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Euro Bailout Halflife: 48 Hours

Tyler Durden's picture




 

10Y US Treasuries have now successfully eradicated all the post-summit losses and are well on their way to last week's low yields as the reality (that we unendingly slammed into people's heads) appears to be hitting managers minds. 2s10s30s has also retraced the entire post-summit shift and the EUR is also getting very close to unch (from pre-summit). This leaves only ES (and credit to a lesser degree) as the odd man out having retraced only 50% of the post-summit euphoria.

The 10Y has recovered all its losses post-summit (as has also 10Y Bunds having already noted Spanish and Italian just keep losing ground). The TSY butterfly has lost its move post-summit entirely suggesting more downside in equities.

And credit and equity markets are back in sync with the late-day technical squeeze in HY from Friday eradicated now.

From a broad risk asset perspective, the intervention last night would have 'normally' suggested significant strength in ES (and other risk assets) but it seemed the risk-off sentiment was far greater than any correlation-driven strength and as the day has worn on, CONTEXT has leaked back (as risk assets in general have dropped back to sync with ES).

So - in summary - every asset class that was designed to benefit from the Euro Summit (rates, sovereign debt, & Italian banks for example) has given up its gains (France CDS widening significantly and EFSF deteriorating also) and the most shocked and still likely scarred (psychologically) equity and credit indices have room to drop here to catch up with that reality - whether the recession on/off switch is triggered or the 'must-buy-to-avoid-career-risk' trade is on.

Charts: Bloomberg

 

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Mon, 10/31/2011 - 11:49 | 1828688 jcaz
jcaz's picture

The bond market never lies.....

Mon, 10/31/2011 - 12:00 | 1828725 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Especially when Bernanke is buying every bond on the market.

Mon, 10/31/2011 - 12:14 | 1828765 ratso
ratso's picture

As of today, Finland is making provisions to exit the Euro.  Holland and Germany are also looking for the exit door.

Mon, 10/31/2011 - 12:24 | 1828788 malikai
malikai's picture

Citations, please.

Mon, 10/31/2011 - 12:26 | 1828796 ratso
ratso's picture

The source is yle.fi

Mon, 10/31/2011 - 12:35 | 1828812 Mike2756
Mike2756's picture

yep, it's there.

Mon, 10/31/2011 - 12:54 | 1828864 malikai
malikai's picture

..and so the next stage begins.

Mon, 10/31/2011 - 18:08 | 1829881 deebee
deebee's picture

he can't keep up with PIIGS bonds

Mon, 10/31/2011 - 12:08 | 1828738 Popo
Popo's picture

Agreed,  it has been said many times:  When bonds and equities disagree -- always listen to bonds.

(The reason being is that bond traders are smart fuckers. Equity portfolio managers by contrast seldom understand the macro picture,  are too focused on granular equity movements,  listen too closely to management or just happened to have rich daddies.  ie:  They are not smart fuckers.)

The equity markets are going to get fleeced in short time.

Mon, 10/31/2011 - 12:11 | 1828757 rajat_bhatia
rajat_bhatia's picture

All you idiots out here. Its just profit booking. Dont you know Le Bernank hates deflation?

Mon, 10/31/2011 - 12:17 | 1828770 LawsofPhysics
LawsofPhysics's picture

Glad I booked some on Friday.

Mon, 10/31/2011 - 11:51 | 1828694 GeneMarchbanks
GeneMarchbanks's picture

Stupid idiot Merkel. Who thought Germans were this dumb...

Mon, 10/31/2011 - 11:58 | 1828718 SheepDog-One
SheepDog-One's picture

What surprises me most is this total BS plan hinged to free Chinese money actually WORKED for as long as 48 hours!

Mon, 10/31/2011 - 11:58 | 1828719 Curtis LeMay
Curtis LeMay's picture

No shit, eh?

One would have of course believed so. How couldn't one?

Perhaps, Frau Doktor Kanzlerin does not have the best interests of the German people at heart?

Maybe it is high time to take away Angie's checkbook - before it is too late?

Mon, 10/31/2011 - 12:20 | 1828781 Zero Govt
Zero Govt's picture

the Germans aren't dumb, probably the smartest country in Europe

...German politicians and bankers ...now they're as dumb fuk stupid as every other of their class across the globe

Mon, 10/31/2011 - 11:51 | 1828696 Momauguin Joe
Momauguin Joe's picture

Guess those Greek pension givebacks didn't go over so well..

Mon, 10/31/2011 - 11:51 | 1828699 Dick Darlington
Dick Darlington's picture

Same ol same ol, equities always first to jump to (usually wrong) conclusions and always last to "get it".

