RBS

Heading into the North American open, EU stocks are seen lower across the board as market participants reacted to cautious comments from Moody’s rating agency on Spain, which noted that Spain’s fiscal outlook remains challenging despite easier targets. Still, the ratings agency further commented that easier targets do not affect Spain’s A3 government bond rating with a negative outlook. Separately to this, a BHP Billiton executive said that Chinese demand for iron ore is flattening, while according to China's state-backed auto association, China's vehicles sales this year will probably miss their growth forecasts. As a result, basic materials sector has been the worst performing sector today, while auto related stocks such as Daimler and VW also posted significant losses. The ONS reported that inflation in the UK fell to 3.4% in February, down from 3.6% in January. However, higher alcohol prices stopped the rate declining further. Going forward, the latter half of the session sees the release of the latest US housing data, as well as the weekly API report.

The Hellenic Republic Greek CDS Auction has ended, pricing at 21.5%, just slightly less compared to the Initial Market Midpoint of 21.75 of par. As explained back in January 2009, those who had bought the Cheapest to Deliver Greek bonds trading in the teens coming into the auction, made a quick buck, as these will be taken out at a nice premium to purchase price. For those who bought at par, we can only hope they have arrangements with the ECB to fund the shortfall, especially since only the ECB can "book a profit" by buying up Greek bonds at 80 cents on the euro and seeing these terminate at 21.5. Limit buy orders that were satisfied ranged from 22.75 (where there was just under 70 million in bids by accounts using JPM and DB as dealers), all the way to 21.625, where the breaking bid was courtesy of 120 million in indicated bids, spread evenly between HSBC and Barclays: these satisfied the 291.6 Million in outstanding Open Interest. Overall, there was 3,362.7 million in total limit buy orders across the stack. The laugh of the day once again comes courtesy of an account using JPM, which submitted a total of €135 million in bids between 8 cents and 1 cents (50 million at the former). If they had been hit on that it would have made quite a payday. On the offer side, the dealers showing the biggest Physical settlement requests were HSBC with €332 million, and BNP at €158 million. And the joke of the day once again comes courtesy of RBS, which as usual seems to have one of the most "entertaining" bond trading desks: the reason for the RBS "Adjustment Amount", as speculated earlier, was that the bank's Bid of 22 was above the market midpoint of 21.75: the good news is that unlike before at least they did not confuse price and discount.

With a economic calendar devoid of virtually any events, the only two events worth of note this morning are the Greek CDS auction (where RBS appears to once again be confusing price and discount), and the Apple cash announcement due in just over an hour. The result is Apple stock which in the premarket session has traded as high as a new record high og $606, even as concerns emerge that the growth phase is over as the company transitions into a MSFT-type, post-Steve Jobs existence. Details of the 9 am call can be found here. Aside from that risk is broadly flat as hungover American traders take their seats.

• There is no Spanish siesta for the eurozone (FT)
• Greece over halfway to recovery, says PM (FT) - inspired comedy...
• Sarkozy Trims Gap With Rival, Polls Show (WSJ) - Diebold speaks again
• IMF’s Zhu Sees ‘Soft-Landing’ Even as Property Slides: Economy (Bloomberg)
• Obama Uses Lincoln to Needle Republicans Battling in Illinois (Bloomberg)
• Three shot dead outside Jewish school in France (Reuters)
• Osborne Seeks to End 50% Tax Spat With Pledge to Aid U.K. Poor (Bloomberg)
• Monti to Meet Labor Unions Amid Warning of Continued Euro Crisis (Bloomberg)

The results from the Greek CDS auction are starting to come in (the full calendar can be found here). Moments ago ISDA, via Creditfixings.com released the initial results of the Auction, which indicate a preliminary market midpoint based on bids and offers of the defaulted bonds of 21.75, which is roughly in line with where bonds had been trading ahead of the PSI completion, if a little higher than the Cheapest to Deliver, indicating some modest upside to those who bought the CTDs in the final days. The Net Open Interest going into the bidding period which begins at 13:30 GMT and lasts for 30 minutes is a modest €291.6 million, with an offer-heavy side. Then final results will become pulbic in 4:30 hours, at 15:30 GMT.Once again, a full generic run down of the whole physical settlement process can be found here. Finally, what's with the RBS "Adjustment Amount": did the bank once again forget there is a difference between "discount" and "price"? Nothing less would surprise coming from the world's most incompetent bank.

• Obama, Cameron discussed tapping oil reserves (Reuters)
• Greek Bonds Signal $2.6 Billion Payout on Credit-Default Swaps (Bloomberg)
• China leader's ouster roils succession plans (Reuters)
• China’s Foreign Direct Investment Falls for Fourth Month (Bloomberg)
• Greek Restructuring Delay Helps Banks as Risks Shift (Bloomberg)
• Concerns Rise Over Eurozone Fiscal Treaty (FT)
• Home default notices rise in February: RealtyTrac (Reuters)
• China PBOC Drains Net CNY57 Bln (WSJ)

All you need to read.

