Archive - Jul 12, 2012

As Europe opens, S&P 500 e-mini futures (ES) have given up all gains for the day and are back below yesterday's day session lows (down 9pts from the close). German and Dutch 2Y interest rates just hit record lows at -0.021% and 0.033% respectively (and Swiss 2Y is back at -35bps just off its lowest ever). Major AUD weakness following its worst of the year drop in employment is impacting carry pairs (notable JPY strength) and the EURUSD is back at yesterday's lows - which is pushing the USD up to week's highs and dragging commodities lower (with Silver and WTI dropping the most). Treasury yields are leaking lower but remain well off post-10Y-auction spike lows for now. Meanwhile - Italian and Spanish sovereign bond spreads are modestly lower. This seems like a combination of technicals from CDS-cash basis traders stepping in at notably wide spreads as well as the considerable decompression in subordinated bank spreads relative to senior/sovereigns - which is/was a popular trade and seems to have gathered steam once again as the Spanish MOU is leaked (and as we suggested Subs get 'bailed-in'). European credit remains markedly underperforming European stocks post EU-Summit, but the stocks seem to be playing catch-down for now today.

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