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EFSF At 5-Day Low Despite Sovereign Strength
While the world of risk explodes to the upside on the back of the LTRO-based carry trade expectations (which is not evident at all in some of the more technical relationships across the sovereign space no matter what headlines try and tell you), the very backbone of support for the fiscal evolution that Europe thinks it will achieve is now trading at a five-day low price having dropped notably post the earlier Fitch 'FrAAAnce' announcement. It is simple enough to think that banks will rapidly seek risk and buy sovereigns with their newfound wealth, but looking at CDS-Cash basis (the difference between CDS spreads and bond spreads) there has been almost no shift in supply/demand (which we would expect to tip to bond outperformance if the carry trade were being placed) and moreover, the sovereign spread curves are NOT bull steepening as one would expect from modest reach for say 2Y/3Y peripheral yield versus the 3Y LTRO. The bottom-line seems to be that equity markets are buoyed by a broad risk asset rally (and TSY selling and 2s10s30s rally) while the underlying beneficiary of this 'solution' does not seem to be improving so much.
The 10Y EFSF has dropped markedly in the last two days and significantly post the Fitch report this morning. Hardly a positive for the bridge to nowhere...
In the meantime, the orange oval shows very little change in the relationship between Bond and CDS spreads (the lines are generally flat) over the past week. This is not what we would expect if bonds were seeing additional demand from the front-running of the LTRO carry trade.
And while broadly speaking sovereign risk is improving today, we would expect to see the front-end rallying more as it would extremely unlikely banks would take on the 'ultimate' all-in trade once more and reach for a flattener and duration extension trade - with its accompanying MtM vol - even if they were to tuck this in their banking (not trading book).
With a yield of 3.38%, the 10Y EFSF is already pricing in non-AAA status as we have been pointing out for a while, but the 26bps decompression of the last two days seems like a bad sign for those thinking that risk is on.
The strength in ES to be frank appears like momentum off an overshoot yesterday as risk assets broadly never really sold off like ES did and are now holding up well enough for today.
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Stop it! You're raining on Santa's "Santa Cause" rally!
Raining here in Pittsburgh again, too. We're to be about 60 degrees tomorrow, on the first official day of Winter.
Yeah. Winter.
Crackheads and tweekers behave erratically, thats all these markets are now.
morning memo said to rally until Europe closes, than sell
http://www.theglobeandmail.com/report-on-business/top-business-stories/meat-and-potatoes-inflation-on-track-for-20-year-high/article2277418/
Meat and potatoes: Inflation on track for 20-year high...so stop eating shit from supermarkets. take gun, go out in the woods, shoot something. no inflation there, is it?
Ice fishing bitchez
Permits, tags, etc. are all up dramatically in cost if you don't want the warden on your case.
Except the purchase price of a gun to shoot, ammo, or the components and equipment to load said ammo. Other than that nature cares little about the follies of man. The universe owes you exactly nothing. TANSTAAFL (There Ain't No Such Thing As A Free Lunch).
This is an engineered short squeeze – violent mark up and maintaining a floor forcing the shorts to cover.
Don’t torture yourself trying to explain the spike based on the actual news or macro fundamentals.
I don't know, the NYSE floor trader interviewed by Bloomberg was saying that the rally was also based on fundamentals of the housing data improvement. (I swear - he did)
My proclivity in believing bullshit tells me that he cannot be wrong.
what shorts? all outflows have left the building, well, except RobotTrader!!!
You know what gets me way more than these silly worthless market gyrations is that things like the Indefinite Detention bill was just passed and signed....hardly any commentary at all about this monstrosity...and SOPA which will surely also pass within days. So while the DOW is up...to 1990 levels, and everyone celebrates and cheers, no one even has noticed the Constitution has been set ablaze and SOPA will make the internet and places like Zerohedge a thing of the past.
Good luck, Commrades, you'll need a lot of it in the coming days.
i am looking forward to the CIA knocking at my door over here. At least travel won't be too long. They still have these secret prisons in Hungary, don't they?
Agree. But I don't think it's all as unnoticed as you fear. 2011 was the turn: a large number of people lost faith in the economic system they live in, including the political leadership. And the more the political types chose to ignore the reality the more masses of people are forced into confrontations with reality. So whether dragged screaming into it, or just barely opening their eyes, people are waking up and they're plenty grumpy.
