What Do European Credit Markets Know That Stocks Don't?

Tyler Durden's picture


Draghi jawboned Zee Germans and rumors of another 'path to fiscal union' were enough to provide equity markets with some ammo to buy-the-dip following the ECB/Buba news that they were lawyering up over the legality of the OMT (and IMF doubting Greece's ability to fund). Rapidly, the high-beta 'options' on Europe - i.e. IBEX, ripped and that dragged stocks into the green across Europe. BUT - while EURUSD also improved (which provided US equity traders with their pre-European-close methadone), European sovereign spreads did not follow the same path of exuberance, Greek bonds tumbled off highs, and European corporate and financial credit spreads cracked wider and kept going in the biggest divergence since Draghi's Dream speech. It seems that post the CDS roll, positioning is becoming a little more nuanced and for sure - credit markets are not buying it...


European stocks (blue) against European credit...

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Tue, 09/25/2012 - 12:14 | 2828227 Cash2Riches
Cash2Riches's picture

Maybe there is some sanity coming into the markets? I doubt it!


Tue, 09/25/2012 - 12:18 | 2828238 idea_hamster
idea_hamster's picture

    What Do European Credit Markets Know That Stocks Don't?

Perhaps that the smokey scent in the movie theater is NOT smell-o-vision?


Tue, 09/25/2012 - 12:21 | 2828255 derek_vineyard
derek_vineyard's picture

i dont read zero hedge much anymore and dont follow financial markets as much anymore....................zero hedge is a great forum, but these are insane financial times so i'm focusing my life on other pursuits

ill be back to read when the system starts collapsing

Tue, 09/25/2012 - 12:56 | 2828290 Pinto Currency
Pinto Currency's picture


Central banks influencing markets by buying bonds and investors with a contrary belief buying stocks with the view that central banks are debasing currencies.

In the end, the c.b.'s are going to be holding all of the bonds.


Tue, 09/25/2012 - 18:46 | 2830035 Buck Johnson
Buck Johnson's picture

They are finally realizing that the game is over and it's time to get out and bunker down somewhere until the whole system resets.

Tue, 09/25/2012 - 12:15 | 2828228 The Axe
The Axe's picture

markets broken....no HFT   there would be 2 million shares trade......  

Tue, 09/25/2012 - 12:15 | 2828229 ZippyBananaPants
ZippyBananaPants's picture

awesome colors

Tue, 09/25/2012 - 12:15 | 2828232 SmallerGovNow2
SmallerGovNow2's picture

WhoTF is on FIRST??? 

From MW, "The Federal Reserve may have to raise short-term interest rates "well before" the current guidance of mid-2015, Charles Plosser, president of the Philadelphia Fed Bank, said Tuesday."

IDIOTS...  More jawboning or what?

Tue, 09/25/2012 - 12:21 | 2828254 lesterbegood
lesterbegood's picture

Long hot air balloons.

Tue, 09/25/2012 - 12:16 | 2828234 Inthemix96
Inthemix96's picture

The jig is up?

Tue, 09/25/2012 - 12:17 | 2828239 Tense INDIAN
Tense INDIAN's picture

havent we seen the credit markets actually correcting to meet stocks sometime back ????

Tue, 09/25/2012 - 12:19 | 2828240 slaughterer
slaughterer's picture

I almost expect to see a bearish DOJI on XLV by EOD: the ultimate danger sign, especially after the mega volume burst on this ETF in the last 20 minutes of trading yesterday. 

Tue, 09/25/2012 - 12:47 | 2828385 imbtween
imbtween's picture

I think you will get that.

Tue, 09/25/2012 - 12:18 | 2828242 Squid Vicious
Squid Vicious's picture

who cares about credit, risk, markets, etc... how many Iphones were sold yesterday?? and when is the I-pad mini going to be released? and the I-phone 6? what about an I-phone 5s in the interim?

Tue, 09/25/2012 - 12:18 | 2828244 AVFMS
AVFMS's picture

They know it's going to rain...

Tue, 09/25/2012 - 12:21 | 2828251 slaughterer
slaughterer's picture

What is crashing WTI this time? 

Tue, 09/25/2012 - 12:22 | 2828260 SmallerGovNow2
SmallerGovNow2's picture

How about the Dow?

Tue, 09/25/2012 - 12:23 | 2828262 Lost Wages
Lost Wages's picture

So should everyone buy stocks or bonds? :P

Tue, 09/25/2012 - 12:37 | 2828325 firstdivision
firstdivision's picture

Good to see markets have returned to normal

Tue, 09/25/2012 - 13:08 | 2828494 slaughterer
slaughterer's picture

If SPY descends to SPY 144 pre-QE3 support, that will be ultimate humiliation for QE3 bulls. 

Tue, 09/25/2012 - 13:19 | 2828540 chart_gazer
chart_gazer's picture

with unlimited funds to infinity that divergence can last a very long time

Tue, 09/25/2012 - 14:17 | 2828771 ekm
ekm's picture

Easiest answer in the world.

Remember MF Global? They kept buying italian bonds because they had no other option, nobody to sell them to, otherwise the value would drop down due to others selling them...........until MFG ran out of money since JPM called margin.


Same with Primary Dealers. They are forced to keep buying stocks, MFG style. It's been since QE1, 3 years of accumulation is quite long................until JPM calls margin on ................probably Morgan Stanley.

Of course, JPM will order the the Fed (otherwise known as the "sucker in chief") to stay aside and watch MS die.

Based on what I've read, the 1st reason to start bank bailouts was saving MS. Hence I'm speculating, MS is the weakest link. 



Tue, 09/25/2012 - 14:56 | 2828946 Shevva
Shevva's picture

You guys really need to catch up with the markets, it's the free toy with every 1,000 you buy.

Wed, 09/26/2012 - 01:26 | 2830955 Colonel Klink
Colonel Klink's picture

When things get serious, you have to lie....errrr buy!

Sat, 09/29/2012 - 18:55 | 2842249 noguess
noguess's picture

One can - temp - trick stock markets (short time frame), but not bond markets (bean counters). Bond markets dont buy the ECB story. Just a thought. ECB-Draghi going Bernanke. Ooops.

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