Shuffle Rewind 15-19 Oct " Lucy In The Sky with Diamonds " (The Beatles, 1967)

Shuffle Rewind 15-19 Oct " Lucy In The Sky with Diamonds " (The Beatles, 1967)
Music Link

This week in review (compared to Fri 12 Oct COB):
Click on day for related post, on title for song.

Last week was mostly boring and worth a “Sleeping Satellite” with Friday 12 Oct being "Sleepy Time Time" (Bunds 1,45% -6; Spain 5,6% -15; Stoxx 2465% -0,7%; EUR 1,294), despite Spain getting squeezed ahead of the weekend.
This week was more spaced out with bouts of pessimism followed by Spain and equities ripping higher on what one should honestly consider as being no news, at least nothing major nor new. So we’ll dedicate the week to the Fab Fours’ song, which title’s abbreviation (and associated clip) urban legends have always linked to substance abuse (confirmed since by Sir Paul). Just be careful when coming down…

Another round of Spain whip-lashing. After Friday’s pre-weekend squeeze (One never knows, the bail-out demand might just be around the corner), Monday was more down to Earth. A "Blue Monday" (Bunds 1,47% +2; Spain 5,8% +20; Stoxx 2480% +0,6%; EUR 1,294), as that bail-out demand didn’t materialize… Tuesday was the wildest day in Risk, as European equities just took off on nothing concrete in 3 stages. One of the trigger was some German mumbling about being supportive of Spain, later corrected. Still, better, higher, higher. Squeeze. "Wild Is The Wind" (Bunds 1,55% +8; Spain 5,78% -2; Stoxx 2545% +2,6%; EUR 1,304). Wednesday was a blast in Spain, as Moody’s announced it wouldn’t junk the rating (yet). Not that this was really the biggest worry around, but eventually the relief, or the addition of relief factors, triggered one of the biggest squeezes witnessed lately in BONOs. Then again, having pre-empted good news the day before, equities only enjoyed so much more improvement, but what a "Rocket Ride" (Bunds 1,63% +8; Spain 5,44% -34; Stoxx 2566% +0,8%; EUR 1,312) for Spain. Following up on this, Thursday saw for the first time in ages a “normal” Spanish auction. Just fine. Rather textbook like. Still the mood felt a little drifty for most of the day, as if floating around in a "Space Oddity" (Bunds 1,63% +0; Spain 5,32% -12; Stoxx 2575% +0,4%; EUR 1,31). Eventually another positive close for Risk, although Credit remained heavy and US closed soft. Hence Friday got off to an ok start, but a softer close. Too much "Space Truckin'" (Bunds 1,6% -3; Spain 5,35% +3; Stoxx 2536% -1,5%; EUR 1,302) just gets you dizzy. Dismal US Friday close to end the week with INDU down 1.5% (crossing 50s at 13.353), S&P 1.6% (crossing 50d at 1433.5) and NASDAQ 2.2%.

Well, a good week for Risk and a cheery week for Spain. It’s just that NOTHING really new happened to fundamentally tweak things for the better. The situation in Spain and Greece hasn’t changed. The EU summit didn’t yield a new super weapon to fight depression and the OMT remains unused, untested, untouched at this stage.

Markets building momentum on last week’s reduced volatility (no shoes dropping), in rather complacent manner, building up on Risk levels that have solely been obtained through massive Central Bank interventions and promises. As Q3 earnings are published, a reality check will need to take place between levels attained on liquidity dope (All is good!) and where to climb from here on down to earth matters like earnings and profits. Or growth…

Very defensive Core EGB action with Bunds (and UST) softer by 15bp on the week, suffering from equity and Periphery strength and recouping just so much at the end of the week to close slightly tighter than the mid-week highs.
Risk On torsion picture with other Hard Core and swaps out by about 10, France & Austria (back over 2%) slightly less (and giving back just half of last week’s tightening), Belgium just a couple after hitting historic lows in 10s at 2.32%.
EFSF best performer on the week and closing in on OAT levels (Spread down to 3 from 11 last week).

So the BIG news for Periphery paper was that Moody’s did NOT junk Spain (yet), leading to a HUGE squeeze in BONOs (-34 bp on Tuesday)(after trading off 20bp on Monday, as no Spailout had taken place), ahead of Thursday’s auction, which seemed to be just fine, balanced, non-hysterical, realistic prices near actual trading rates.

I remain wary about any change in DBRS' view on Spain, as a single notch downgrade (still well above the Big 3 raters), would kick Spanish debt in a lower ECB bucket and increase haircut by 5% on tons of LTRO ware, pulling billions in liquidity.
Big Winner of course Spain, which closed tighter by 25bp on the week, having had to recoup a 20bp trashing (out to 5.80%) on Monday. Were levels below 5.50% to hold for a while, it would certainly mark a change, as this mark was the upper range hit several times, before things went totally loose. Spread to Bunds now squarely below 400 (+375, down 40 on the week).
Italy doing fine, tagging along Spain and down 20bp on the week. Note that Italian 2s remain stubbornly stuck over 2%.

EUR swap curve steepening to 135 from 128, but some ultra-long end action starting Thursday supported both the 10 YRS area and flattened 10-30s.

Rangy and jumpy equity world: last week -2.4%, prior +3% after -4.5%... This week still up 2.9% (although nearly 2% off highs) with the US solely trading up 0.8% (at European close Fri).
Credit still on a tightening bias (maybe triggered by naked CDS regulation starting next month), after a flat prior week. Here as well, we got some volatility with regular over- and then undershooting compared to equities. Main 4% tighter, Financials even over 8%, although closing off tightest levels after Friday afternoon.

Commodities once more a relative haven of stability, mixed on the week in diminishing volatility. Overall CRB about unchanged for the third week in a row. Oil flat until Friday (WTI better, Brent worse). Gold a little fickle lately (-2%). Copper down 1%. EUR up again on the week, but off highs.

BDY trucking ahead with another 9% added.

New Issue supply was on the lighter side this week with EUR 14.4bn in 17 deals (after last week’s EUR 18bn in 22), of which nearly half courtesy of the new EFSF 5 YRS deal for EUR 5.9bn. Add another EUR 1.6bn+ for SSA and LRG issues, mainly in increases.
EUR 2.25bn for senior debt via BNPP, BPCE or Co-op UK.
EUR 1.9bn for some mixed periphery supply for Iberdrola, Abertis, UniCredit OBG (covered bonds) or Bankinter CH (covered bonds) after last week’s EUR 5.5bn. Better Periphery conditions mean as well an end to yield hunting / shopping…

On the week (compared to Fri 12 Oct COB):

10 YRS Yields: Germany 1,60% (+15); Luxembourg 1,68% (+11); Netherlands 1,82% (+12); Finland 1,84% (+13); Swaps 1,84% (+10); EU 1,93% (+6); Austria 2,02% (+7); EIB 2,14% (+3); France 2,21% (+6); EFSF 2,24% (-2); Belgium 2,40% (+3); Italy 4,77% (-20); Spain 5,35% (-25).

10 YRS Spreads: Luxembourg 8bp (-4); Netherlands 22bp (-3); Finland 24bp (-2); Swaps 24bp (-5); EU 33bp (-9); Austria 42bp (-8); EIB 54bp (-11); France 61bp (-9); EFSF 64bp (-17); Belgium 80bp (-12); Italy 317bp (-35); Spain 375bp (-40).

EUR swap curve 2-5 YRS 52bp (+6,0); 5-10 YRS 83bp (+1,0) 10-30 YRS 58bp (-2,0).
2 YRS German BKOs closed 0,112% (+7) and 5 YRS OBLs 0,63% (+13), on the week. with UST at 1,79% (+15)
Swiss 2-years flat on the week at -0.20% (unch).

Main at 122 from 127 (3,9% tighter); Financials at 163 after 178 (8,4% tighter ). Cross at 495 from 540.
SovX at 106 from 135, but will stop monitoring this one, as it is becoming rather virtual…
Stoxx Futures at 2536 / +2,9% from 2465 with S&P minis at 1438 / +0,8% from 1426, at European COB last week.
VIX index at 15,7 after 15,6 last week. Ticking higher.

Oil 91,8/112,0 (WTI/Brent) from 91,9/114,3 (-0,1%/-2,1%). Gold at 1726 after 1762 (-2,0%). Copper at 367 from 371 (-1,1%) . CRB closes 309,0 from 309,0 (unchanged).
BDY finally hurdled the 4-digit mark on Friday, up 9.1% to 1010 from 926 on the week. First time over the 1k-mark since end of July. Xmas is coming; iPhones need to be delivered… Summer rebound peak had been 1162 early July (15% away). Feb low of 647 (36% away). Sep low was 661.

EUR 1,302 after 1,294 last Friday

Greek guesstimate: Stunning. There’s such certainty that things will eventually be fixed that Greek bonds have become the hottest thing in town. Down another 100bp to 16.25% for 2023s and down even 125bp to 14.25% for 2042s over the week. New highs. Traded 19.25% and 18% 3 weeks ago. SOMEHOW.GREECE.WILL.BE.SAVED. Somehow…

All levels Friday COB 17:30 CET

Upcoming Macro Data:
Still doesn’t make for an exciting reading. European data mostly minor. Next week will see Flash PMI data all around, starting Wednesday. US Q3 figures next Friday. No noteworthy US data until Wed.
Trading will remain rather technical, subject to Periphery rumours and jitters.