In their zeal to "stabilize", TPTB are creating instability.
Constitution? Who cares about that old rag?
No one does, in a FEMA forced labor camp.
Market is a first-timer on LSD today... Totall freaking out man!!! :-)
Game plan: save the banks.
Plan B: save the banks.
No change in thinking, strategy or even methods. Just details.
It's becoming clearer than ever that this will end in economic and political disaster for the developed world.
No Eurobonds – no euro
According to the EU monetary chief, the eurozone may only have a few days left to find a way out of the crisis. But economic analyst Michael Mross believes that Germany would rather let the euro die than support the idea of Eurobonds.
http://www.mmnews.de/index.php/english-news/8997-no-eurobonds-no-euro-
The great thing about abstractions is that regardless of the actions of certain individuals operating as its agents, the fiction can always plausibly maintained as to what the abstraction "believes." All it simply has to be stated over and over throughout the echo-chamber.
Directed history, FTMFW.
France is not AAA
GERMANY NEITHER
Compared to who? Using what set of books?
In other words, it's all relative. Until the flush completes, we'll all be either higher or lower in the bowl than the other turds.
Looks like the ECB only got between 160b and 170b in 7-day liquidity mop up ops. And 0 LT. Needed 211bEuro to sterilize:)
This is getting crazy at the Central Banks!
Clash of the Titans: Fed Versus ECB Balance Sheets. ECB Offers As Much Money As Banks Want for 1,124 Days!
http://confoundedinterest.wordpress.com
Always a good time to pull out this video from Frankie Goes to Hollywood.
http://www.youtube.com/watch?v=RTOQUnvI3CA (Two Tribes)
EFSF was so October 2011.
Now the LTRO is going to save us.
Don't look behind the curtain to question how lending to the banks so they can load up on their sovereign debt to repo at the ECB for more money to load up on more debt is going to do anything but create more SYSTEMIC risk. Just double fist all the EU debt you can find, and enjoy the circle jerk.
well, i shorted -50 /es at 1230, molon labe
what no robo asshole talking up the mkts today....
BLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAHBLAH
Sorry, suffering from ZH burnout.
Might I suggest trying random ip addresses?
Dont worry, after SOPA passes in a few days you wont have to worry about seeing any more tiresome internet forum discussions.
12-20 10:54: Greek development minister says Greece able to return to bond market...
The original "plan" for Greece was to return to bond "markets" in 2012. Now almost 2 years after the first GRAND PLAN to save the zEuro by bailing Greece out the first time, Greece is way deeper in the hole and, well, will probably not come back in the next couple of decades. What a success story! Can we have MORE?
The 300 Greek Political Pluto-Cleptocrats Incomes (according their official... statements
http://www.hellenicparliament.gr/Organosi-kai-Leitourgia/epiropi-elegxou...
EXminister of immigration has 1 million euros deposits in SWITZERLAND (declared of course, high incomes, no black money, but she prefers to have her money in another country and not in Greece...)
THIS IS THE 'NEW PATRIOTISM'
GREECE: THE STORY OF A COUNTRY WHER 300 'ELECTED' PLUTOCRATS OPPRESS AND SELL 9 MILLION PEOPLE
i am wearing this move....oh well just have to wait until january to be rt
"Sovereign Strength" That's teh funnah!
You mean weapons systems, right?
Or perhaps the tyranny of the minority who support their own plundering?
Don't look now, but EURCHF is leaking into the 1.21 handle. Wonder if Hilde and SNB have any Christmas surprises for traders?
http://vegasxau.blogspot.com
So if I could get free money from the ECB and sure up my capital ratio, WHY would I turn around and buy bad risk state bonds other than to maintain civil relations with them? Take the money and run boys...
A 2% move for now. Maybe the "buy the rumor, sell the news" cycle can be measured in days at this point. Maybe one day all that will matter is the news of the curent minute.
That day arrived about a year ago, friend.
The EFSF and all other 'emergency' funding mechanisms are just derivatives off of the current EMU system and if that is gunked because of the high nature of leverage in the system and good collateral has become the holy grail will it's only a matter of days before this one goes the way of a maxed out credit card.