Shuffle Rewind 03-07 Dec
" Only When I Sleep " (The Corrs, 1997)
This week in review (compared to Fri 30
Nov COB):
Click
on day for related post, on title for song.
Following volatile and versatile weeks of
Awakening (to the Fiscal Cliff), followed by direction-less trading (in –
temporary - absence of Fiscal Cliff discussions) and then a huge rebound (All
is good!), the last week of November had been Cuddle Time. Nice and easy. A big
Hug for everyone: Bonds, Equities, Periphery, ah, Periphery bonds! Greece… Didn’t Super Mario himself say, albeit in a
different context: “We were living in a
Fairy World”. Fairies, rainbows, wonderful world… We had to put IZ on the case, for a BIG
cuddle!
"Somewhere Over The Rainbow"
(Bunds 1,38% -6; Spain
5,30% -30; Stoxx 2580 +1,1%; EUR 1,301 +50).
Europe ended
that week direction-less on its own on Friday 30 Nov with Risk still rather firmer
than not, but with equally ok bonds. Macro data remained bleak, although
expectations have been put so low lately that anything about palatable would
do. Not much in terms of FCDRE. The week ended drifting, chatting or checking. "What's Up?"
(Bunds 1,38% +1; Spain
5,3% -2; Stoxx 2580 unch; EUR 1,301 +30).
Peace & Love.
As we ended November, we started December.
Quietly. Monday 03 Dec had some Fiscal Cliff Discussion Risk Event, some Spanish
budget math. Questions on others. Bah… Things felt a bit out of touch with
reality here (equities vs. bonds). And that Greek buy-back prices looked
really, really generous. Outwordly. Then
again, best way to get rid of private ownership. After the OMT, the OPM… Obviously, other people’s money. Manufacturing
PMI painted a slightly less bleak picture, but on rock bottom levels. "Out Of Touch" (Bunds 1,41% +3; Spain 5,24% -6; Stoxx 2580 unch; EUR 1,306 +50). Same treatment for Tuesday: Lather.
Rinse. Repeat. Europe still doing about fine on its own and with an urge
to test higher risk levels, in absence of negative news. US remained more
fickle on FCDRE. If it wasn’t for a
bit of FCDRE… Tick. By. Tick. Movements. Equities high. Soft Core closing on
historic lows. "11 O’Clock Tick Tock
" (Bunds 1,39% -2; Spain 5,23% -1; Stoxx
2587 +0,3%; EUR 1,308 +20).
And a further sleepy sequel on Wednesday: Lather. Rinse. Repeat. Over and over. Europe still doing rather fine on its own and with an
urge to test higher risk levels, in absence of negative news. However, Spanish
BONOs ended feeling sad… after a botched auction. EGBs basked on a bit of
uncertainty, a repeat of reaaally
low, but better Service PMI numbers and that Spanish weakness with the Soft Core compressing
further. The US remained more nervous and
Apple got trashed. Question of Muppets getting nervous out of boredom, or what?
"Furry Happy Monsters"
(Bunds 1,35% -4; Spain 5,38% +15; Stoxx 2589
+0,1%; EUR 1,307 -10) .
Of course, Thursday had once more a strong start in Risk to
take out new 2012 highs in Equities and trying to retrade 2012 Credit
lows, too. Core EGBs remained cool, but eventually Bunga Square’s rug pulling on Monti scuttled all
that easy living by noon, weighting heavily on the Periphery and boosting Core
EGBs. Super-Mario was gloomy at his show. The equity–bond divergence was not
yet a flyer, though… The US went sideways and
Risk Watchers back to scanning European politics. The EUR fell heavily off the
carpet. "Magic Carpet Ride" (Bunds 1,29% -6; Spain 5,46% +8; Stoxx 2605 +0,6%; EUR 1,297-100) . We closed Friday
musing about the need to find other ways to kill time until Year End. Morning
highs, lunch time lows and then trailing the US. EGBs remained on the stronger
side with augurs seeing a weakening Germany and calls for lower rates putting
the EUR under pressure. Ok, Germans: Now work! Somebody has to pay the bills! "Bruttosozialprodukt"
(Bunds 1,3% +1; Spain 5,45% -1; Stoxx 2597 -0,3%; EUR 1,295 -20). NFP were
strong, hitting USTs, but not enough to persuade US equities to do more than
trade sideways.
Eventually, this was a very quiet week,
after all. If it hadn’t been for the EUR volatility, a rather botched Spanish
auction, Apple getting peeled and Bunga
Bunga politics, we would probably have trailed mostly sideways, trying to
sleepwalk into the year-end. And still, if you want to sleep tight, you seem in
need to remain long Risk AND long bonds.