GE: Fri PPI fcst +0.3% after last +0.5% MoM / +1.6% YoY, Wed Mfg PMI fcst 48 after 74.4, Services fcst 50 after 49.7, IFO Biz Climate fcst 101.6 after 101.4, Current was 110.3, Expectations 93.2
FR:  Tue Production Outlook and Biz Conf (was 90); Wed PMI Mfg prior 42.7, Services prior 45; Jobless Claims; Fri Cons Conf
Italy: Fri Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY); Wed Consumer Conf prior 86.2; Thu Retail Sales
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY); Mon Mortgages; Thu PPI; Fri Unemployment
US: Fri Home Sales // US Q3 Fri 26 Oct. Mon nothing. Tue Richmond Fed. Wed New Home Sales & FED. Thu Durable Goods, Claims & Pending Home Sales. Fri GDP & UoM Conf.

Click link under title or below for this week’s musical support:
Follow her down to a bridge by a fountain
Where rocking horse people eat marshmallow pies
Everyone smiles as you drift past the flowers
That grow so incredibly high
Just be careful when coming down…
Music Link

http://www.aviewfrommyscreens.com

19 Oct 2012 – “ Space Truckin' ” (Deep Purple, 1972)

19 Oct 2012 – “  Space Truckin' ” (Deep Purple, 1972)
Music Link

One click too far, seemingly... Soft & Tech have become the daily anvil lately. Ah, can’t remember how much the iPhone 5 was supposed to add to Q3 GDP anymore. 0.2-0.5%, or so?! US indices closed flattish negative (despite an attempt to hark back in the last hour) to plain negative for the NASDAQ on Google and AMD hangover. Asia closing the week mixed with mainly Japan and Oz slightly positive and everyone else softer, although not massively.
EU Summit yielding no big results, but then, no one seriously expected so either. Nice classical compromise on SSM (Bank Supervision): in place by next year, on paper, and effectively starting, hum, sometimes... Probably after German elections. That i,s if everyone’s behind it. And in absence of further conditions piling up.
Nothing new on Spain (“thinking”), nor Greece (“doing efforts”), who gets a pat on the back.

Sideways opening in Bunds (1.63%, unchanged) and most EGBs. EUR swap curve about unchanged.
Italy and Spain some 5 bp tighter throughout the curve with Spain within one bp of 5.25% and Italy squarely below 4.75% (4.70%). Italian 2s back on the 2%-mark.
Equities a shade lower than yesterday’s close. Credit out a tick. Commodities, probably the least volatile market these days, roughly flat. Gold has been quietly drifting lower over the week, shedding 2% over time. EUR back below the 31-handle at 1.307.

No real macro feed: German PPI in line with expectations at +0.3% after +0.5% MoM, YoY headline figure a tick higher than forecast at 1.7% (after +1.6%), but tame. Italian Indu Orders sliding to -9% YoY nsa (after -4.9%), but Sales recovering to -2.6% from -5.2%. Monthly sa data +0.7% (after +2.9%) and +2.9% after +1.3%. Summer was less bleak than expected, but Q3 will seemingly make up for that, as already relayed in plenty of data sets.
Next week’s data supply non-existent to light until PMI releases on Wednesday.

No auction supply today with next week light to uninspiring as well with a EUR 4bn 10 YRS Bund reopening slated for Wednesday and Italian 2 YRS zeroes on Friday. Finland will have one of its rare auctions in 10s and 30s on Tuesday, but the combined size of EUR 1.5bn shouldn't rock things.
Italy finalized a third BTP Italia retail-placement for an impressive EUR 18bn, after EUR 7.3bn and EUR 1.7bn earlier this year, showing that Italian savers can mobilize serious cash, when enticed (2.55% Oct 2016 ILB domestic CPI).
Expect to see Spanish government-guaranteed ICO to tap the short to medium end of the curve next week and the EU in 15 YRS.
New Issue supply was otherwise on the lighter side this week with EUR 14.4bn, of which nearly half courtesy of the new EFSF 5 YRS deal for EUR 5.9bn. Add another EUR1.6bn+ for SSA and LRG issuers, mainly increases. EUR 2.25bn for senior debt via BNPP, BPCE or Co-op UK. EUR 1.9bn for some mixed periphery supply for Iberdrola, Abertis, UniCredit OBG (covered bonds) or Bankinter CH (covered bonds).

Given the above–mentioned absence of hard facts or data in the first days of the upcoming week, markets will remain totally subject to rumours, headlines, headline risks, sentiment swings and further Q3 earnings or surprises.

Markets turned heavy by mid-morning, as sentiment kicked in that nothing has really changed for the better, in reality. Equities sliding 0.75% from early morning highs. Bunds getting some traction and Periphery bonds paring some of their gains. Slide morphing into Risk Off with specific reason or trigger, bare a hang-over or height dizziness after the nearly 5% drive upwards this week.

Cool to have all involved parties of last night’s EU party reappearing on the tickers right after 12 CET and stating that they all obtained / defended whatever they wanted (Merkel, Rajoy, Hollande, Barnier, later Monti…), which supports the idea that nothing has really advanced yesterday.
And, yes, any bailout demand by Spain will be taken in its best interest, but not yet… We certainly wouldn’t like to miss THAT information on a daily basis. That Spain doesn’t feel under pressure at actual levels is certainly less a result of an impressive turn-around in market sentiment, but of the (virtual) support provided by others.
As for the start of SSM, pay-outs to Greece are either a must or a (whished-for) possibility, depending on speaker (…). Oh, and with regards to the bank recap possibilities, everyone feels a winner, too. It’s just that the Germans categorically dismiss the idea. For Merkel, there won’t be any retroactive direct bank recap. Basta. And to make sure things won’t get rushed, there needs to be a resolution solution in place before that.
So much complacency…
Mid-day levels in ROff manner with the Periphery paring most morning gains and some flight into EGBs.
Bunds 1,61% (-2), OBLs 0,63% (-1), BKOs 0,106% (unch). UST 1,80% (-1)
Spanish 2s 2,71% (+3) and 10s at 5,32% (unch). Spanish 2-10s 260bp (-5).
Italian 2s 2,07% (+1) and 10s at 4,74% (-2). Italian 2-10s 267bp (-4).
Equities down about 1%. Credit unchanged.
Commodities about unchanged, although Copper futures on the slide. EUR 1.305

Balearic Islands to demand EUR 355m funding and, to round it up, Asturias, too, needs some EUR 262m, joining Catalonia, Andalucia, Valencia, Castilla-La-Mancha, the Canary Island and Murcia. Demand to the regional fund now at EUR 16.7bn (from earmarked EUR 18bn), Valencia has been attributed EUR 2.5bn from its initial EUR 3.5-4.5bn. Coincidental timing? Deputy PM Saenz on the tickers stating the need to check whether that fund should be extended (Again with the Lottery taking a loan with Spanish banks and the rest funded by a “private placement” of Spanish bonds with Spanish banks???? Talk of a never-ending loop here…).

US cash open 0.5% in the red and softening further. Sole eco numbers for the US with Existing Homes sales as expected at 4.75m (fcst 4.75m after 4.82m, revised 4.83m), -1.7% (fcst -1.6% MoM after +7.8%, rev.+8.1%), ahead of next week’s New Home Sales (for all that explosive construction needs to be sold at some stage). Non-event. Should have been a square beat to turn around the opening mood. Weighting further on European Risk with Credit drifting wider in the afternoon, having remained put until noon.

Risk Off close, certainly in equities and Credit and some profit taking in the Periphery to close the week.

Interesting to see Core EGBs’ only muted reaction to the fading Risk sentiment, though (Bunds and UST still +15 on the week).
Note as well Italian 2 YRS keep on failing to break lower than 2%.
Bunds closed at 1,60% (-3), OBLs at 0,63% (-1) and BKOs 0,112% (+0,5) with UST at 1,79% (-2)
Spanish 2s at 2,71% (+3), 10s at 5,35% (+3). Spanish 2-10s 264bp (-1).
Italian 2s at 2,07% (+1), 10s at 4,77% (+1). Italian 2-10s 270bp (-1).
Commodities still drifting, mainly sideways with a slight negative bias. Copper outlier and weak today (-1.9%). EUR volatility, as in the case of Cored EGBs, certainly restricted and the softer close  at 1.302 seems tame, given the ambient mood.

Take-away: Spacy week, though… Song pick of yesterday’s said it all. Somehow, things have spun out of control and the rocket started stalling and then drifting into the void… Poor Major Tom left the capsule too early.
Regional elections in Spain over the weekend in Galicia and the Basque Country. As Rajoy denies there’s any pressure to seek help, BONOs slide. Damned if you don’t; damned if you do…

Well, a good week for Risk nevertheless and a cheery week for Spain, although the week on week tightening was “only” of 25bp, as Wednesday’s squeeze (-34bp) had to correct Monday’s slide (+20bp)… It’s just that NOTHING really new happened to fundamentally tweak things for the better. The situation in Spain and Greece hasn’t changed. The EU summit didn’t yield a new super weapon to fight depression and the OMT remains unused, untested, untouched at this stage. Markets building momentum on last week’s reduced volatility (no shoes dropping), in rather complacent manner, building up on Risk Levels that have solely been obtained through massive Central Bank interventions and promises.
As Q3 earnings are published, a reality check will need to take place between levels attained on liquidity dope (All is good!) and where to climb from here on down to earth matters like earnings and profits. Or growth…

Outlook for Monday? Mood-driven, depending on tonight’s US close (50d average at 13354 and 1434), market players’ weekend quality in total absence of data and eventually Spanish regional elections.

New Issues reduced to a EUR 500m Sep 2025 increase by the EIB at MS +43. Had as well a EUR 600m Collectivités Territoriales de France (Joint French local authorities’ bundling project, but with disparate rating and no joint-liabilities or cross-guarantees) 10 YRS at MS +245, some 208bp over the French OAT put on track.

Don’t miss the Shuffle Rewind over the weekend.