Mon, 10/31/2011 - 11:51 | 1828701 HoofHearted
HoofHearted's picture

Newet t-shirt..if WB7 can figure out a nice pic of Merkel...

I wasted a trillion euros, and all I got was this lousy depression.

Mon, 10/31/2011 - 11:58 | 1828720 Overflow-admin
Overflow-admin's picture

"Trick or threat the IMF" with Merkel and Sarkozy is sooo beautiful! Buybuybuy!

Mon, 10/31/2011 - 11:52 | 1828702 Caveman93
Caveman93's picture

Damn! I can hold an erection longer than that! That's without Viagra or Super Yohimbi Powder!

Mon, 10/31/2011 - 11:55 | 1828712 GeneMarchbanks
GeneMarchbanks's picture

The person who's erection you're holding probably wants it back by now.

Mon, 10/31/2011 - 12:01 | 1828731 TheLooza
TheLooza's picture

No, it's cool, just a few minutes longer.

Mon, 10/31/2011 - 12:11 | 1828760 Sudden Debt
Sudden Debt's picture

Rubber bands aren't good for ya you know.

Mon, 10/31/2011 - 12:25 | 1828791 Zero Govt
Zero Govt's picture

imagine how limp the dicks at the EC and ECB ?

Mon, 10/31/2011 - 11:53 | 1828706 jcaz
jcaz's picture

PS-  I'm tired of that "must buy to avoid career risk" CNBC theory-  if that were the case, stocks could be bid to infinity by the end of the year, and you as a fund manager would have to perform at infinity plus 1 to gain any ground back- yeah, that's likely to happen-  you've underperformed the index all year, but you're gonna turn the jets on NOW, uh-huh.

A more logical way to gain ground would be to stay in cash, and let stocks decay around you, thus improving your relative position, but then that method doesn't sell as much advertising on CNBC.....

Mon, 10/31/2011 - 11:56 | 1828714 SheepDog-One
SheepDog-One's picture

Time to tie more carrots to sticks again I guess.

Mon, 10/31/2011 - 11:57 | 1828717 Frank N. Beans
Frank N. Beans's picture

so when is the ES going to come to the same conclusion as treasuries?  didn't they get the memo?

Mon, 10/31/2011 - 11:59 | 1828724 SheepDog-One
SheepDog-One's picture

Full retard equities are still busy playing with turds in the sand box.

Mon, 10/31/2011 - 11:59 | 1828722 hackettlad
hackettlad's picture

You might speak to soon

Mon, 10/31/2011 - 11:59 | 1828726 lolmao500
lolmao500's picture

So when do they downgrade France already?

Mon, 10/31/2011 - 12:05 | 1828740 Cangoroo
Cangoroo's picture

Not too far away

Mon, 10/31/2011 - 12:22 | 1828784 Neidhammel
Neidhammel's picture

In case this happens Germany will reintroduce the Deutschmark immediately.

Mon, 10/31/2011 - 12:28 | 1828799 lolmao500
lolmao500's picture

Riiiiiiiiight. Not with Merkel and their ilk in power.

Mon, 10/31/2011 - 12:01 | 1828732 unemployable
unemployable's picture

how about must buy to avoid homelessness

Mon, 10/31/2011 - 12:03 | 1828735 ZeroPower
ZeroPower's picture

Absolutely no volume today in equity futures (ES, NQ). Seems suspect, funds probably wanna show some exposure especially the long-onlys since it is month end.

Dollar futures looking great however.

 

Mon, 10/31/2011 - 12:05 | 1828739 SheepDog-One
SheepDog-One's picture

Now bonds are ignoring 'Yen-tervention'...uh oh.

Mon, 10/31/2011 - 12:07 | 1828746 thunderchief
thunderchief's picture

Fiat projectile vomit.

All over everything, including the PM's for god's sake.

When are these markets going to price this cave in to the PM's

They should be soaring to the moon.

This is truely Fiat projectile vomit.

Mon, 10/31/2011 - 12:08 | 1828748 Mister Ponzi
Mister Ponzi's picture

Just a quick thought: Could it be that the outperformance in credit constitutes a paradigm shift? In the last months there were a lot of discussions about safe haven assets and more than once the question was posed whether a highly diversified corporate bond portfolio may be indeed a safer investment (in terms of default risk) than most government bond investments, but at the same time with a historically high spread premium. Here in Europe, we see a lot of investors with minimum yield requirements shifting into corporate bonds at the moment. So, the divergence of credit performance may be explained by these asset allocation effects.

Mon, 10/31/2011 - 12:09 | 1828749 s2man
s2man's picture

Gold has not retreated to pre-summit levels, yet.