Slapped
by 12 bp the week France got downgraded
(caught together, hung together) and when Risk went soaring, Bunds had already
recouped 6 bp last week and added a further 8 this week. Summer 2012 levels,
when the living was easy. Or simply back to mid-November… By and large,
range-bound and now rather at the lower end (1.13% - 2.07%, retracements at
1.35%, 1.49% and 1.60% on the upside).
Monday
+3 on Risk On to close at the week’s high of 1.41%, tightening by 2 on Tuesday,
4 on Wednesday after the Spanish auction, snapping 6 tighter on Bunga Thursday to close at 1.29% before
closing the week at 1.30%.
Note
that Schätze moved back strongly into negative territory (-9 to end at -0.080%)
with 5 YRS OBLs outperforming the wings (-11 to 0.29%).
NB:
End of July closing lows in sight for 2 YRS -0.095%, 5 YRS 0.24% and 10 YRS a
little further away at 1.17%.
Last
week was Soft Core week, this week Agency bonds were flavour of the day: EU 12 tighter,
EIB 11 tighter, EFSF 13 tighter. Welcome to the compression movement cum flight
into bonds, guys!
Soft
Core still doing ok, though, but caught between the bullets. Still, France, too, was allowed to have an auction right on
historic lows on Thursday and managed to sneak below 2% in 10 YRS. Belgium is piggy-backing, but already expensive enough
compared to France, can’t push much more on
its own. Austria overtaken by both, having had a solo escape from its Soft Core
brethren earlier. Historic lows hit on Friday close in the Soft Core and Agency
bonds. Hard Core lows were in June.
Things
were certainly less straight-line for Periphery bonds than during the previous
week, where Italy had tightened 26bp and Spain 30bp. While Monday saw a brush with 2-year yield
lows with 10 YRS hitting respectively 4.37% and 5.15%, it was difficult to
maintain that drive and while Tuesday was still about ok, although off these
lows, Wednesday’s rather unimpressive Spanish auction (less than target-size
and pretty poor prices) sent BONOs spinning 15bp wider. Bunga Bunga’s rug pulling exercise on Thursday sent Italy and Spain
spinning big time over lunch, some 15 bp higher, before recovering somewhat.
Still, damage done: Italy wider by 4 on the week (-5, -2, +3, +13 & eventually -5, after widening in the morning)
and closing 323 to Bunds (+12) and Spain wider by a quarter for a while, closing
+15 (-6, -1, +15, +8 & -2), ending at 415 to Bunds (from 392).
Italian
2s softer by 4 on the week (1.84% after 1.80%) and Spain +10 at 2.93% (from
2.83%), both closing 10 better than Friday morning wides. 2-10s flattening for
a while in Italy, before closing unchanged at 26 and steepening somewhat in
Spain (252 after 247).
The Greek bond-buy back prices were finally
disclosed on Monday. And what prices they were! The bonds went through the roof
to hit the buy-back / exchange levels. Obviously other people’s money… These
bonds closed – on a price basis – about 34.3% and 25.7% on Friday 23 Nov and
about 35.60% and 28.50% on Friday 30 Nov. Rather the bid side (then), so put
the offer maybe 1 point higher, but these prices really seem generous. And somehow
5% above the levels only 10 days earlier. No small change…. Obviously, other
people’s money… After the OMT, the OPM… Some corrections thereafter. -0.25% on
Tue (price-wise), split Wednesday (-0.75% / +0.25%). Ending the week with 2023s
at 40.75 (14.15%) and 2042s at 31.0 (11.71%), which is a nice end of the year
give-away to some astute buyers.
Buy-back price proposal: 38.1-40.1% &
30.2-32.2%
Another historic weekly low in Swaps (up to
11 YRS). 2-10s unchanged at 126, with 2-5s at 44 from 45 and 5-10s adding 1 to 82.
10-30 YRS still steepening, which strikes me as odd, again, ending at 70 (from
63). As last week (+2 to 63), I would expect X-longs to tighten in increased an
increased low-inflation cum Risk On
scenario.
2 YRS 0.310% 5 YRS 0.750% 10 YRS 1.580% 30
YRS 2.280% (all-time low was 1.81% in June on a much flatter curve).
Having
tightened up to 14% two weeks ago and drifted about unchanged last week, Credit
tried to push tighter, in line with upbeat equities.
Credit indices still seem to attempt taking
out new lows for the year (Main 112 in March, today 115 before bounce back;
Financials hitting 146 past the Oct 153 point; Cross low 462 mid Sep, 468
today). Closing another 3.5% tighter this week, on average.
Highs were respectively 208 &184 in Nov
2011 and then May 2012 in the Main, 355 & 309 for Financials and 842 &
753 for the Crossover. So we’ve come some way here, too.