Closing levels:
10 YRS Yields: Germany 1,60% (-3); Luxembourg 1,68% (-1); Netherlands 1,82% (-3); Finland 1,84% (-3); Swaps 1,84% (-1); EU 1,93% (-2), Austria 2,02% (-1); EIB 2,14% (-2); France 2,21% (-3); EFSF 2,24% (-2); Belgium 2,40% (+0); Italy 4,77% (+1); Spain 5,35% (+3).

10 YRS Spreads: Luxembourg 8bp (+2); Netherlands 22bp (unch); Finland 24bp (unch); Swaps 24bp (+2); EU 33bp (+1); Austria 42bp (+2); EIB 54bp (+1); France 61bp (+0); EFSF 64bp (+1); Belgium 80bp (+3); Italy 317bp (+4); Spain 375bp (+6).

EUR swap curve 2-5 YRS 52bp (unch); 5-10 YRS 83bp (+1,0) 10-30 YRS 58bp (-2,0).
2 YRS German BKOs closed 0,112% (+0,5) and 5 YRS OBLs 0,63% (-1).

Main at 122 from 118 (3,4% wider); Financials at 163 after 158 (3,2% wider). SovX at 106 (-2). Cross at 495 (+7).
Stoxx Futures at 2536 / -1,5% (from 2575) with S&P minis at 1438 (-1,2% from 1455, at European close).
VIX index at 15,7 after 15,1 yesterday same time.

Oil 91,8/112,0 (WTI/Brent) from 91,7/112,6 (+0,1%/-0,5%). Gold at 1726 after 1745 (-1,1%). Copper at 367 from 374 (-1,9%). CRB at EU COB 309,0 from 308,0 (+0,3%).
BDY stepped back yesterday to better hurdle the 4 digits today, up 2.1% to 1010 from 989. First time over the 1k-mark since end of July. Xmas is coming; iPhones need to be delivered…

EUR 1,302 from 1,310

Greek guesstimate: Stunning. There’s such certainty that things will eventually be fixed that Greek bonds have become the hottest thing in town. Down another 75bp to 16.25% for 2023s and down 50bp to 14.25% for 2042s. New highs.

All levels COB 17:30 CET

Upcoming Macro Data:
Still doesn’t make for an exciting reading. European data mostly minor. Next week will see Flash PMI data all around, starting Wednesday. US Q3 figures next Friday. No noteworthy US data until Wed.
Trading will remain rather technical, subject to Periphery rumours and jitters. Auction supply low and mostly unexciting.

GE: Wed Mfg PMI fcst 48 after 74.4, Services fcst 50 after 49.7, IFO Biz Climate fcst 101.6 after 101.4, Current was 110.3, Expectations 93.2
FR:  Tue Production Outlook and Biz Conf (was 90); Wed PMI Mfg prior 42.7, Services prior 45; Jobless Claims; Fri Cons Conf
Italy: Wed Consumer Conf prior 86.2; Thu Retail Sales
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY); Mon Mortgages; Thu PPI; Fri Unemployment
US: Mon nothing. Tue Richmond Fed. Wed New Home Sales & FED. Thu Durable Goods, Claims & Pending Home Sales. Fri GDP & UoM Conf.

Click link under title or below for today’s musical support:
Yep, it’s entertaining criss-crossing the universe… 

The answer is out there, somewhere, and is 42.
Music Link

http://www.aviewfrommyscreens.com

18 Oct 2012 – “ Space Oddity (Major Tom) ” (David Bowie, 1969)

18 Oct 2012 – “ Space Oddity (Major Tom) ” (David Bowie, 1969)
Music Link

No follow-up traction to the upside in the US, essentially because IBM weighted down indices with INDU closing just about flat, as did the NASDAQ, and the S&P eking out 0.4%. Had a noon dip in the US, which was neatly recovered, and the US closed near their highs.
Cyprus buried by S&P, lowered to B with negative watch from BB. Bailout #6 lining up and probably to be discussed as side-subject during the EU summit, which was stressed not to be an EZ (easy?) summit.
Other less palatable news of further strikes in the Periphery; the Greece situation remains totally unclear (although the basic assumption is that it won’t be let down)(then again, it might be a page taken from Mariano’s play book: just keep dragging things until somehow support is propped up by fed-up peers), as well as pre-pitches from all EU players with regards to their (high) expectations (from others). So, as things seem so settled these days, everyone’s back to his own agenda. Had S&P following-up on its sovereign rating action and downgrading Spanish regions and Cities (Barcelona & Madrid BBB-; Andalusia, Aragon, Canaries, Galicia, Madrid all BBB-. All with negative outlook. Special-status regions Basque Country, Navarra and Bizkaia BBB+, negative).
Chinese data well-telegraphed in advance, but still a hint better than expected (good for a +1.5% average close) with 3Q GDP slowing to 7.4% (from 7.6%) YoY, QoQ slightly better at +2.2% (fcst +2% after +1.8%, revised +2%). GDP slowest since Q1/2009. Sep Industrial Production rising to +9.2% (fcst +9% after 8.9%) and Retail Sales at +14.2% (fcst +13.2% unchanged). Biz Climate dipping for the 6th consecutive month to 122.8 (late high was 138 in Dec 2011), Q3/2011 levels. Controlled slow down, obviously.

Ok, taking a breather. Pre-market more buoyant, but morning quotes after cash open slightly more defensive, although Bunds eventually quoted unchanged after ticking up 40cts from Eurex open and equities just slightly negative (with EStoxx dipping 20 ticks from early pre-open levels).
Bunds 1.63% (UST still lagging at 1.80%). EGBs flat. Periphery giving back some of yesterday’s gains (Italy 17 tighter, Spain double that and 34 tighter) with Italy at 4.79% (316 to Bunds, +3) and Spain at 5.49% (386 to Bunds, +5), ahead of the morning’s BONO auction. EUR swap curve flat, after yesterday’s steepening move.
EUR slightly lower, just under 1.31. Commodities roughly flat.

Ongoing live testing of Spain’s stress scenarios (and future viability of the bad bank): Bad loans rising 3% to EUR 178.6bn in August (10.5% of outstanding, from 10.1%). Lending down 1.1% MoM, 5% YoY.
Dutch Consumer Conf down to -32 (fcst -27 after -29), back to Summer levels. No further noteworthy macro data.

Spain’s auction at tightest levels in 6 months totalling EUR 4.6bn (announced was EUR 4.5bn, but the Tesoro restricted itself on over-allocating) pretty evenly split in EUR 1.64bn 4.000% Jul 2015 at 3.227% (COB 3.19% & 3.26% ahead of the auction), EUR 1.46bn 4.250% Oct 2016 at 3.977% (COB 3.95%; pre-auction 4.01%) and EUR 1.51bn 10 YRS 5.85% Jan 2022 at 5.458% (COB 5.44%; pre-auction 5.475%). Limited tails of 2-3bp compared to earlier auctions. Bid to cover ratios not overly exciting and falling, but then again so are the yields.
Wow! A “normal” auction!!! No wild overbidding. No wild overselling. Prices in line with “spot reality”. Obviously levels lower from previous auctions as 10s were sold at 5.666% a month ago, so that’s 20bp lower. Normality kicking in.
Then again, is that all?
French supply totalling for just under EUR 8bn with EUR 1bn BTAN Sep 2014 at 0.19% (COB 0.19%, pre-auction 0.20%), EUR 1.45bn Jul 2015 at 0.34% (COB 0.345%; pre-auction 0.35%), EUR 795m Jul 2016 at 0.61% (COB 0.605%; pre-auction 0.61%) and EUR 4.7bn Jul 2017 at 0.92% (COB 0.93%; pre-auction 0.93%). Good B/C. Limited tails. Non-event. Had as well EUR 2.1bn new OATi 0.1% 2021 (ILB) sold at -0.04% (vs. interpolated nominal of 1.96%, hence 2.00% break-even).
EUR 500m Irish 3m bills at unchanged 0.70% (last 0.70% in Sep): a bargain for Ireland compared to Italy (0.765%), Spain (1.20%) or Portugal (1.37%).

Some post-auction relief in Spain with 10s snapping nearly 10 bp tighter, putting all auction paper 7bp in the money. Well. Nice. Bueno.

Not much going on over lunch outside Periphery drifting a little wider and equities a touch lower. Hard and Soft Core EGBs turning back flat to yesterday’s close from a little softer at open.
Bunds 1,63% (unch), OBLs 0,64% (+1), BKOs 0,103% (+0,8). UST 1,81% (+3)
Spanish 2s 2,73% (-1), 10s at 5,38% (-6). Spanish 2-10s 265bp (-5).
Italian 2s at 2,11% (+13), 10s at 4,78% (+2). Italian 2-10s 266bp (-12).
Commodities drifting sideways, as is the EUR just above / on 1.31.

Pre-EU summit claims confirm that this won’t be a smooth ride with Hollande going for “Summit Decision is about Banking Union”, which is certainly not as such on the agenda of both the non-EZ as well as the less troubled Hard Core nations. Would look like a Good Cop / Bad Cop act, if it wasn’t clear that the players actually mean what they are saying.

US Claims headlines disappointing after the latest series of positive news, clocking in at 388K (fcst 365k after 339k, revised 342k), with Continuous claims split at better 3252k (fcst 3275k after 3273k, revised higher to 3281k).
Leading to a bit of Risk Off in equities (after a 4% rise since Friday), as well as in Credit.

Spanish House prices still sliding at -2.4% for Q3, after -2.5% in Q2. Slightly better than expected, but still down 9.3% YoY.

Further mixed figures with Philly Fed at 5.7 beating consensus at +1 after -1.9 (all these FED data sets seem to be surprising either way these days) and Leading Indicators looking good at +0.6% vs. +0.2% fcst, but with prior data revised lower to -0.4% from -0.1%. About neutral.

