Archive - Sep 25, 2012

After briefly attempting to stage a rise in the early overnight session, the EUR has since resumed its lower glidepath (something which Germany's export-focused economy and the only realy economic driver in Europe desperately needs: after all Europe is the only entity in the world whose central bank is working to promote a stronger currency) to the 1.2900 support, as once again Europe comes back into focus, exposing all its warts, scars and boils in perfect 1080HD resolution. Among the key events were a Spanish €4.00 billion bill sale as well as an Italian €3.94 billion 2 year bond sale, which despite selling at the maximum of the intended range, showed far less investor demand than on recent occasions, a development which Rabobank said is to be expected as the "Draghi effect" wanes, and once again Europe is left to its own devices. "The longer Spain delays on requesting bailout, the more the improvement in sentiment following Draghi’s pledge to save euro is likely to unwind" Richard McGuire, fixed income strategist at Rabobank, writes in client note. "Unraveling of “Draghi effect” may accelerate, with possible Moody’s downgrade this week and lack of progress at Oct. 8 Eurogroup summit." Other events out of Europe include the ongoing attempts in Spain to package lots of trash under the rug (see: Spanish Bad Bank Risks Investor Conflict With Stressed Lenders), the realization that the Swiss National Bank instead of continuing to exchange EUR for AUD, bought €80 billion of core debt according to S&P, the print of Italy's September consumer confidence which held near 15-Year lows, a French industrial sentiment which held near Two-Year lows, and so on. Greece too continues to make noises but it seems that the little country is being ignored by everyone. Catalonia's separatist tensions however are getting louder after the Barcelona province did not get the unconditional bailout it demanded (as we wrote yesterday).