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Late-Day Equity Ramp But European Bonds Ain't Buying It

Tyler Durden's picture




 

Between the escalation in the Middle East and Olli Rehn pouring cold-water on the hopes and prayers of an imminent Spanish rescue-request, sovereign bond risk rose notably today. A late-day rampapalooza in EURUSD (another round of end-of-day repatriation?) signaled risk-on in the correlated monkeys and sure enough (in the US and Europe) stocks rose into the European close. The USD is remarkably unchanged on the week - despite the volatility in risk assets in general (zee stabilitee at the 1.27 peg seems the new normal) - as the Fed/ECB 'agreement' appears to have crushed the life out of yet another market-based signal - as EURUSD implied vol crashes to five-year lows.

European government bond risk (Spain red) was not buying into the hope (or whetever it was) that spurred stocks and EURUSD to levitate in the last hour of the European day...

 

and broadly speaking, EGB spreads rose (weakened) from the US open...

 

EUR strength seems antithetical to the general risk-off sense and implies a liquidty-based repat rather than positive belief... JPY weakness overnight on the chance of new elections and an uber-dove stepping in was generally ignored by the risk-on carry implications...

 

as implied vol has been crushed in EURUSD - seemingly driven by the dismal reality of Fed/ECB balance sheet war-games...

 

and Brent crude priced in EURs rose considerably on the Israel news...

 

Charts: Bloomberg

 

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Wed, 11/14/2012 - 12:57 | 2980205 slaughterer
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Crude up only 1%?  On the beginning of WW3 in Middle East?  WTF?  

Wed, 11/14/2012 - 12:58 | 2980209 magpie
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Don't forget the Euro safe haven

Wed, 11/14/2012 - 13:03 | 2980240 Village Smithy
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I think the big players are beginning to realize that the liquidity they need for quick and profitable exits may not be there. Lack of confidence in the system is making it's presence felt.

Wed, 11/14/2012 - 20:36 | 2982231 Buck Johnson
Buck Johnson's picture

Everything is being manipulated.  They know that if oil started to climb it would exponentially increase the effects of the recessions and inflation that is happening now.  But it won't last long.

Wed, 11/14/2012 - 13:00 | 2980214 swissaustrian
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War is good for commodities, we knew that.

But now war is good for EUR/USD? Since when is the Euro outperforming the Dollar in a geopolitical event? That's something new.

Wed, 11/14/2012 - 13:08 | 2980256 LawsofPhysics
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the answer you seek can be found in the fiat that backs the world's "police" force.  It isn't the euro.

Wed, 11/14/2012 - 13:13 | 2980283 swissaustrian
swissaustrian's picture

You misanderstood my post: Why would the Euro outperform the dollar after the Isreal news? That doesn't fit into the classical scheme of Dollar strength in times of geopolitical stress. Usually the theme "Dollar is backed by the pentagon" would have made the Dollar the big winner today.

Wed, 11/14/2012 - 13:23 | 2980346 magpie
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Weak yen is picking up the slack and propping up the Euro today ?

Wed, 11/14/2012 - 13:49 | 2980511 LawsofPhysics
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That's exactly what I am saying.  Think "Chinese Pentagon", as the world is losing faith in the "american" one.

Wed, 11/14/2012 - 14:54 | 2980840 disabledvet
disabledvet's picture

I would agree "flight to safety is flight to safety." that would be the dollar. We have lots of alternatives to oil in this world so going hog wild in that space...and then turning it into an economically significant event...strikes me as a difficult task. I still believe we have a strong inflationary bias in the US because unlike almost everyone here I believe in the recovery thesis...and while interest rates are at rock bottom low yields "that's because of the Fed." it's really hard to price in "total war in the Middle East" other than to say "you're going to need a lot of war wagons." the USA can do that...already has been...that strikes me as very good for industrials and transports. The Federal Government has a lot of "tools in the toolbox" if the war option that is on the table is "total."

Wed, 11/14/2012 - 12:59 | 2980217 Alpha Dog Food
Alpha Dog Food's picture

 

Give up on the markets and come to my market instead :-)

http://alpha-dog-food.com for wine women and song

We might as well enjoy ourselves while we're watching economies burn (bitchez!)

Wed, 11/14/2012 - 13:02 | 2980226 MoreNails
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It's not a war, it's a stimulus !

Wed, 11/14/2012 - 13:03 | 2980236 BBullionaire
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The ECB has pegged the eur at 1.27? a bit like what the SNB were doing serrepticiously a couple of years ago before the announcement and the same for the BOJ? will we some odd 'intervention alert' moves then and be able to short a diminishing manipulative half life in the eur/usd pair? hope so

Wed, 11/14/2012 - 13:10 | 2980262 swissaustrian
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It more and more looks like the fiat endgame is a singularity of multiple pegs of the major currencies to the dollar. This way the FED eventually runs monetary policy globally.

EUR/USD at 1.27 (+ EUR/CHF at 1.20)

USD/JPY at 80

CNY/USD at 6 ish

USD /CAD at 1

Stealth pegs are in place in DNK/EUR and soon SEK/EUR.

Who's left amoung the bigger economies to act on pegging?

GBP, INR, RUB, BRL.

The Indians are kind of an exception. The Ruppie is so weak, they don't need to peg anyway.

 

 

Wed, 11/14/2012 - 13:21 | 2980332 BBullionaire
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very interesting observation/insight thx

Wed, 11/14/2012 - 14:58 | 2980863 disabledvet
disabledvet's picture

France is already nationalizing. I think the USA won't be far behind. "The economy is too important to be left in the hands of Wall Street."

Wed, 11/14/2012 - 15:11 | 2980913 Overflow-admin
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Indians are kind of an exception. They use gold and silver instead.

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