This page has been archived and commenting is disabled.
Euro Meanders In Overnight Session As Record ECB Deposit Soak Up Entire LTRO
There was not much to note in the overnight session, where aside from artificial market-boosting developments out of China (noted here) which have carried over into a risk-on mood for the US market, however briefly, Europe has been virtually unchanged following two quiet auctions by Austria and the Netherlands. Austria sold a total of €660m of 4% 2016 bonds, and €600m of 3.65% 2022 bond. Avg. yield 2016 bond 2.213% vs 1.96% in the previous auction, in other words the shorter borrowing costs roses, and the longer ones fell. Holland sold a total of €3.105b of 0.75% 2015 bonds; the target was up to €3.5b. with an average yield 0.853%. End result EURUSD is virtually unchanged for the day at 1.2770 as of this writing despite some serious short covering earlier (as expected), while the Italian BTPs remain unch at 7.15%. What is probably more disturbing and is to be expected, is that now virtually all the free cash from the December 21 LTRO (all €210 billion of it) and then some has been allocated to the ECB, where the Deposit Facility usage rose by nearly €20 billion overnight to a new record of €482 billion, €217 billion more than the December 21 notional. The question that should be asked is just what do banks know that lemming long-only investors don't. Hint - ask UniCredit.
And a recap summary courtesy of Bloomberg's Daybook by James Halloway:
- Treasuries lower within last week’s 1.87%-2.04% range, before $66b in note and bond auctions begin with $32b 3-yrs.
- WI 3-yr yields 0.39%; notes sold last month drew 0.352%, second-lowest on record, and record-high 3.62 bid/cover
- German two-year note yields matched a record low amid speculation a meeting of Merkel and IMF chief Lagarde will fail to stem the region’s debt crisis; AAA-rated Norway’s 10-yr note yield fell to the lowest since at least 1992
Fitch’s head of sovereign-debt ratings sees a “significant chance” of an Italy rating downgrade, says IMF’s Greece program doesn’t seem to be working; unlikely to downgrade France this year
- Stocks rallied, commodities gained after a report overnight showing China’s import growth fell to a two-year low in Dec., spurring speculation the nation may act to spur growth
WHAT TO WATCH
- The departure of White House Chief of Staff William Daley reflects Obama’s choice to abandon a strategy of seeking accommodation with congressional Republicans and his critics in corporate America
- Wall Street’s biggest firms, facing a slump in investment banking revenue, are considering freezing compensation levels for some junior bankers, according to people familiar with the deliberations
- 7:30am, NFIB Small Business Optimism, Dec.
- 10:00am, IBD/TIPP Economic Optimism, Jan.
- 10:00am, JOLTs Job Openings, Nov.
- 10:00am, Wholesale Inventories, Nov., est. 0.5% from 1.6%
- 10:30am, Fed’s Williams to speak on economy in Vancouver, Washington
- 11:00am, Fed to purchase $1b-$1.15b TIPS in 1/15/2018 to 2/15/2041 range
- 11:10am, Fed’s Pianalto speaks on labor markets in Ohio
- 11:30am, U.S. to sell 4-week bills, $25b 52-week bills
- 1:00pm, U.S. to sell $32b 3-yr notes
- 1:00pm, Fed’s George speaks on economic outlook in Kansas City
TREASURY YIELD OUTLOOK
- Overnight, yields rose modestly, led by 7-yr +1.4bps; majority of rise came in Asian trading, where sentiment was boosted on perception U.S. growth is strengthening and that slowing Chinese trade would lead to policy easing, according to Bloomberg analyst TJ Marta
- Little scheduled risk; Treasury $32b, 3-yr note auction might provide some volatility
- 2-yr yield slipping from Friday high, consolidating between 50-DMA 0.2486%, 100-DMA 0.2396%, support Dec. low 0.2141%, Nov. low 0.2067%, Sept. record low 0.1431%; resistance Jan. high 0.2798%, Dec. high 0.2943%, Nov. 2010 low 0.3118%, Oct. high 0.3167%, June low 0.3208%
- 5-yr yield consolidating near lows for year; support Dec. 19 low 0.7943, Sept. record low 0.7605%; resistance 50-DMA 0.8909%; 100-DMA 0.9282%, psychological 1.00%, Oct. high 1.22%
- 10-yr yield still consolidating just below 2.00%; support Dec. 19 low 1.80%, Oct. 4 low 1.72%, Sept. record low 1.67%; resistance 50-DMA 1.98%, 100-DMA 2.02%, Dec. high 2.16%, Oct. high 2.42%
- 30-yr yield consolidating just above 3.00%, 50-DMA 3.00%; support Dec. 19 low 2.78%, Oct. low 2.69%; resistance 100-DMA 3.11%, Dec. high 3.15%, Nov. high 3.19%, Oct. 28 high 3.48%; *2/10 curve consolidating in 170s around 50-DMA 173bps; support Dec. 19 low 156bps, Oct. low 147bps; resistance 100-DMA 178bps, Dec. high 189bps, Nov. high 190bps, Oct. high 211bps
CURRENCY MARKETS
- Euro and sterling gain vs. dollar as risk sentiment improves after Fitch says euro area breakup is not base case scenario and it’s not expecting French downgrade this year
- Focus on unfolding developments on Greek PSI and meeting between German Chancellor Merkel and IMF Chief Lagarde in Berlin
- EUR/USD +0.2% to $1.2796
- Dollar Index -0.2% to 80.83
- Dollar liquidity tensions continue to ease and investors are turning complacent on outlook for global growth: BOTM
- Encouraging to hear Merkel and Sarkozy’s new push to revive economic growth and jobs in euro zone; euro attempting relief rally on improved risk sentiment, extreme short speculative positions: BOTM
- Risk sentiment also boosted by prospects of more monetary easing in China: BOTM
- 5948 reads
- Printer-friendly version
- Send to friend
- advertisements -



JP Morgan (JPM) is prepared to try and take over another North American lending group according to the co. CEO
Any idea who this is?
