Archive - Feb 25, 2010 - Story

Ah, curve pancaking - better known in bond parlance as the death rattle. The Greek 4 Year GGB just traded wider of the 15 Year at a spread of -4bps (yup, negative). This, to continue the parlance lesson, means the bond vigilantes are now pretty sure how the Greek situation will play out. Oh, and Greece, all the best with that €5 billion10 year bond issuance. The 1 Year spot his exploded from just over 200 bps on January 1, to just under 5%, a rout for all short-term GGB holders. We are anxiously awaiting RBS' rebuttal.

Greeks just can't catch a break. Market News reports that a "joint report drafted by the European Commission, the International Monetary Fund and the European Central Bank finds that the calculations contained in Greece's budget plan falls €4.8 billion short of what is needed to meet its deficit cutting objective this year" according to senior Greek government officials. Well, our RBS spin-unadjusted take on this data is bearish to quite bearish for the country's Moody's downgrade prospects, which is the gating factor to utter and total chaos once the GGB are no longer accepted as collateral by the ECB. Not to mention Greece's bond issuance propensity (but anonymous government sources have said about 50 times this week the.bond.is.getting.done), and its Bund spread, which at last check was set to probe recent record wides. In the meantime there is no bank run, repeat NO BANK RUN in Greece.

Many have speculated, but so far there have been no real facts. Until now - Pravda quotes Russia FinMarkets news agency, which has said that Chinese officials have confirmed an interest in purchasing the 191 tons of IMF gold currently on the block. The IMF, which will likely see a significant funding need shortly as it commences to bail out PIIGS by peripheral PIIGS, is likely running out of time with gold sale posturing and will need to find a purchaser who can take the entire amount asap. Even as the agency has already started to expand its domestic funding capacity via bank lines, the total amount could easily be greater than capital that the IMF has access to which could force the IMF's hand to transact swiftly. And China fits just the profile for a distressed buyer of such a sizable amount. Should the FinMarkets information be credible, look for the price of gold to spike following confirmation of Chinese purchasing interests.

Today's ugly initial claims number has already found its scapegoat: excess February snowfall. As the NCDC charts below demonstrate, February 7-13 drought/snow debt levels were certainly material. This has caused reputable firms such as Stone & McCarthy to speculate that weather sensitive jobs, such as construction, have "probably suffered." Yet with ongoing inclement weather, with today's Nor'Easter being no exception, this "non-recurring" component will be a prevalent one for at least 2 more weeks, allowing pundits to provide whatever explanation they wish to recent not so good Insurance Claims patterns.

Bernanke's prepared testimony is the same as yesterday. Full commercial free webcast accessible here.

RANsquawk 25th February US Morning Briefing - Stocks, Bonds, FX etc.

"Yes, Senator, I just want to say first of all we are looking into a number of questions relating to Goldman Sachs and other companies and their derivatives arrangements with Greece and this issue as well. As you know credit default swaps are properly used as hedging instruments. The SEC, of course, has been interested in this issue. Obviously using these instruments in a way that potentially destabilizes a company or a country is counterproductive. The SEC will be looking into that. We'll certainly be evaluating what we learn from the activities of the holding companies that we supervise here in the U.S." - Ben Bernanke

• Yet another example of the ongoing FASB crookery via Jonathan Weil (Bloomberg)
• Markopolos on Schapiro and the SEC: "she has the wrong staff. They're a bunch of idiots there." (HuffPo)
• Semi-nationalized RBS loss shrinks to just $1.2 billion, has approval for $1.3 billion in bonuses: one wonders just how the FASB is involved in this one (MarketWatch)
• British Pound could fall as low as $1.05 (Telegraph)
• +22K in Jobless Claims to 496K, 460K expected,: 6 our of 8 weeks in 2010 have seen growing jobless claims (Bloomberg, DOL) snow blamed for firings, and worst initial claims number since November 14
• Palm slashes guidance (Palm), keeps retarded white font on blue background website color scheme
• The 21st century economic breakdown (Minyanville)

• Asian stocks were mostly higher Thursday, lifted by Bernanke's reassurance that interest rates will stay low for some time.
• Euro plunges to lowest level in year against Yen on risks to Greece rating.
• German unemployment rate edges up to 8.7 percent in February.
• India forecasts 8.2% growth next year, giving room for exit from stimulus.
• Japan stocks fall for 3rd day on strong yen; Toyota down despite president's US testimony.
• New home sales plummet 11 percent in January, the 3rd monthly decline in a row.

RANsquawk 25th February Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 25th February Morning Briefing - Stocks, Bonds, FX etc.