Sideways to slightly negative US cash open. Mood stalling? Air too thin up here?

Slightly better Risk close, as soon as INDU ticked back to unchanged, but with Credit decoupling from equities and Spanish relief and trading on the heavier side. Upcoming CDS naked-short regulation kicking in 01 Nov, coupled with the last days squeeze might have taken a toll open protection buyers and triggered stops. On the Core front it seems that some extra-long buying supported EGBs overall and flattened the curves. Another good Spanish close, Italy treading water, though, and mostly heavy on the short end throughout the day with no notable news (Position unwinding against Spain, maybe?).
Bunds closed at 1,63% (unch), OBLs at 0,64% (+1) and BKOs 0,106% (+1,1) with UST at 1,81% (+3)
Spanish 2s at 2,68% (-6), 10s at 5,32% (-12). Spanish 2-10s 265bp (-5).
Italian 2s at 2,06% (+8), 10s at 4,76% (unch). Italian 2-10s 271bp (-7).
Commodities drifting with a negative bias. On the heavier side, but nothing outrageous.

Take-away of today: The first “decent” Spanish auction in ages, decent being just normal, if not even boring. While this is certainly not the end of the crisis, as hailed here and there and certainly more until tomorrow evening, it certainly is a change from the hysterical and bi-polar attitude experienced this year.
Give me that for 3 months and then we’ll talk about calm, but as Spanish yields tumbled 34bp yesterday, after some sideways movement on Tue, a 20bp widening on Mon after sliding 15 on Friday – and the whole thing without notable advances on or application of bail-outs, OMT or other crutches, just some mental hypnosis trick “All will be well! Believe me…", I’d like to remain on the cautious side.

Microsoft and AMD figures later. Tomorrow will be minor on data, once more. German PPI fcst +0.3% after +0.5%. Italian Indu Orders and Sales (last -4.9% and -5.3% YoY nsa). Sole US number will be Existing Homes sales fcst 4.74m after 4.82m, -1.8% MoM after +7.8%, ahead of next week’s New Home Sales (for all that explosive construction).
Ahead of the 25th anniversary of the class of ’87 crash: 22.6% would be over 3.000 points and take us down to 10,492. But that’s just my fingers playing wild on the HP12.

Raise a glass on today’s initially sole EUR New Issue: Campari EUR 400m 7 YRS at MS +325. Early announcements were for EUR 350m up to 25bp wider. Investor Thirst. 7 YRS Italy around MS +260. Had BankInter later selling EUR 500m 3 YRS CH (Spanish mortgage-backed covered bonds) at MS +335 (Spain 3 YRS curve MS +250) and the EIB increasing a March 2018 deal by EUR 650m at MS -1. Low traffic week.

Closing levels:
10 YRS Yields: Germany 1,63% (unch); Luxembourg 1,69% (-2); Netherlands 1,85% (unch); Finland 1,87% (unch); Swaps 1,85% (-3); EU 1,95% (-2), Austria 2,03% (-1); EIB 2,16% (-3); France 2,24% (-1); EFSF 2,26% (-2); Belgium 2,40% (-1); Italy 4,76% (unch); Spain 5,32% (-12).

10 YRS Spreads: Luxembourg 6bp (-2); Netherlands 22bp (unch); Finland 24bp (+0); Swaps 22bp (-3); EU 32bp (-2); Austria 40bp (-1); EIB 53bp (-3); France 61bp (-1); EFSF 63bp (-2); Belgium 77bp (-1); Italy 313bp (unch); Spain 369bp (-12).

EUR swap curve 2-5 YRS 52bp (unch); 5-10 YRS 82bp (-2,0) 10-30 YRS 60bp (-2,0).
2 YRS German BKOs closed 0,106% (+1,1) and 5 YRS OBLs 0,64% (+1).

Main at 118 from 116 (1,7% wider); Financials at 158 after 153 (3,3% wider). SovX at 108 (+2). Cross at 482 (+7).
Stoxx Futures at 2575 / +0,4% (from 2566) with S&P minis at 1455 (unchanged, at European close).
VIX index at 15,1 unchanged from yesterday same time.

Oil 91,7/112,6 (WTI/Brent) from 91,8/113,1 (-0,1%/-0,5%). Gold at 1745 after 1751 (-0,4%). Copper at 374 from 374 (unch). CRB at EU COB 308,0 from 306,0 (+0,7%).
BDY stopped by the 4th digit, fixing down 1% to 989 after 999.

EUR 1,310 from 1,312

Greek guesstimate: 25bp tighter in belated tightening on underlying hope that someone will manage to muddle through the discussions. 17.00% and 14.75% for 2023s and 2042s. Post-PSI digestion highs.

All levels COB 17:30 CET

Upcoming Macro Data:
Still doesn’t make for an exciting reading. European data mostly minor. Next week will see Flash PMI data all around, starting Wednesday. US Q3 figures next Friday. No noteworthy US data until Wed.
Trading will remain rather technical, subject to Periphery rumours and jitters.

GE: Fri PPI fcst +0.3% after last +0.5% MoM / +1.6% YoY, Wed Mfg PMI fcst 48 after 74.4, Services fcst 50 after 49.7, IFO Biz Climate fcst 101.6 after 101.4, Current was 110.3, Expectations 93.2
FR:  Tue Production Outlook and Biz Conf (was 90); Wed PMI Mfg prior 42.7, Services prior 45; Jobless Claims; Fri Cons Conf
Italy: Fri Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY); Wed Consumer Conf prior 86.2; Thu Retail Sales
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY); Mon Mortgages; Thu PPI; Fri Unemployment
US: Fri Home Sales // US Q3 Fri 26 Oct. Mon nothing. Tue Richmond Fed. Wed New Home Sales & FED. Thu Durable Goods, Claims & Pending Home Sales. Fri GDP & UoM Conf.

Click link under title or below for today’s musical support:
This is ground control to major Tom, you've really made the grade
And the papers want to know whose shirts you wear
Now it's time to leave the capsule if you dare
Music Link

http://www.aviewfrommyscreens.com

17 Oct 2012 – “ Rocket Ride ” (Ace Frehley / KISS, 1977)

17 Oct 2012 – “ Rocket Ride ” (Ace Frehley / KISS, 1977)
Music Link

Lift Off, we had a Lift Off! Finally US stocks managed to escape gravity yesterday and kept the stance after European close, which hadn’t happen for a while. Monday’s bounce off the 50d average helped and the first round of earnings yesterday noon, coupled with the European relief rally (regardless  whether the reality of the relief was actually factual or not at that time). Healthy +1% close, although IBM and Intel results and especially outlook disappointing after-markets. INDU trying, but failing to take out the latest highs of 05 Oct, though. Need to watch 13.550-13.600 area. Same for S&P with 50d average now at 1430.
Overnight news coming from Moody’s NOT junking Spain at this stage with Baa3 re-affirmed with a negative outlook (from negative watch). Greek haggling with the Troika still very unclear, depending on who talks last. Obviously blocking points still seen in Labour law reforms, a problem seemingly belittled by the parties in place, but obviously a growing tension source within the Greek government coalition.
Asian close most positive in Japan (+1% on yet another stimulus programme), but less stellar elsewhere with China still lying low with a marginally positive close (Big Chinese data dump tonight).

Still there comes a time when the actually relief yields to the nagging question “What’s next? For real?”. Hence opening quotes that might seem less stellar than expected, at least on equities, which had already discounted quite some good news yesterday. Equities slightly higher but less than 0.50% half an hour into the cash session. EGBs still under flight out of quality pressure with the Periphery lurching better on Moody’s Spain verdict.
Bunds out +3 to 1.58%, about in line wit UST at 1.74% (+2). Spanish curve tighter by 25bp, Italy by about 10bp; both with only marginal curve movements. EUR swap curve only marginally steeper. Credit again squeezing tighter with Main down 3 (2.5%) and Financials an impressive 8 (4.7%). EUR hitting the 1.31-mark (from 1.304 at COB). Commodities about where left yesterday evening. Somehow an uneven picture. Still, Risk On. Lift Off, we had a Lift Off! But where to???
Had some light back and forth on attained levels, but by and large opening quotes confirmed, even improved in the case of Spain with 10s hitting 5.50% for the first time since Q2/2012. Spanish 2s now well though 3%. Italy around 4.80% in 10s and 2s flirting with 2%. All is good. Credit still ripping higher.

No hard data with exception of the EZ Construction Output (for August) rising 0.7% MoM (down 5.5% YoY (after revised +0.1% MoM/ -6.2% YoY from -0.3% MoM sa / -4.7% YoY). Ok, that won’t boost European economy.
Talking about car woes yesterday, it looks like Banque PSA, the financing offshoot of Peugeot Citroën is getting under pressure.

