Euro Jumps, Risk Is Bid, Following Strong Spanish Bond Auctions, Trichet Promises For EU Finance Ministry

Tyler Durden's picture

Risk is solidly bid this morning as the EURUSD has jumped to overnight highs of just under 1.45, and the DXY has just dropped to a one month low, following two Spanish bond auctions which saw yields surge yet came at far higher bids to cover than previously. From Reuters: "Spain saw strong demand for 3.95 billion euros ($5.67 billion) of medium-term bonds on Thursday, though a broad drop in risk appetite and lingering uncertainty over how talks on fresh aid for Greece will pan out kept yields high. In a litmus test of investor appetite for peripheral euro zone debt as policymakers thrash out a plan to avert a Greek default, the 2014 bond, with a 3.4 percent coupon, sold 2.75 billion euros at an average yield of 4.037 percent. That compared with 3.568 percent at the previous auction in April, while the bid to cover rate rose to 2.5 compared with 1.8. The 2015 bond, last issued in September of last year and with a coupon of 3 percent, sold 1.2 billion euros at an average yield of 4.230 percent, slightly lower than yields on the secondary market. The bond was 2.9 times subscribed after being 1.6 times subscribed at its last auction. "Since the (2014) launch early April, we've had an escalation on the peripheral side, so a firm selling since then, which is why (the yield) jumped so much," economist at 4Cast Jo Tomkins said. "You'll see plenty of buyers coming in at that level, especially since the Greek deal seems to be moving in a positive direction." Also adding to the risk appetite are statements from Trichet that in the longer term, he could suggest forming a finance ministry of the European Union, adding there is no crisis in the EUR. Lastly, he added that if aid programs fail, as a second stage he could consider deeper integration of economic policy, more central command of domestic policies. Of course they will: once all is plundered, the ECB will become the defacto "protector" of its colonies. And falling solidly into the trap is Greece where according to a government source the privatization plans may run faster than expected.

Altogether, as the chart below suggests the market has roundly decided to stick its head in the sand today.