Citigroup have said that they believe that gold will rise to $2,400/oz in 2012 and by $3,400/oz in “the coming years”. However, Citi’s Tom Fitzpatrick warned of price weakness in the short term and said there is a “real danger” that there may be a correction to $1,600/oz which would provide an even better buying opportunity. Citi are also cautious near term on oil and silver. Production of gold in Australia slid again last year, despite gold fetching higher nominal prices than ever before. According to gold experts, Surbiton Associates, 264 tonnes of gold were produced last year, two tonnes less than in 2010. The 264 tonnes equated to about 8.5 million ounces and ensures that Australia remains a major player in gold, with only China producing more last year. The United States was the world's third-biggest producer with 240 tonnes. Australia's gold production was well below the nation's production peak in the late 1990s.  This further suggests the possibility of peak gold production. Of the world’s four biggest gold producers (China, Australia, the U.S. and South Africa), only China has managed to increase gold production in recent years and this Chinese gold is used in China to meet the rapidly growing demand for gold jewellery and coins and bars as stores of value in China.

$15 Trillion Dollar Fraud … Or Nigerian Style Scam?

The following people are paid to have an opinion, whether right or wrong, so it is our job to listen to them. Supposedly. Reuters summarizes the professionals kneejerk reaction to the LTRO 2. Because when it comes to explaining why Europe's banks are not only not deleveraging but increasing leverage while paying an incremental 75 bps on up to €700 billion in deposits soon to be handed over to the ECB, one needs all the favorable spin one can muster.

There is broad disagreement among European banks on whether they should (and whether they will) choose to access the LTRO. We have discussed the top-down perspective and the very granular bank-by-bank perspective, and we end with a more bottoms-up perspective on the bank's own views of the LTRO. As SocGen notes, the investment banks (and certain Swedish banks) are very skeptical (and rightly so given the 'LTRO Stigma') while the Italian and Spanish are open to taking whatever they can, whenever they can (is that really a good sign?). Bank management must weigh the transparency they will face at the end of the quarter when sovereign bond holdings are exposed and just as SocGen points out, banks with considerably higher exposure (implicitly through the carry trade) may well face much more negative market action (even if Basel III doesn't handicap that risk). As with LTRO 1, the ECB will only reveal aggregate data, leaving the individual banks themselves to reveal their own take-up - we suspect the investment banks will make a point of highlighting that they did not take the funds, while the Portuguese, Italian, and Spanish banks will promote the benefits of their government-reach-around self-immolating ECB life-line.

• Germany Crisis Role in Focus After G-20 Rebuff (Bloomberg)
• G20 to Europe: Show us the money (Reuters)
• Draghi’s Unlimited Loans Are No Panacea (Bloomberg)
• Geithner says Europe has lowered risks of "catastrophe" (Reuters)
• Gone in 22 Seconds (WSJ)
• Gillard beats Rudd to stay Australian PM (FT)
• Brazil Will Continue Reducing Interest Rates, Tombini Says (Bloomberg)
• China to Have ‘Soft Landing’ Soon: Zoellick (Bloomberg)
• China To Be Largest Economy Before 2030: World Bank (Reuters)
• Obama pressed to open emergency oil stocks (FT)

An explicit contagion path chart, since you probably won't get info like this anywhere else... 

Despite the release of better than expected German IFO survey, stocks in Europe remained on the back foot after the EU Commission slashed forecasts for 2012 Eurozone GDP to -0.3% vs. 0.5% previously, while EU's Rehn added that the Euroarea has entered a mild recession. As a result Bunds advanced back towards 139.00, whereas the spread between the Italian/German 10-year bond yields widened marginally on the back of touted selling by both domestic and foreign accounts ahead of the upcoming supply on Friday. Looking elsewhere, EUR/USD erased barriers at 1.3300 and 1.3325, while today’s strength in GBP/USD can be attributed to a weaker USD, as well as touted EUR/GBP selling by a UK clearer.

• IMF Official: 'Huge' Greek Program Implementation Risks In Next Few Days (WSJ)
• European Banks Take Greek Hit After Deal (Bloomberg)
• Obama Urged to Resist Calls to Use Oil Reserves Amid Iran Risks (Bloomberg)
• Hungary hits at Brussels funds threat (FT)
• Bank Lobby Widened Volcker Rule Before Inciting Foreign Outrage (Bloomberg)
• Germany fights eurozone firewall moves (FT)
• New York Federal Reserve Said to Plan Sale of AIG-Linked Mortgage Bonds (Bloomberg)
• G-20 Asks Europe to Beef Up Funds (WSJ)
• New Push for Reform in China (WSJ)