Mon, 10/31/2011 - 12:11 | 1828758 common_sense
common_sense's picture

huh huh...careful...bear trap on the horizon...

 

everything is UP UP UP...easy now:  new G20 meeting to avoid implosion in Eurozone, USA, CHina , Japan, Europe...everyone are afraid about financial crisis, so, for now the code is: UP UP UP...with NO SOLUTION AT ALL. BUT not solution isnt for ever...

Mon, 10/31/2011 - 12:13 | 1828763 marcusfenix
marcusfenix's picture

that was fast...somebody at the global financial information manipulation and propaganda ministry of truth is getting a pink slip...maybe even several somebody's.

although it probably wasn't their fault what they threw didn't stick to the wall for long...the politicians didn't do a particularly good job selling it.

Mon, 10/31/2011 - 12:14 | 1828764 Royal Fleming
Royal Fleming's picture

Its nice to see negative speculation...but I caught the whole move last nite, with an entry buy above price...which I do everyday at asia open...SSI was at 17 to 1 ..long to short...what has to happen, is more small interventions to show the world that BOJ means biz. Just like the SNB did with a floor on eur/chf at 1.20 ...Personally I have caught the majority of the last 4 interventions in yen now...

Mon, 10/31/2011 - 12:19 | 1828774 catch edge ghost
catch edge ghost's picture

DUDE. What part of Buzzkill do you people not understand?!! DAMN. 

I'll have no more of it I tell you. I'll have 1400 S&P.  Okay. 1375, but that's it, by year's end. 

Think of the children.

Mon, 10/31/2011 - 12:26 | 1828793 Tsar Pointless
Tsar Pointless's picture

I know, right?

You failed to include the children disguised as adults - the majority of the US population who make everyday Halloween in my book - in your thoughts.

Only terrorists want the stock markets to go down. Evil doers!

Mon, 10/31/2011 - 14:29 | 1829224 TruthInSunshine
TruthInSunshine's picture

Everything is fine in equity markets.

Japan's Nikkei is down 94% in real terms since its 1989 highs, and the U.S. major indexes are back where they were in 1999 in nominal terms and back to where they were in 1984 in inflation adjusted (i.e. real) terms, and the Chinese equity markets have begun a rapid descent.

It's all good. Be the buy and hold bagholder, because everyone who does accordingly willl end up like Warren 'Thanks for bailing my criminal ass out, taxpayers' Buffett.

All who follow in Buffett's footsteps, buying Coca-Cola, Disney, sheetriock manufacturers and some mundane ice cream manufacturer (the name of which escapes me), will retire as rock stars, pimps and billionaires. It's so easy (and non-rigged so as to never have a chance of crucifying most who dare to invest-gamble against the black box algos, HFT scalping/frontruniing/arbitraging machines and clients of expert networks) that a cave man can do it.

Mon, 10/31/2011 - 12:19 | 1828775 Caviar Emptor
Caviar Emptor's picture

Bwahaha!

Nobody escapes the curse of Ponzi risen from the dead! He has plotted his revenge on global financialists for nearly a hundred years since the collapse of his scheme in 1920. And he wants to suck their blood! All he has to do is bite financiers, bankers and central bankers and he recruits them into his underground network of conspirators who then rig their evil spider web to snag the unsuspecting, mesmerized public. He teaches them his chant "buy...buy...buy!" and they blindly follow, turning over their life savings with a smile. He has grown so powerful he can convince even gurus, even regulators, central bankers and even national leaders! And then he hooks them for life as the charge for keeping them in the game is....Blood!!!

Bwahaha!

Mon, 10/31/2011 - 12:21 | 1828782 boiltherich
boiltherich's picture

Euro Bailout Halflife: 48 Hours

And it goes so well with Japanese yen selling which seems to have a half life of 18 hours.  From 75.5 to 79.9 overnight and already this morning back to 77.79.  This looks a lot like TSHTF again.

Here is what was reported at Barrons, the analysis of MFG by Sandler O'Neill & Partners September 22.  It ends with:

"...MF Global's transaction volumes have a higher correlation with CME Group volumes than volumes from other exchanges. Our volume estimate for MF Global assumes a 4% increase in exchange-traded volumes to 598 million contracts.

We are reducing our fiscal 2012 and 2013 EPS estimates to 30 cents and 60 cents from 46 cents and 76 cents, respectively. We are trimming our price target to $8 from $9 to reflect the decline in peer valuations since we last updated our model.

Our revised price target is based on 1.0 times tangible book value of $8.12. There is no change to our Buy rating.

