Archive - Jun 23, 2010 - Story

Even as CDS spreads continue surging on solvency threats, FX markets seems comforted by the latest batch of drivel out of Moody's, which earlier reported that UK emergency budget is supportive of the country's AAA rating. GBP spikes immediately following the news, leading to a rise in all EUR pairs as well. Ironically all this isoccurring even as a new rumor of an imminent Fitch downgrade of France is making the rounds.

Ironically even with Greek CDS surging by 60 bps to 909 bps this morning, the biggest mover in percentage terms is not the bankrupt Mediterranean country but Europe's "stablest" one -  Germany, whose default risk has spiked by 9.19% according to MarkIt. Without splitting hairs, Europe is a sea of red this morning as the ugly specters of default and complete lack of credibility in the EU administration raise their ugly heads again.

Markit reporting that Greek Bund Spreads have suddenly exploded by 65 bps to 776, the highest since May 7, and inches away from the all time record of 900 bps, even as CDS blows out to over 900 bps. The reason quoted is that traders have cited forced index selling and the absence of central bank buying: have banks finally left Greece to dry? Or is it just that Greece is once again caught lying, pardon, having to issue a public retraction: apparently German Handelsblatt ran an interview with Greek finance minister George Papaconstantinou, in which the Greek was "misquoted."According to Market News: "Some of the headlines issued earlier Wednesday on the basis of an interview Greek Finance Minister Giorgos Papaconstantinou gave to German business daily Handelsblatt were based on an erroneous version of the interview placed by the paper on its website. Papaconstantinou did not say in the latest interview with Handelsblatt that Greece would get its deficit-to-GDP ratio below 3% by mid-2012; that and some other headlines were based on an older interview the paper accidentally published. In the actual interview, according to the print version of the newspaper, Papaconstantinou said, "Of course not," when asked if he expects his fiscally troubled country to go bankrupt." The credibility-deficient minister also noted: "The country will “absolutely” endure the crisis without
restructuring its debt, he vowed, since such a step “would exclude Greece for a long time from the financial markets." The punchline was the conclusion that Spain and Portugal are “in a much better position” than Greece. Which bring us to our next point - Portugal's 5 year auction which came in at 4.657%, almost a full percentage point worse compared to the last auction on May 26, which closed at an average yield of 3.70%. Portugal may be better, but at this rate of collapse it means absolutely nothing.

• 56% of 106 economists, analysts surveyed expect home prices to fall this year: Macromarkets LLC.
• Asian stocks fell Wednesday, with energy stocks among the biggest losers.
• Banks hit by £2B yearly levy in UK; France and Germany promise similar measures.
• Chinese steelmakers hit hard by govt saying it will scrap a tax rebate for exports.
• Oil firms, drill operators clash on who should pay for rigs idled by the recent offshore-drilling moratorium.
• Adobe Board grants authority to repurchase up to $1.6B in common stock by 2012.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 23/06/10