European
Risk was definitively on a ramp, following the prior week’s 1.1% equity rise in
cuddly surrounding, but totally held back by US FCDRE (and some, but not much, Periphery jitters). Repeated attempt
to open higher and take out new 2012 highs have repeatedly been scuttled by
less supportive US markets and the week see-sawed higher, tick by tick, with
Monday unchanged, Tuesday up 0.3%, Wednesday 0.1% and Thursday’s winning push
to new highs (2618) and ending up 0.6%. Closing Friday down 0.3%, mainly on a weak
German outlook and especially on lacklustre US.
Volatility
rising somewhat in the US.
European
50 & 100d averages: EStoxx 2514/2476, DAX 7279/7147, CAC 3457/3437, MIB
15569/15232, IBEX 7813/7575.
US
50, 100 & 200d averages: INDU 13153/13152/12998, S&P 1418/1412/1386,
NASDAQ 3009/3023/2988 with AAPL at 602/623/601.
Uhh…
Apple… Getting peeled in Wednesday’s session. Performance over the last year has
been that outrageous that we need to crawl back in time to find some chart
points. $525-530 and then 506 (that was 3 weeks ago, thinking of it…). If we
take the low of the latest (relative) weak patch in Nov 2011 at 364 as base and
21 Sep 2012 705 high, we end with a 50% retracement at 534, a level where we
are around nowadays, then 494 and 444. 50g average at 605 catching up on 200d
at 601. Suit yourself. Rebounced from 520 at Wed's open to 569 at Fri's open, just close over $30 lower back to... that very 533.
Pogo
time in EUR/USD… Having shaken off its Risk Off banner role with the Fiscal
Cliff discussion putting event risk back into the US camp, the EUR had rocketed
260 pips two weeks ago, ending at 1.296 (from 1.27), and added another 50 pips
last week to 1.301. Chart-wise, things were pointing to mid-1.31, which was
eventually nearly, but only nearly, reached on Wednesday at 1.313, before losing
steam back to mid-1.30 and getting Bunga’ed
on Thursday (-100), falling off the Magical Carpet Ride, and further depressed by the German eco outlook and rate cut discussions at the end of the week.
Mon
+50, Tue +20, Wed -10, Thu -100, Fri -20.
Resistance
1.315-1.317 area. EUR: 50d 1.291, 100d 1.270 & 200d 1.279. Fibo retracement
(of May 2011 1.494 & Jul 2012 1.204 down-leg) at 1.273& 1.315, then
1.349 (50%).Jul 2012 to Sep rebound levels: 1.231 – 1.247 – 1.261 – 1.274 –
1.291 -1.317 .
Commodities
range-bound to softer: Oil -3% with WTI drifting to the low of a 86-89 range,
Brent 111-107. Gold, unable to break over 1750 last week, fell from 1720 down
to 1685, before rebounding past 1700 and settling there. Copper would rather
have traded the upside, especially driven by China’s rebound in the middle-of
the week, but weighted lower by its peers (+1%). CRB (-1%) representative and
ranging below the 300-mark.
After last week’s furious EUR 27.7bn (of which EUR 7bn
for an EFSF 1-year deal) in 30 deals, December started in quieter manner with
19 deals totalling EUR 14bn. Again, mixed ware, but tending rather to the safe
side with EUR 3.75bn issued in covered bond format (KBC, NAB, SG) and EUR 1.6bn
issued for German SSA names (LBank, Hessen and Schleswig-Holstein). EUR 4bn in
mainstream / household name corporates (Deutsche Post, Rio Tinto, Metro,
Auchan, Air France). Two Italian issuers, pre-Bunga
return, with Unicredit issuing 750m in senior debt and Generali EUR 1.25bn
in Tier 2 bonds. Credit Agricole adding to the 2 YRS senior FRN round (as BNPP
and BPCE in the previous week).
Outlook:
Same
on the menu: Broadly sideways, unless a shoe drops. If the sun shines, test the
upside. Fiscal Cliff uncertainty remains on the menu. Italy becoming again a
wobbly candidate for some Periphery stress. Need to see if the Greek buy-back
will take Greece off the radar screens (for a while).
Lots of sentiment data with especially the
flash PMI round on Friday to be scrutinized.
EGBs, and now all of them, very strong
alongside very tight Risk. Seems a little odd and decorrelated. Compression
movement still on-going with the Soft Core (and the Periphery, unless Bunga’ed) tightening in on Germany. Core
short end taking clues from the rate cute / negative rates discussions with
Schätze back near historic, negative lows.
On the week (compared to Fri 30 Nov
COB):
10 YRS Yields: Germany 1,30% (-8);
Luxembourg 1,38% (-11); Netherlands 1,52% (-9); Finland 1,55% (-7); EU 1,58%
(-12); Swaps 1,58% (-9); Austria 1,69% (-5); EIB 1,75% (-11); EFSF 1,86% (-13);
France 1,95% (-9); Belgium 2,09% (-7); Italy 4,53% (+4); Spain 5,45% (+15).
