US: The markets have a more bullish tone globally as further support for the Euro region comes from comments out of Japan and China. LIBOR-OIS tops 13bp as bank CDS traded wider yesterday. Today features a smattering of data including NFIB Small Business Optimism, but eyes will be on Europe and tomorrow's Beige Book, Import Price data, and Monthly Budget Statement for market direction.
Europe: Sovereign credit a bit better this morning on renewed pledges for support from Asia. Spain announcing they have arranged for a direct (non-auction) pre-sale of €6B in 10Y bonds. Italy completed a sale of €7B in 1Y bills at a yield of 2.067% (+2bp from prior) and a b/c of 1.63x (v 2.00x prior). Italy, along with Belgium, has very high sensitivity to refi risk over the upcoming year. Prospects of a bailout situation for Portugal seem to be on the rise as their refi ability is questioned by other EMU members.
Asia: China M2 Money Supply 19.7% YoY v 19.0%E. December new Yuan loans 480.7B V 360.0BE (a 1 year low, but still above expectations). Loan growth has still not moderated in China despite other tightening measures, thus the artificial demand continues and the potential for a hard landing is put off. Japan Finance Minister Noda stating that it is appropriate for Japan to buy Irish bonds and that Japan may buy about 20% of EFSF bonds to be issued later this month.
From Brian Yelvington of Knight Capital