German 2 YRS auction easily absorbed with EUR 5bn issued at 0.07% (COB 0.076%), of which EUR 800m retained for market intervention. Traded softer at open and just slightly wider ahead of the auction. Up from +0.06% in Sep, 0.000% in August and, drum roll, -0.06% in July auctions. Healthy bidding size-wise with an ok 2.0 bid-to-cover. Could have been worse given thet Risk On environment…
Good timing for Portuguese bills with EUR 250m 3m at 1.37%, EUR 830m 6m at 1.84%, EUR 770m 12m at 2.10%. Latest auction were 6m at 1.70% and 18m at 2.97% on 19 Sep. Interestingly plenty of bids (BC 6 and 12m 2.5 and 2.8, 3m 8.1), but not the maximum size in allocation with 3m bills especially skimpy. Bad prices?
Yesterday’s new 5 YRS EFSF now at MS +18 (from launch at +23). Good performance. Felt it was generous with FV around +17. Then again, great books (Asia 30%, Central Banks / SWF 43%).
Well, looking forward now to Spain’s auction at these tight levels tomorrow with up to EUR 4.5bn in 4.000% Jul 2015 (COB 3.19%), 4.250% Oct 2016 (COB 3.95%) and the 10 YRS 5.85% Jan 2022 (COB 5.44%). Wouldn’t be surprised that given attained levels, the Tesoro falls back to its bad habit of overshooting the auction size, if bids are fine. Whatever the outcome, results will show a marked improvement (just to pre-empt the headlines about falling funding costs).
Will have as well up to EUR 8bn BTAN Sep 2014 (COB 0.19%), Jul 2015 (COB 0.345%), Jul 2016 (COB 0.605%) and Jul 2017 (COB 0.93%), next to EUR 500m in Irish 3m bills (last 0.70% in Sep).

Interesting late morning press conferences / interview pre-releases criss-crossing (no shouting match yet) between Hollande, Schaueble and other German government officials ahead of the next 2 days' meetings: black, white; left, right; austerity, growth; up, down; integration, support; conditions, understanding - especially as BBG spit out the news in alternating sentences. Very funny read.
For Hollande, all is good, the end (of the crisis) is nigh. Spain needs to know OMT conditions, while up to the Germans, they depend of Spain’s assessment of assistance needs. German mantra on its understanding that bank recaps won’t be possible before banking union, which is not tomorrow’s business. Let’s say 2014. Interesting view of Hollande favouring a multi-speed Europe, debt pooling anyway and that EZ interest rates should be “harmonized”, which is a fall-back to traditional French state intervention doctrines and market control phantasms, cherished since Colbert (1619-1683, so they’ve been around for a while…). Germany’s integration first, sharing later versus sharing now for later bonding. Oh, and suddenly no one expects anything to be said or done about Greece in the coming days…
That summit will be tense and will probably not yield much.

German government economic outlook update with 2012 growth ticked up to 0.8% (from 0.7%), but with 2013 cut to a mere 1% (from 1.6%) on lowered export growth outlook (+4.4% after 5%).

If that is not “All is Good!”, tell me what it could be. Mid-day print in Risk On mode: Equities up 0.7%, but by far not leading anymore. Main down 5 ticks (4%) and Financials 14 ticks (8% tighter).
Spain crawling toward a 30 bp rally (over 200 price ticks), although most achieved at morning open. Hard Core heavy, Soft Core a a tick better. Curve movement limited. Which makes me tick a bit. This not (yet) a massive flight out of safe haven. Feels more like lightening upor unwinding spreads.
Bunds 1,60% (+5), OBLs 0,60% (+3), BKOs 0,082% (+0,6). UST 1,76% (+4)
Spanish 2s 2,79% (-30) and 10s at 5,49% (-29). Spanish 2-10s 270bp (+1). 10 YRS Bund spread crashing through 400 with no break.
Italian 2s 2,04% (-6) and 10s 4,81% (-12). Italian 2-10s 277bp (-6).
Commodities unchanged, when comparing with the rest. EUR 1.312.

Too much good news seemingly discounted as strong Sep US housing figures only had only a moderate impact: Housing starts up 872k (fcst 770k after 750k, revised 758k) and Building Permits  hitting 894k (fcst 810k after slightly revised 801k). MoM surges of 15%, respectively 11.6%. All is good?
US cash open around -0.3% refreshing the upbeat spirit and weighting a little on European equities, but some recovery with IBM and INTEL surviving initial plunges (Big Blue into the Deep Blue. Yes, I know that’s an easy one).

Afternoon bits on developing Cyprus bail-out (Cail-out?), Spain confirming that it still hasn’t agreed to anything (...) and Finland pushing the Schaueble idea that ESM lite / OMT  / credit line doesn’t count as real bail-out. Whatever, the coming EU summit will be interesting, given the disparity of views. Combining all that maybe worth a Novel prize after all…

Bunds trashed again, but remaining in its longer Mar-Jul trading range (1.13%-2.07% and below the mid-Sep high of 1.73%. Chart points 1.49 – 1.60 – 1.71 – 1.85).

Spain, on the contrary, if confirming the 5.50% level, is coming below what used to be the upper band when spiking out end of 2010. Similar point would be 4.75-80% for 10 YRS Italy.
Credit spreads crushed with Financials closing 10% tighter and the Main about 5%. Cross, too, 6.5% tighter and through 500.
Bunds closed at 1,63% (+8), OBLs at 0,64% (+6) and BKOs 0,095% (+1,9) with UST at 1,78% (+6.)
Spanish 2s at 2,74% (-35), 10s at 5,44% (-34). Spanish 2-10s 270bp (+1).
Italian 2s at 1,98% (-12), 10s at 4,76% (-17). Italian 2-10s 278bp (-5).
Commodities by and large unchanged, if not weaker (WTI -1.5%). EUR holding above 1.31, but not breaking out.

Take-away of today: European Risk remains buoyant (unlike in the US), but the question is whether Moody’s upholding Spain a tick above Junk is really worth a 30bp plus relief rally? At this stage, most SPGB owners are fully aware of the rating issue. For me the question remains rather about DBRS’ views on Spain. Any downgrade here would make LTRO stocks much heavier. But, so be it.

Post close comments that less than EUR 100bn will be used for Spain's banking bail-out. Hence, solely the EUR 60bn or so audit results?
Tomorrow, we will have a Spanish auction at the lowest levels since early April this year. Yummyyy! Chinese data dump with  Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY. US claims fcst 365k (after 339k, Continuous claims at 3275k after 3273k, Philly Fed fcst +1 after -1.9 (all these FED data sets tend to be disappointing these days) and Leading Indicators expected at +0.2% after -0.1%.

Mixed bag of New Issues with BNPP in senior for EUR 1bn 10 YRS at MS +105, Spanish concession Abertis for EUR 750 7 YRS at 4.825%, Deutsche Telecom for EUR 650m 12 YRS at MS +82, Lagardère for EUR 500m 5 YRS at MS +325, UniCredit for a EUR 250m increase of an outstanding Jan 2018 mortgage-backed OBG (Italian-law covered bond) at MS +190 and finally the German Land of NRW for a EUR 250 increase of a Apr 2016 issue at MS -6.

Closing levels:
10 YRS Yields: Germany 1,63% (+8); Luxembourg 1,71% (+7); Netherlands 1,85% (+7); Finland 1,87% (+8); Swaps 1,88% (+6); EU 1,97% (+4), Austria 2,04% (+5); EIB 2,19% (+2); France 2,25% (+5); EFSF 2,28% (+1); Belgium 2,41% (+4); Italy 4,76% (-17); Spain 5,44% (-34).

10 YRS Spreads: Luxembourg 8bp (-1); Netherlands 22bp (-1); Finland 24bp (unch); Swaps 25bp (-2); EU 34bp (-4); Austria 41bp (-3); EIB 56bp (-6); France 62bp (-3); EFSF 65bp (-7); Belgium 78bp (-4); Italy 313bp (-25); Spain 381bp (-42).

EUR swap curve 2-5 YRS 52bp (+3,0); 5-10 YRS 84bp (+1,0) 10-30 YRS 62bp (+1,0).
2 YRS German BKOs closed 0,095% (+1,9) and 5 YRS OBLs 0,64% (+6).

Main at 116 from 122 (4,9% tighter); Financials at 153 after 170 (10,0% tighter!!!). SovX at 106 (-12). Cross at 475 from 508.
Stoxx Futures at 2566 / +0,8% (from 2545) with S&P minis at 1455 (+0,6% from 1447, at European close).
VIX index at 15,1 after 14,7 yesterday same time.

Oil 91,8/113,1 (WTI/Brent) from 91,9/114,9 (-0,1%/-1,6%). Gold at 1751 after 1744 (+0,4%). Copper at 374 from 370 (+1,1%). CRB at EU COB 306,0 from 305,0 (+0,3%).
BDY unstoppable, fixing up +1.8% to a jolly 999 after 981.

EUR 1,312 from 1,304

Greek guesstimate: unchanged 17.25% and 15.00% for 2023s and 2042s, tendency heavier, though. Didn’t take part in the rally today.

All levels COB 17:30 CET

This Week’s Macro Data:
Doesn’t make for an exciting reading. European data mostly minor.
Trading will remain rather technical, subject to Periphery rumours and jitters.

GE: Fri PPI  (last +0.5% MoM)
Italy: Fri Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Thu Claims, Philly FED, Leading Ind, Fri Home Sales //  US Q3 Fri 26 Oct
China : Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Cohete Viajar. Enjoy the trip!
Music Link

http://www.aviewfrommyscreens.com

16 Oct 2012 – “ Wild Is The Wind ” (Bon Jovi, 1988)

16 Oct 2012 – “ Wild Is The Wind ” (Bon Jovi, 1988)
Music Link

Oh, yeah. For once in the last couple of days, US Risk didn’t run out of steam after the European close, but managed to close on the highs of the day, up some 0.75% on average (that is including AAPL). Asian session in similar fashion, although Japan at +1.3% an outlier with China closing just about flat, way off highs, and the rest rather in the +0.25%-0.75% range.

Still, good back drop for some cheery Risk On to call the start of the European session. US futures still green and European equities opening quotes up 1% from COB 17:30. Spain in the headlines again with S&P following-through on the sovereign rating downgrade by cutting 11 Spanish banks (BBVA BBB- neg, as the sovereign, and Santander still BBB neg). The FT running an article that finally Spain is starting to come to a conclusion of its thought process and would ask, not for immediate support, but for a back-stop line (although not immediately), as current rates are judged as being, if not comfortable per se, bearable. Hmmm… Pollo y huevo.
Car sales, a recurrent worry next to banks over the last 4 years, down 18.5% YoY in the EZ, 10.8% in Europe as a whole (Germany -10.9ù, France -17.9%, Italy -25.7%, Spain -36.8% and Greece even -48.5%). Next support monies, this way please!

