.004%). It’s forensics, but yields are creeping up here…

Another round of bills tomorrow from Spain, EUR 2bn 3m for the EFSF, EUR 1bn 3m for Greece and EUR 3.2bn 3 & 12m for Belgium.

Otherwise, we’ll only have UR 5bn German 2 YRS on Wed with further EUR 1.75bn bills in 6 and 12m, courtesy of Portugal, as well as up to EUR 8bn French 2, 4 and 5s on Thursday. So nothing highly exciting, but the Spanish auctions.

Spanish bills for EUR 4.5bn 12 and 18m, so venturing well into OMT territory, to be followed by EUR 4.5bn in new 3 and 10 YRS on Thursday. While the last 12 & 18m bill auction was already for EUR 4.5bn (EUR 3.5bn 12m at 3.07% and EUR 980m 18m at 3.335% on 21 Aug), the bond auction size is rather on the mighty side. The last auctions were for EUR 3.5bn on 06 Sep, before that EUR 3.1bn on 02 Aug, just under EUR 3bn on 19 Jul and EUR 3bn on 05 Jul. So EUR 4.5bn is chunky. Might weight further on performance until Thursday.

Greece, Spain and Ireland meeting in Italy on Friday (Portugal not invited to join the party???).

Merkel press conference, but nothing crisp (“Bleeding heart” seeing Greek hardship, but that things couldn’t be delayed, although Greece should remain in EZ etc. No comment on BuBa / Weidman splits.)

And if everyone lets go, so why not the Finns? Revised budget and deficit outlooks now show 3.4% deficit this year (after 3.3% last year) and 2.8% next year (revised from 1%). To hell with austerity… Slippery road.

Midday levels still showing some adverseness, but not necessarily a recovery of the Hard Core from the bashing of last Friday (Bund closing 14 bp wider). Discomfort essentially on Spain, wider by 10 in 10s, pushed lower by the shorter throughout the morning. So here as well, no recovery from Friday’s weakness (+20 in 2s and +16 in 10s). Outside that, not much else.

Bunds closed 1,69% (-1), OBLs 0,69% (-2); BKOs 0,089% (-1,3). UST stable on US closing levels of 1.87%.

Spanish 2s 3,20% (+13), 10s at 5,86% (+10). 2-10s 266bp (-3).

Italian 2s 2.32% (+8), 10s 5.12 (+5). Italian 2-10s 281bp (-3)

Equities stable at -0.5%. Credit 2 ticks wider. Commodities and EUR at opening levels.

Early afternoon announcement of the Spanish auction sizes and the resignation of the Region of Madrid’s president (for personal and health reasons) adding a little more to Periphery blues. Sounds obvious, but at 5.90% the 6%-handle is in near sight…, which was duly touched by mid-afternoon. That level was broken to the downside following the OMT announcement 10 days ago.

The lone US data set for the day was a strong miss, as Empire Manufacturing numbers for Sep clocked in a -10.4  (fcst -2 after -5.85) with New Orders at the lowest since Apr 2009 and new orders since Nov 2010. Then again, last month was an even bigger near 13 point miss.

Uneventful slightly negative US open, confirming the bluesy European mood. Bluesy, but not utterly depressed.

Mostly bored.

Bunds closed at 1,68% (-2), OBLs at 0,67% (-3) and BKOs 0,084% (-1,8).

Spanish 2s closed at 3,27% (+20) and 10 YRS BONOs at 5,96% (+20), having flirted with the 6% mark. Spanish 2-10s 269bp (+0). Italian 2-10s 284bp (+0) with 2s and 10s out +8bp.

Not much else. UST tighter by 3, pretty much as Bunds.

New Issue supply rather limited with Rentokil cleaning EUR 500m 7 YRS at MS +195 in a quick wipe and Iberdrola adding EUR 250m 5 YRS at MS +295 on last week’s trade (down from the initial +360 for the first tranche). Morgan Stanley raised EUR 1bn 5 YRS at MS +275.

Should see a new EIB 10 YRS EARN (euro area reference note) tomorrow. Actual ref closed 2.30% / Bund +62 / MS +40 today. Hearing mid 40s over swap initial pricing thoughts.

Shana Tova, for those concerned.

Closing levels:

10 YRS Yields: Germany 1,68% (-2); Luxembourg 1,75% (-1); Netherlands 1,92% (-2); Finland 1,92% (-2); Swaps 1,91% (-3); EU 2,03% (-3), Austria 2,16% (+1); France 2,28% (+3); EIB 2,30% (-1); EFSF 2,47% (-4); Belgium 2,65% (+4); Italy 5,15% (+8); Spain 5,96% (+20).

10 YRS Spreads: Luxembourg 7bp (+1); Netherlands 24bp (unch); Finland 24bp (unch); Swaps 23bp (-1); EU 35bp (-1); Austria 48bp (+3); France 60bp (+5); EIB 62bp (+1); EFSF 79bp (-2); Belgium 97bp (+6); Italy 347bp (+10); Spain 428bp (+22).

EUR swap curve 2-5 YRS 55bp (-1,0); 5-10 YRS 84bp (unch) 10-30 YRS 56bp (-2,0).

2 YRS German BKOs closed 0,084% (-1,8) and 5 YRS OBLs 0,67% (-3).

Main at 120 from 118 (1,7% wider); Financials at 189 after 185 (2,2% wider). SovX at 172 from 172. Cross at 469 from 460.

Stoxx Futures at 2586 / -0,2% (from 2592) with S&P minis at 1457 (-0,3% from 1461, at European close).

VIX index at 14,8 after 14,3 yesterday same time.

Oil 99,3/116,2 (WTI/Brent) from 99,5/117,1 (-0,2%/-0,7%). Gold at 1770 after 1774 (-0,2%). Copper at 381 from 384 (-0,8%). CRB at EU COB 319,0 from 320,0 (-0,3%).

Baltic Dry up 1 tick to 663, after Friday’s1 tick fall…

EUR 1,313 from 1,315

Greek bonds guesstimates: Everything stable here with 2023s at 20.50% and 2042s 18.25%.

ECB SMP unchanged at EUR 209bn

All levels COB 17:30 CET

This week:

Light on data. US housing on Wed. Flash PMIs on Thursday are all expected a tick better.

Spanish 3 and 10 YRS auction on Thursday.

EZ: Tue Sep ZEW prior -21.2, Wed Construction, Thu Advanced PMI Comp fcst 46.6 from 46.3, Manu 45.5 from 45.1, Services 47.5 from 47.2, EZ Confidence fcst -24 after -24.6

GE: Tue ZEW Current fcst 18 after 18. and Sentiment -20 after -25.5; Thu PPI fcst +1.5% after 0.9% YoY, PMI Manu fcst 45.2 after 44.7, Services fcst 48.5 after 48.3

FR: Thu PMI Manu fcst 46.5 after 46, Services 49.4 after 49.2

Italy: Thu Indu Orders prior -9.4% YoY, Sales prior +2.7% YoY Spain: Fri Mortgages

US: Tue NAHB Index fcst 38 after 37; Wed Housing Starts fcst 765k after 746k, Build Permits fcst 795k after 811k, Home Sales fcst 4.56m after 4.47m; Claims fcst 370k after 382k, PMI 51.5, Philly Fed fcst -3.3 after -7.1, Leading Ind fcst -0.1% after +0.4%

Click link on title or below for today’s musical support:

The Original. Yep, 1949…

http://youtu.be/qy_H-1J4xWs

Love BB, but he “only” copied that one…

http://youtu.be/NZpevSkpLiI