10 YRS Spreads: Luxembourg 8bp (-3);
Netherlands 22bp (-1); Finland 25bp (+1); EU 28bp (-4); Swaps 28bp (-1); Austria
39bp (+3); EIB 45bp (-3); EFSF 56bp (-5); France 65bp (-1); Belgium 79bp (+1);
Italy 323bp (+12); Spain 415bp (+23).
EUR swap curve 2-5 YRS 44bp (-1,0); 5-10
YRS 82bp (+1,0) 10-30 YRS 70bp (+7,0).
2
YRS German BKOs closed -0,080% (-9) and 5 YRS OBLs 0,29% (-11), on the week.
with UST at 1,62% (+1). Swiss 2 YRS down to -0.295%, after an about unchanged prior
week at -0.230%.
Main at 119 from 123 (-3,3% tighter);
Financials at 153 after 160 (-4,4% tighter); Cross at 480 from 497 (-3,4%
tighter).
Stoxx Futures at 2597 / +0,7% from 2580
with S&P minis at 1413 / +0,1% from 1412, at European COB last week.
VIX index at 16,5 after 15,8 last week.
Oil 86,2/107,0 (WTI/Brent) from 88,5/110,9
(-2,7%/-3,6%). Gold at 1701 after 1712 (-0,6%). Copper at 365 from 361 (+1,1%)
. CRB closes 296 from 299 (-1,0%).
Another
down week for the BDIY, and back through the 1000-mark, at 966 from 1086 last
week (-11%) and from the last 1104-peak 2 weeks ago.
Xmas
shipping really, really, really over? Upcoming Chinese New Year (10 Feb 2013)
an excuse? Still, one to watch for the real economy.
Intermediate
2012 high(post-Chinese New Year) was at 1165 early May after a 10-year low at
647 early Feb, before dipping to 872 in June, rising back to 1162, retesting
lows at 661 mid-Sep, re-testing highs at 1109 before sliding back to 916 in the
last down-leg
EUR 1,295 after 1,301 last Friday
Greek guesstimate:
Ending the week with 2023s at 40.75 (14.15% yield) and 2042s at 31.0 (11.71%
yield), which is a nice end of the year give-away to some astute buyers.
They closed about 34.3 and 25.7 on Friday
23 Nov and about 35.60 (16% yield) and 28.50 (12.5% yield) on Friday 30 Nov. Buy-back
price proposal: 38.1-40.1% & 30.2-32.2%. Other People’s Money…
All levels Friday COB 17:30 CET
Fast-forward
Macro and Events:
German Exports on Mon (somebody has to
grow!), ZEW Sentiment on Tue, especially flash PMI releases on Fri 14
everywhere. For the US, FOMC on Wednesday, Retail Sales and IP next Friday.
Not much pencilled in government
supply-wise, mostly bills (EUR 4bn Dutch 3 & 6m and EUR 6bn French 3, 6 and
12m on Monday; Belgium, Greece, Spain on Tuesday). Italian 12m bills on Wed. Spanish
3 YRS, off-the-run 5 YRS and, ballsy, given this week’s lukewarm auction, 2040
bonds on Thursday.
US going for USD 32bn 3 YRS on Tue, USD
21bn 10 YRS on Wed and USD 13bn 30 YRS on Thu.
EC: Mon 10 Sentix Sentiment fcst -18 after
-18.8; Tue ZEW Sentiment, Wed IP fcst +0.3% after -2.5% MoM sa; Fri flash PMI
Comp fcst 46.9 after 46.5
GE: Friday Industrial Production fcst flat
/ -1.5% from last -1.8% MoM/-1.2% YoY; Mon Exports fcst -0.6% after -2.4%, Tue
ZEW Sentiment fcst 6 after 5.4; Wed 12 CPI; Fri flash PMI MfG fcst 47.1 after
46.8 and Services fcst 50.3 after 49.7
FR: Mon Biz Sentiment, IP fcst +0.1% after
-2.7% MoM, Wed 12 CPI, Fri flash PMI MfG last 44.5% and Services last 45.8
Italy: Mon IP fcst -0.3% after -1.5%, Wed
final Q3 GDP; Thu CPI; Fri Government Debt
Spain: Wed Housing transactions; Thu CPI,
Fri 14 Q3 House Prices & Labour Costs
US: Mon nothing; Tue Small Biz Optimism
last 93.1, Wholesale Inventories fcst +0.4% after 1.1; Wed FOMC; Thu Retail
Sales fcst +0.3% after -0.3%, PPI, Claims; Fri CPI, PMI last 52.4, Industrial
Production fcst +0.2% after -0.4%, Capacity Utilization.
Click link under title or below for
today’s musical support:
You're only just a dreamboat / Sailing
in my head
Are
you meaning “Risk awareness”???