Real opening quotes after cash open slightly off highs. Bunds softer by 2bp, other EGBs by 1. Italy and Spain tighter by 3 on the short end, ahead of Spain’s long bill auction in 18m, and tighter by 3-5 in 10s (after yesterday’s 20bp widening for BONOs).
Belgium still ticking tighter and tighter, as local elections have not yet transpired the usual “schism” fears (yet) and hitting historic lows at 2.32% in 10s. That is less than 20bp to France and starts to be on the expensive side with an average since Jan 2009 of some 45 and a mean of over 50. We traded over 200 less than a year ago.
Credit tighter and catching up yesterday’s lag. Equities up 0.75%. EUR flirting with the 30-handle. Oil snapped back from yesterday’s soft patch (+2% compared to the European close) with Copper, too, on the shiny side at +1.5%.

Spanish hopes eventually overdone and BONOs rapidly back to square 1 ahead of the bill auction results. The auction size beat the targeted EUR 4.5bn with EUR 4.86bn split into EUR 3.4bn 12m at 2.823% (after 2.84%) and EUR 1.4bn at 3.022% (after 3.07%). Bid to cover 2.7 and 3.0 after 2.0 and 3.6, so mixed. Some tail on the 18m with lowest bids allocated at 3.07%. Auction results without further supporting effect for Spanish bonds.
Further bill auctions out of Belgium for EUR 1.5bn 3m at -0.01% (last -0.003%) and EUR 1.6bn 12m bills at +0.072% (last +0.095%) [Total auction size slightly below the maximum target of EUR 3.2bn, because the issuer was being price sensitive, not a demand problem per se], Greece with EUR 1.25bn (+EUR 375 non-comp bids) 3m at 4.24% (last 4.31%) and finally the EFSF sold just short of EUR 2bn 6m at -0.024% (last -0.018%).
Tomorrow will see EUR 5bn in 2 YRS re-opening out of Germany (COB 0.076%. Last +0.06% in Sep after 0.00% in Aug), next to EUR 2bn in Portuguese 3, 6 and 12m bills (Latest auction were 6m at 1.70% and 18m at 2.97% on 19 Sep).
Note that Ireland has announced EUR 500m of 3m bill for Thursday and Finland one of its rare auctions with 10s and 30s on Tue 23 Oct.
New EFSF 5 YRS benchmark opening books at mid 20s area for a Nov 2017 maturity, which seems rather on the generous side (I had gather low to mid 20s for a long 5 YRS) with an outstanding curve interpolation at MS +17. With books rapidly past EUR 7bn, guidance was eventually tightened to +23-25 with pricing at MS +23 for a EUR 5.9bn benchmark (with books closing above EUR 11bn). Deal size just shy of July’s EUR 6bn 5 YRS, its biggest public deal to date.

Mid-morning data flash: Mixed ZEW sentiment data for Germany with Current Conditions at 10 failing to meet expectations of a slight decline to 11.8 after 12.6, but with Economic Sentiment at -11.5, recovering over expectations of -14.9 after -18.2. EZ sentiment at -1.4 after -3.8. EZ CPI a tick better, after French downwards revisions, with a final reading at 2.6% (1.5% Core). EZ Trade balance a little over expectations on rising exports. No real market impact.

While an utterly useless exercise at this stage, it seems that Spain will keep pushing for joint bill issuance at the EU summit later this week, as well as for Banking Union, if possible by yesterday (Spanish approach: By pooling everyone’s debt, one will end with Federalism – by default). But Angela will only take so much- and that subject is totally taboo.
In the meantime, Schaueble out to push for stronger EU budget oversight (German approach: Federalism comes before pooling debt), frontal against France & UK attitudes.

Better Risk On midday, although not roaring:
Bunds 1,49% (+2), OBLs 0,53% (+2), BKOs 0,058% (+0,8). UST 1,69% (+2)
Spanish 2s 3,16% (unch) and 10s at 5,81% (+1). Spanish 2-10s 265bp (+2).
Italian 2s 2,11% (-2) and 10s at 4,94% (-3). Italian 2-10s 283bp (-2).
Equities up a short 1% (Spain +1.5%), in line with S&P futures. Risk 3% tighter. EGB curve up to Belgium 1-2 softer. Belgium unchanged near historic lows (see above); Italy trying to tighten again and Spain slightly wider, after paring early morning gains. Commodities still better, although off highs. EUR trying to hold out above 1.30.

Risk gaining some more traction on ok Q3 earnings, but especially with German lawmaker comments confirming earlier statements that the Spanish precautionary credit line story is unfolding. Na sowas?!
Bunds spontaneously sold down 50 ticks and Bund yields out by 5bp with the reverse for Spain, 4bp tighter in the aftermath. Equities up 0.7%. Then again, conditionality is stressed. Showdown during the EU meeting?

US CPI figures for Sep stable at +0.6% MoM (fcst +0.5 after +0.6%) / +2.0% YoY (fcst +1.9% after +1.7%) with the core rate at +2% YoY (fcst +2% after +1.9%). More importantly Industrial Production rose +0.4% (fcst +0.2% after -1.2%, although revised to -1.4%) with Capacity Uitlization as foreseen at 78.3% (fcst 78.3% after 78.2%, revised lower to 78%). So the Aug 5-year drop in IP was even worse than expected initially. Finally the NAHB housing index rose to 41 (fcst 41 after 40).

Risk On ongoing with European equities up nearly 2% by mid-afternoon, Bunds +7 & Spain -7. Rotation actually against swaps and associated agency paper. Credit ripping at 4 to 5% tighter.
Healthy US open, gapping up 0.50%.
The only shadow casting is a news, although dating from noon, that Troika talks in Greece have totally broken down, with the EU and ECB reps already gone and the IMF rep leaving, too, citing “total” disagreement. Looks like the EU meeting will be a real showdown on a couple of subjects… And Merkel on the ticker to repeat (over and over and over) that shared liability (be it presented by HvR, or by the Spaniards, or by the French, or by anyone else is totally Nein! – see above). And to add up to the disappointment, the German parliamentarians who had been so understanding at the end of the morning started a serious backpedalling exercise at the end of the afternoon. ROn equities, ROff Spain.

Hmmm… Bunds getting trashed on equity buoyancy, back to 26 Sep levels, and Spailout; Spain getting a lift on the latter, but a break from Greek Troika news and German back pedalling. Spain better, but had lost 20 bp just yesterday. Equities stopping out and squeezing. Credit ripping tighter. Risk On, but not everywhere. Wild.
Bunds closed at 1,55% (+8), OBLs at 0,57% (+6) and BKOs 0,076% (+2,6) with UST at 1,72% (+5)
Spanish 2s at 3,09% (-7), 10s at 5,78% (-2). Spanish 2-10s 269bp (+6).
Italian 2s at 2,10% (-3), 10s at 4,93% (-4). Italian 2-10s 283bp (-2)
Commodities doing alright, but not stellar in the ambient risk mood. EUR up 100 pips to 1.304, but off highs.

Take-away of today: European equities once more decoupling from the EGB weight. EGBs more cautious, but hit by equities. End of week summit might become a major food fight – or not.
Will have German 2 YRS tomorrow (COB 0.076%); German government macro-outlook; EZ Construction Output (last -0.3% MoM sa in Aug). Not much concrete. US Housing starts (fcst 770k after 750k) and Building Permits (fcst 810k after revised 2k lower 801k). Nothing funky. Doubtful the second presidential debate will steer markets.

New Issue supply once more on the light side with the EFSF EUR 5.9bn Nov 2017 at MS +23 the main event. Had English Co-operative Bank issuing EUR 500m senior 3 YRS at MS +180 and German IT leaser  Grenke EUR 125m 4 YRS at 3.125% / MS +236.

Closing levels:
10 YRS Yields: Germany 1,55% (+8); Luxembourg 1,64% (+5); Netherlands 1,78% (+6); Finland 1,79% (+6); Swaps 1,82% (+6); EU 1,93% (+5), Austria 1,99% (+5); EIB 2,17% (+3); France 2,20% (+6); EFSF 2,27% (+1); Belgium 2,37% (+4); Italy 4,93% (-4); Spain 5,78% (-2).

10 YRS Spreads: Luxembourg 9bp (-3); Netherlands 23bp (-2); Finland 24bp (-2); Swaps 27bp (-2); EU 38bp (-3); Austria 44bp (-3); EIB 62bp (-5); France 65bp (-2); EFSF 72bp (-7); Belgium 82bp (-4); Italy 338bp (-12); Spain 423bp (-10).

EUR swap curve 2-5 YRS 49bp (+3,0); 5-10 YRS 83bp (+1,0) 10-30 YRS 61bp (unch).
2 YRS German BKOs closed 0,076% (+2,6) and 5 YRS OBLs 0,57% (+6).

Main at 122 from 127 (3,9% tighter); Financials at 170 after 176 (3,4% tighter). SovX at 118 (-7). Cross at 508 from 532.
Stoxx Futures at 2545 / +2,6% (from 2480) with S&P minis at 1447 (+1,4% from 1427, at European close).
VIX index at 14,7 after 16,1 yesterday same time.

Oil 91,9/114,9 (WTI/Brent) from 90,2/114,2 (+1,9%/+0,6%). Gold at 1744 after 1735 (+0,6%). Copper at 370 from 367 (+0,8%). CRB at EU COB 305,0 from 307,0 (-0,7%).

