Archive - Jan 5, 2012 - Story

• ECB Cash Averts ‘Funding Crisis’ for Italy, Spain (Bloomberg)
• Bailout talks in Greece ‘crucial’, Premier says (WSJ)
• Spain sees €50bn of new bank provisions (FT)
• Fed says expand Fannie, Freddie role to aid housing (Reuters)
• France’s Borrowing Costs Rise at Bond Sale (Bloomberg)
• Europe worries linger after French auction (Reuters)
• PBOC Suspends Bill Sale as Money Rates Rise Before Holiday (Bloomberg)
• Turkey warns against Shi'ite-Sunni Cold War (Reuters)
• New capital rules for banks ‘delayed to 2H’(China Daily)

Gold's fifth day of price rises is the longest rally we've seen in two months. Concerns about the solvency of European banks and sovereigns is overcoming the 'risk on' appetite of late 2011 and early 2012. The euro has fallen to 1.2840 USD and to €1,256/oz. Growing tensions with Iran including the European Union's preliminary agreement to ban Iranian oil, will fuel gold's  safe haven status for investors. Gold is trying to consolidate above psychological levels of $1,600/oz, £1,000 and €1,200/oz. The 200 day moving average is $1,631.60 which remains resistance. The intraday high hit $1,624.66, was gold's highest price since December 21. We expect gold demand to pick up ahead of the Chinese Lunar New Year, The Year of the Dragon, which begins on January 23.

UPDATE: EURUSD is moving to new lows for the day now at 1.2831

French 10Y bond spreads had widened almost 50% (from 100bps to 149bps) in the last week of trading ahead of this critical auction and the EURUSD is over 200pips lower. The auction results are in and it is not a total disaster but the bid-to-cover dropped significantly to its lowest since October 2010 and they missed their maximum target.

• *FRANCE SELLS TOTAL EU7.963B VS MAX TARGET EU8B OF BONDS
• *FRANCE SELLS EUR4.02 BLN 3.25% 2021 BONDS; YLD 3.29%
• *FRANCE SELLS EUR690 MLN 4.25% 2023 BONDS; YLD 3.5%
• *FRANCE SELLS EUR1.088 BLN 4.75% 2035 BONDS; YLD 3.96%
• *FRANCE SELLS EUR2.165 BLN 4.5% 2041 BONDS; YLD 3.97%
• *FRANCE SELLS 2021 BONDS AT AVE. YIELD 3.29% VS 3.18% DEC. 1
• *FRANCE 2041 BOND BID-TO-COVER 1.82 VS 2.26 AT DEC. 1 SALE
• *FRANCE 2021 BOND BID-TO-COVER 1.64 VS 3.05 AT DEC. 1 SALE

EURUSD is leaking a little lower and 10Y French spreads are widening modestly but the initial reaction is unimpressive for now.

UPDATE: EFSF said to get EUR4bn of orders for 3Y issue is providing some cover (at what rate? We offer to buy 1tn at 300% yield...)

With plenty of time left until France unleashes its supply (and a dismal consumer confidence print earlier), there is a plethora of notable market moves: Unicredit is halted down 7.9% (seems to be the culprit for the initial risk-off turn in Europe), but Deutsche Bank is down over 5% on liquidity problem rumors, EURUSD traded under 1.2850 at its lowest level since September 2010, 10Y Italian bonds have pushed well above 7% yields and 510bps spread to Bunds as Unemployment rises to 8.6%, Belgian 10Y yields are over 4.5% - highest in 3 weeks, and the rest of European Sovereigns are all leaking wider (near wides of the year). Risk assets (CONTEXT) broadly are under pressure but ES (the S&P 500 e-mini futures contract) is holding off yesterday's early morning lows for now. Commodities are all dropping fast with Gold (actually outperforming in this slide) back at $1615, Oil at $102.50, and Copper approaching $340. Treasuries are bid but trading in line with Bunds' movements so far in general. Some chatter of ECB buying in the last few minutes is stabilizing things a little here.