-- Richard Repetto
-- Mike Adams

http://online.barrons.com/article/SB50001424052702304902904576586752069681500.html

Shouldn't there be consequences for such "analysts" when they issue rosy projections and buy ratings on zombie corporations?  Part of the reason we are in the mess we are is paid for analysis that at best sugar coats the truth and at worst is utter fiction.  Oh I forgot, all analysis comes with a link to a disclaimer.

 

Mon, 10/31/2011 - 12:29 | 1828802 DoChenRollingBearing
DoChenRollingBearing's picture

Of course there should be consequences!  Corzine was rumored to be heading for work with the Obama administration, MF Global could not complete a bond deal with buyers unless Corzine STAYED with MF.

CORZINE should suffer some consequences!  Where are the OWS people and HATERS OF THE RICH screaming for Corzine's head now that he walks away with a $12,000,000 bonus?  Where are you?

Mon, 10/31/2011 - 12:25 | 1828789 JR
JR's picture

Bloomberg yesterday:

MF Global’s futures unit earns interest income from the collateral it holds to back its customers’ trades. That revenue has been cut as the Federal Reserve target interest rate on overnight loans has been between zero and 0.25 percent since late 2008. The firm reported interest income of $113.2 million in the quarter ended in September. When rates were at 5.25 percent in 2007, the company earned $1.77 billion in the quarter ended in March. MF Global also makes money by charging fees for brokering trades at futures and options exchanges.

http://www.bloomberg.com/news/2011-10-29/mf-global-s-board-said-to-be-meeting-today-to-discuss-selling-the-company.html

Mon, 10/31/2011 - 12:29 | 1828790 Caviar Emptor
Caviar Emptor's picture

The world has changed, tender lambs. The guarantee to bail out the world, aka the Bernanke-Trichet put along with the Obama-Merkozy call, is no more. Greek sov haircuts and the MF Global bankruptcy signal a sea change in psychology where safety will come first. Risk is now more than just "Risk :-)".  And fiscal stim is hogtied by the backbenchers of indecisive "givernments". Austerity looms large. It has become all too real on this, the spookiest day of the calendar year. 

Mon, 10/31/2011 - 12:36 | 1828815 Zero Govt
Zero Govt's picture

Spookey indeed... spooks in Brussels, spooks in banks, spooks in our Govts and spooks in the financial markets

the spookey Ghosts of Christmas past (2008) coming back to haunt us ..should have killed the zombies back then but no, they kept the walking dead

Mon, 10/31/2011 - 12:55 | 1828871 Caviar Emptor
Caviar Emptor's picture

The resurection of the zombies......

Mon, 10/31/2011 - 12:27 | 1828797 lizzy36
lizzy36's picture

Well according to the FT the EFSF is already scaling back their next bond issue due to "lack of demand". Exactly how the HELL are the going to get to $1T if they can't even get off a EUR 5B bond?

The bond from the European Financial Stability Facility will only target €3bn, instead of €5bn, and will be in 10-year bonds rather than a 15-year maturity because of worries over demand. A 10-year bond is more likely to attract interest from Asian central banks than a longer maturity.

One banker said: “There is so much uncertainty over the EFSF that it will be much harder to sell than it was earlier in the year, when we saw massive demand from European funds and Asian accounts. Japan and China bought in big size earlier in the year. We are not sure we are going to see that type of demand this week.”

http://www.ft.com/intl/cms/s/0/cfe1b102-03d2-11e1-bbc5-00144feabdc0.html#axzz1cNRC7iDG

Mon, 10/31/2011 - 12:31 | 1828805 TruthInSunshine
TruthInSunshine's picture

Well according to the FT the EFSF is already scaling back their next bond issue due to "lack of demand". Exactly how the HELL are the going to get to $1T if they can't even get off a EUR 5B bond?

 

Myanmar.

It's the next big thing.

Myanmar is going to backstop all EU Member sovereign debt and derivative exposure thereof.

Mon, 10/31/2011 - 12:49 | 1828848 Strider52
Strider52's picture

I heard it was the Grand Duchy of Fenwick that was going to backstop all Sovereign Debt. (/little-known Mouse That Roared reference off)

Tue, 11/01/2011 - 02:10 | 1830944 Hephasteus
Hephasteus's picture

EFSF = Groupon IPO.

Mon, 10/31/2011 - 12:31 | 1828806 monopoly
monopoly's picture

Gold holding very well here, gotta have corrections. 

And as far as the mighty dollar..."Dead Man Walking", move aside.

Mon, 10/31/2011 - 12:39 | 1828820 The Knights Who...
The Knights Who Say Ni's picture

'Euro Bailout Halflife' is an anagram of 'A Beautiful Hero of Ill'.

Mon, 10/31/2011 - 13:12 | 1828906 Sokhmate
Sokhmate's picture

Just about the half life of Xenon - 133m

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