BDY unstoppable, fixing +4.3% at 981 after 941.

EUR 1,304 from 1,294

Greek guesstimate: unchanged 17.25% and 15.00% for 2023s and 2042s, tendency heavier, though.

All levels COB 17:30 CET

This Week’s Macro Data:
Doesn’t make for an exciting reading. European data mostly minor.
Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.
Auction supply with attention on Spanish 3, 4 and 10 YRS BONO auction on Thursday.
Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Wed Construction Output
GE: Fri PPI  (last +0.5% MoM)
FR: nothing
Italy: Fri Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)
Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)
US: Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales
China : Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for today’s musical support:
Wild…
Music Link

http://www.aviewfrommyscreens.com

15 Oct 2012 – “ Blue Monday ” (Nouvelle Vague, 2006)

15 Oct 2012 – “ Blue Monday ” (Nouvelle Vague, 2006)

Music Link

Once more, US Risk in sluggish manner on Friday to end the week with the S&P closing just slightly negative, bang on its 50d average at 1428 and the INDU just 10 ticks above that mark (NASDAQ through that since 05 Oct). Same trading pattern since Tuesday: Start, uptick, 0.75% slide, close. No further IMF revelations out of Tokyo. Weekend news light and scattered. Nothing concrete on Greece (due to finalize Troika negotiations by Thursday) or Spain, knowing that a November schedule for some block assistance to Greece, Cyprus and Spain seems to go its way. While the Swedish FM openly pointed out Grexit in the coming months, Germany’s Schaueble stressed that would never happen, no “Staatsbankrott” – but that Greece ought to continue to tighten its belt, ergh, to follow its path of reforms. And Banking Union for 2013 seems more and more remote.

Chinese CPI tame at +1.9%, as expected, after 2%; PPI sliding further to -3.6% (fcst was unchanged at -3.5%). Trade data showing an unexpected surge in Exports (+9.9% YoY, fcst +5.5% after +2.7%) – iPhone 5-driven? Xmas toy production? – with imports at +2.4% (fcst +2.4% after -2.6%). Foreign reserves at USD 3290bn near Feb all-time high.

Asian equities generally slightly lower, but for Japan. After testing closing levels in early future trading, a little lower, than a little higher, and in absence of major news or data, European Risk started on a positive footing: EGBs all softer, with exception of Italy on ROn trade. European equities up a small 1% compared to Friday evening. Credit roughly unchanged, though. Bunds out by 3bp to 1.48%, Spain out by 4 to 5.64%. Italy remains just below the 5% mark at 4.96%. Belgium unchanged, unharmed by the separatist vote in Antwerp. EUR unchanged at 1.294. Commodities all a little softer. Pure equity rebound.

No European data to speak off, knowing that the whole week won’t show much with regards to hard macro input.

Auction supply restricted to Dutch and French bills: EUR 1.1bn 3m at -0.037% (after -0.047%) and EUR 1bn 6m at -0.021% (after -0.013%), followed by EUR 4bn 3m BTFs at -0.023% (after -0.018%), EUR 1.2bn 6m at -0.007% (after -0.01%) and EUR 1.8bn 12m at +0.016% (after +0.018%). Uneventful.

Will have plenty of bills again tomorrow with EUR 4.5bn Spanish 12 and 18m of interest (last 2.84% and 3.07% mid Sep) as the one to follow. Further supply from Belgium EUR 3.2bn 3 and 12m bills (last -0.003% and +0.095%), Greece with EUR 1.25bn 3m (last 4.46%) and the EFSF with EUR 2bn 6m (last -0.018%).

Uneven midday picture: Equities up over 1%. Hard Core EGBs a bit softer; Soft Core a bit firmer (Austria, France and Belgium 2-4 tighter). Italy on stand-still on the positive opening levels. Spain softer by 5 on the short and 9 on the longer end (after having tightened by 15 on Friday in an empty market). Credit about unchanged, a little firmer for financials.

Bunds 1,47% (+2), OBLs 0,51% (+1), BKOs 0,047% (+0,8). UST 1,66% (+2)

Spanish 2s 3,09% (+5) and 10s 5,69% (+9). Spanish 2-10s 261bp (+5).

Italian 2s 2,09% (-4) and 10s 4,94% (-3). Italian 2-10s 285bp (+1).

Commodities unchanged from opening levels with the EUR pushing a little higher, without much force, though.

US futures up 0.5% from close, so pretty much back to European closing levels.

Split US figures to kick-off the afternoon session with Empire Mfg for Oct at -6.2 (fcst -4 after -10.4), but with Advanced Retail Sales stronger than expected at +1.1% (fcst +0.8% after +0.9%, revised to +1.2%), on “ex” basis +0.9% (fcst +0.4% after +0.1%, revised higher as well at +0.3%), putting some weight on safe haven bonds and supporting equities further, although given the advance already taken these numbers were only good for +0.1-0.2% in futures.

US cash open sluggishly positive, just on post-figure futures uptick levels of about +0.25%. European equities losing some lustre on widening Spanish bonds with 10s nearing 5.75% again, retracing Friday’s squeeze (and a Spanish equities turning negative).

Business Inventories (note that is August data) rising +0.6% (fcst +0.5% after +0.8%) with not other impact than having US equities slipping down back to closing and chart levels (INDU 50d average 13323, S&P 1429).

Greek bonds still very much en vogue and hitting levels unseen since the PSI for the 2023s falling down to 17.25% (yield-wise) and taking out 32% price-wise. 2042s at 15% in yield / over 22% in price, unseen since late March.

Never mind the fact that the Greek FM, maybe encouraged that the whole haggling of late hasn’t irritated anyone beyond means, seems to be telegraphing that numbers won’t be there for to meet Thursday’s deadline and that tranche pay-out approval would need to be agreed in emergency later this month.

European equities taking comfort from the fact that US peers didn’t break lower, but bounced off closing levels, and clinging to some gains.

Spain drifting wider and losing all of Friday’s squeeze gains (-15 to 5.60%) and back to last Tuesday’s levels of 5.80%. Short end weak, too, with 2s widening by 12bp. Italy eventually unharmed and closing unchanged, fighting off the gravity pull.

Bunds closed at 1,47% (+2), OBLs at 0,52% (+2) and BKOs 0,050% (+1,1) with UST at 1,67% (+3)

Spanish 2s at 3,16% (+12), 10s at 5,80% (+20). Spanish 2-10s 263bp (+7).

Italian 2s at 2,13% (+0), 10s at 4,97% (+0). Italian 2-10s 285bp (+1).Commodities a bit softer. EUR pretty much back to where it started.

Commodities taking a bath across the board. Oil weak, Gold weak, Copper weak. EUR unchanged.

Take-away of today: European equities trying to decouple from EGBs and US equities, trying to trade “No news is good news”. Low action day. Short term trading strategy buy Spain on weekend bail-out hopes and resell rapidly might need to be deepened. Not much to chew on eventually.

Will have German ZEW sentiment tomorrow. US CPI shouldn’t bring much news. US IP to be watched.

New Issue supply surprisingly light, given the Risk On morning, especially in equities: French strategic oil reserve manager SAGESS with EUR 700m 7 YRS at MS +50, French BPCE with EUR 750m April 2018 at MS +105 and Iberdrola increasing a Oct 2018 benchmark by EUR 400m at MS +310.

New 5 YRS EFSF deal announced, probably for delivery tomorrow. Sep 2017, launched in July at MS +50, now about MS +15. May 2019 at MS +low 30s. Long 5 YRS should probably be marketed around MS +low to mid 20s.

Closing levels:

10 YRS Yields: Germany 1,47% (+2); Luxembourg 1,59% (+2); Netherlands 1,72% (+2); Finland 1,73% (+2); Swaps 1,76% (+2); EU 1,88% (+1), Austria 1,94% (-1); EIB 2,14% (+3); France 2,14% (-1); EFSF 2,26% (unch); Belgium 2,33% (-4); Italy 4,97% (unch); Spain 5,80% (+20).

10 YRS Spreads: Luxembourg 12bp (unch); Netherlands 25bp (unch); Finland 26bp (unch); Swaps 29bp (unch); EU 41bp (-1); Austria 47bp (-3); EIB 67bp (+1); France 67bp (-3); EFSF 79bp (-2); Belgium 86bp (-6); Italy 350bp (-2); Spain 433bp (+18).

EUR swap curve 2-5 YRS 46bp (unch); 5-10 YRS 82bp (unch) 10-30 YRS 61bp (+1,0).

2 YRS German BKOs closed 0,050% (+1,1) and 5 YRS OBLs 0,52% (+2).

Main unchanged at 127; Financials at 176 after 178 (1,1% tighter). SovX at 125 (-10). Cross at 532 from 540.

Stoxx Futures at 2480 / +0,6% (from 2465) with S&P minis at 1427 (+0,1% from 1426, at European close).

VIX index at 16,1 after 15,6 yesterday same time.

Oil 90,2/114,2 (WTI/Brent) from 91,9/114,3 (-1,8%/-0,1%). Gold at 1735 after 1762 (-1,5%). Copper at 367 from 371 (-1,1%). CRB at EU COB 307,0 from 309,0 (-0,6%).

BDY still on the rise, fixing at 941 from 926 (+1.4%).

EUR 1,294 from 1,294

Greek bonds still very much en vogue and hitting levels unseen since the PSI for the 2023s falling down to 17.25% (yield-wise) (-50) and taking out 32% price-wise. 2042s at 15% in yield (-50) / over 22% in price, unseen since late March.

All levels COB 17:30 CET

This Week’s Macro Data:

Looking forward to this week's data supply doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator tomorrow. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.

Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.

Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Tue EZ CPI Final +2.7%; Wed Construction Output

GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)

FR: Pffff… Rien

Italy: Fri 19 Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)

Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)

US: Tue CPI fcst 1.9% after 1.7%, IP fcst 0.2% after -1.2%, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales

China : Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

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

Yes, I know the original is more exciting (here), but that samba mood seemed more fitting.

Music Link

http://www.aviewfrommyscreens.com

Shuffle Rewind 08-12 Oct " Sleeping Satellite " (Tasmin Archer, 1992)

Shuffle Rewind 08-12 Oct " Sleeping Satellite " (Tasmin Archer, 1992)

Music Link

On the week (compared to Fri 05 Oct COB):

Click on day for related post, on title for song.

Last week was “Good Enough for Rock ‘n Roll”, not magnificent, but good enough for some stability and ending with a 2% Friday squeeze after the NFP figures, chanting "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.

This week has been more a recurrent series of corrections of bouts of European over-optimism, essentially on US data: Monday was a rougher start, as Europe had closed in a Bull Trap and corrected its optimistic assessment of the US, swearing "Won't Get Fooled Again" (Bunds 1,47% -5; Spain 5,70% +3; Stoxx 2499% -1,0%; EUR 1,297). Tuesday saw the IMF turning quite bearish with its latest WEO, still markets seemed to cling to last weeks’ spirit that things were fixed and faced a "Wall of Denial" (Bunds 1,47% unch; Spain 5,8% +10; Stoxx 2462% -1,5%; EUR 1,288), before giving in. Then again, you can’t always have a view and Wednesday was rather directionless and for once "She Went Quietly" (Bunds 1,49% +2; Spain 5,78% -2; Stoxx 2453% -0,4%; EUR 1,290). What could have been a bad day with S&P ticking 2 notches off Spain’s rating, ahead of an Italian auction, ended with a "Jump" (Bunds 1,51% +2; Spain 5,75% -3; Stoxx 2482% +1,2%; EUR 1,293) on Thursday, as Risk managed to rebound from this week’s low, mainly as all bad news seems to have been spilled out. Friday morning saw once more Risk getting dragged off the previous day’s closing, as the US didn’t share the willingness for rebound. Some joyful Spanish bond squeeze, but Risk under pressure, despite another set of stronger confidence numbers in the US. US eventually closing flat again with the S&P right on 50d average for some quality "Sleepy Time Time" (Bunds 1,45% -6; Spain 560% +55425; Stoxx 2465% -0,7%; EUR 1,294).

Particularly light on hard data, take away from this week’s action was reduced volatility in the EGB world (unlike rather more jumpy and eventually depressed equities). After rainy weeks, better weeks, we pretty much had a rather sleepy week. Bouts of optimism, but fading equities. Still waiting for Spain to get along with a demand for assistance. OMT and QE signed, but underused, not used at all. The IMF confirming a nighty night outlook for almost everyone. Gravity forces taking US equities back to 50d average. And then?

EGBs still mainly range-bound. Germany pretty much gaining (-7 to 1.45%) what was lost last week (+8 to 1.52%), same for the Hard Core gang. Soft Core and Agencies outperforming the wings with Austria now back through 2% and France catching up. Belgium closing at historic lows in 10s at 2.37%. France, EIB and the EFSF bonds star performer of the week in 10 YRS, closing 13-14 tighter and tightening by about 7 to Bunds.

EUR swap curve flattening on equity fatigue and closing again at 128 (after widening last week from 128 to 1.33). Very long end unchanged to 10s, though. Good 5-year flight to quality move, although the week didn’t feel panicky as such.

Italy weathered the S&P downgrade of Spain rather well with a healthy 3 YRS auction, although the auction result would point out a larger sponsor rather than an overall scrambling to load up on Italian debt. But, so be it, well done. Closing below 5%, but at unchanged spread to Germany.

Spain managing to squeeze out some performance in an empty market on Friday, closing at 5.60% (-7 on the week after -24 the week before), spread to Bund however unchanged at 415.

Having closed up 3% last week, essentially on Friday with the NFP, from a 4.5% correction the weak earlier, European equities shed back pretty much everything on Monday and Tuesday, before recouping half these losses Thursday and drifting back a little on Friday and closing the week down 2.4%. Equity-fatigue, similar to the US (-2.5%).

Credit, on the other side, remains on its stability, even tightening trend. All is good. While not explosive, it is consistent and somehow reflects the diminishing volatility (Everything relative, of course) in Periphery bonds. About unchanged on the week (+/- 1), after a 7% tightening on the Main and 13% in Financials the week before. Still in line with end of Sep levels. Outpacing equities again.

Commodities once more overall flat on the week with the CRB about unchanged for the second week. Oil (+2.5-3%) roughly made good on last week’s losses, while Gold (1%) did the contrary. Copper likewise range-bound.

EUR giving back a little to the USD.

Better and more diversified New Issues activity than last week. Had slightly over EUR 18bn in 22 deals, of which EUR 5bn for KfW’s latest 7 YRS benchmark. EUR 5.5bn for Periphery issuers with Infrastructure / Utility names much sought after (EUR 2bn 2-trancher for ENEL, EUR 750m for Terna, EUR 750m for Portugal Telecom, among others). Senior financial issues with EUR 1.25bn for Intesa and EUR 1.5bn for Crédit Agricole. Allianz with EUR 1.5bn subordinated 30 YRS.

Gold goes to Nestlé for EUR 500m 4 YRS at MS+5, a mere 0.75% in yield. Probably the lowest or one of the lowest corporate coupons ever. It should be noted, though, that two transactions were pulled this week, which is rare (UniCredit Austria and Banco Popolare).

Closing levels (compared to Fri 05 Oct COB):

10 YRS Yields: Germany 1,45% (-7); Luxembourg 1,57% (-7); Netherlands 1,70% (-8); Swaps 1,74% (-6); Finland 1,71% (-10); EU 1,87% (-9); Austria 1,95% (-9); EIB 2,11% (-13); France 2,15% (-13); EFSF 2,26% (-14); Belgium 2,37% (-9); Italy 4,97% (-7); Spain 5,60% (-7).

10 YRS Spreads: Luxembourg 12bp (unch); Netherlands 25bp (-1); Swaps 29bp (+1); Finland 26bp (-3); EU 42bp (-2); Austria 50bp (-2); EIB 66bp (-6); France 70bp (-6); EFSF 81bp (-7); Belgium 92bp (-2); Italy 352bp (unch); Spain 415bp (unch).

EUR swap curve 2-5 YRS 46bp (-4,0); 5-10 YRS 82bp (-1,0) 10-30 YRS 60bp (unch).

2 YRS German BKOs closed 0,039% (-2) and 5 YRS OBLs 0,50% (-7), on the week. with UST at 1,64% (-7)

Swiss 2-years ticking tighter and tighter, step by step, -0.20% (-2).

Main at 127 from 126 (0,8% wider); Financials at 178 after 178 (unch). SovX at 135 from 138. Cross at 540 from 531.

Stoxx Futures at 2465 / -2,4% from 2525 with S&P minis at 1426 / -2,5% from 1463, at European COB last week.

VIX index at 15,6 after 14,3 last week.

Oil 91,9/114,3 (WTI/Brent) from 90,2/111,8 (+1,9%/+2,2%). Gold at 1762 after 1782 (-1,1%). Copper at 371 from 379 (-2,1%) . CRB closes 309,0 from 310,0 (-0,3%).

After last week(s 14% surge to 875, the BDY added again 51 ticks (5.8%) to close at 926. Summer rebound peak had been 1162 early July (25.5% away). Feb low of 647 (30% away). Sep low was 661.

EUR 1,294 after 1,305 last Friday

Greek bonds guesstimates: Having traded totally sideways throughout the week, Greek bonds closed on some good Friday performance with 2023s at 17.75% (-25) and 2042s even at 15.5% (-100). Traded 19.25% and 18% 2 weeks ago. SOMEHOW.GREECE.WILL.BE.SAVED. Somehow… Unlikely.

All levels Friday COB 17:30 CET

Next Week Macro Data:

Looking forward to next week doesn’t make for an exciting reading. European data mostly minor. German ZEW sentiment indicator. Chinese massive data dump on Thursday 18 Oct. US IP and housing in the widest sense.

Auction supply with attention on Spanish 18m bills next Wed and especially the 3, 4 and 10 YRS BONO auction on Thursday.

Trading will remain rather technical, subject to Periphery rumours and jitters.

EZ: Tue EZ CPI Final +2.7%; Wed Construction Output

GE: Tue ZEW (last Current 12.6, Sentiment -18.2); Fri PPI  (last +0.5% MoM)

FR: Pffff… Rien

Italy: Fri Indu Orders (last -4.9 YoY), Sales (last -5.3% YoY)

Spain: Thu Q3 House Prices (last -2.5%, QoQ, -8.3% YoY)

US: Mon Empire Manu, Retail Sales, Biz Inventories, Tue CPI, IP, Wed Housing Starts & Building Permits Thu Claims, Philly FED, Leading Ind, Fri Home Sales

China : Sat 13 Trade (fcst Exports +5.6% after 2.7%, Imports +2.4% after -2.6% YoY); Mon CPI fcst +1.9% after +2%; Thu Q3 GDP fcst +7.4% after +7.6% YoY, +2% after +1.8% QoQ, IP fcst +9% after +8.9% YoY, Retail Sales +13.2% unch YoY.

Click link under title or below for this week's musical support:

Did we fly to the moon too soon?

Did we squander the chance? In the rush of the race

The reason we chase is lost in romance

And still we try to justify the waste

For a taste of man's greatest adventure

Is that a song about Risk chasing Central Bank liquidity???

Music Link

http://www.aviewfrommyscreens.com