"JP Morgan (JPM) is prepared to try and take over another North American lending group according to the co. CEO
Any idea who this is?"
Yep...the Fed. Oh wait, scratch that...that was 2008's takeover for JPM.
And just what would happen to commodirty prices if this money was not parked on deposit.
The only alternative to skyrocketing food costs is skyrocketing gold and silver.
Nuff said. It's only a matter of time...
maybe the euro meandered but pm's bonered.
the market has gone psycho and doesnt care about all this. if you all are trading on these fundamentals you are insane too. Yesterday I posted that there was an upward triangle in ES with likely breakout to the upside and then SPX will test 1300. Also that Netflix and BAC would continue rallying. ZHers didnt like those comments because they weren't bearish. Netflix up BIG yesterday and BAC modestly up, big today in premarket. Look at ES today too. you all need to brush up on your technical analysis skills and stop having faith in the fundamentals for short term trades. I dont even want to know how many ZHers are losing money trading on news developments and fundamentals.
I am a novice when it comes to financial markets (economics professor and construction manager by trade) but it seems like there is a lot of pump and dump going on. Seems like smoke and mirrors, hope and dope. I say this because I look at the employment and get some basic data from ZH (for example gas sales down 14% in December) and it just does not sustain a bull market.
The employment labor force has been down 5 strait months and actual employment turned negative (NSA) in December.
Where is the actual growth of physical product coming from?
The borrowing ($20 billion) is for cars and credit.
Please explain further where the optimism is coming from? Ben Bernanke printing press?
"Please explain further where the optimism is coming from?"
Ahh yes, without even realizing it, you have bit the MSM hook. There is no "optimism". The billions in retail outflows from mutual funds continue, which means any ramps are a combo of short squeezes and low volume 40x leveraged HFT ramps utilizing Brian Sack's fresh fiat as well as ECB backdoor (read: up the middle classes "backdoor") bailouts. The fact Eurobanks continue to park record deposits with the ECB is perfect canary in the coal mine fear/reality indication.
I am not optimistic at all about economic developments. but i separate that bias from my trading decisions. all my trading decisions are based on charts. thats it. here is a good book to learn solid technical analysis: http://www.amazon.com/Technical-Analysis-Financial-Markets-Comprehensive/dp/0735200661
One swift move by the fed or ecb could destroy any position you are in. Why risk it?
the price action and volume in the charts can help you anticipate their actions. you dont think the major market movers are in bed with the fed and ecb? they know exactly what the central banks will do and the price action in the charts before their decisions gives hints to those not in the club but paying attention
I think you're right on one thing - fundamentals matter more for long-term investors, not short-term investors.
However, the thing is fundamentals can jump up and bite you in the ass when you least expect it. If a company is fundamentally insolvent - maybe it's not noticed today or tomorrow. But at some point - people are going to notice, and technicals aren't going to save you then.
The technicals in price action and volume will give you warning signs before anything significant happens.
Its a bank run behind the scenes. Fiat ist transferred from Italian and French banks to banks in Germany, the Netherlands and Finland and these banks directly "park" the fiat at their national banks resp. the ECB. Target2 balances seem to confirm that. The German national bank has become a net borrower already.
Nobody seems to be talking about it but German 3 month bonds have dropped NEGATIVE since yesterday!
http://www.bloomberg.com/markets/rates-bonds/government-bonds/germany/
And in real news, just as ZH and many readers knew, Vampire Squid clients [having been Stolpered] wake to see another day of higher EURUSD prices while short. Where's the stop Tom? {so we know where to get short]
http://vegasxau.blogspot.com
How come money is drained at the same time from the European banks? ECB refi-operation drained another 20 bill. euro. Is it because the banks don´t need the money or can´t put up the required collateral (quality requirements being so low and all)? Anyone has any theory?
UNICREDIT IS ONE BIG CONFUSION.
So much for the "end of year window dressing" and other nonsense arguments for the ever-increasing deposits at the ECB. It looks like no one trusts anyone in Euroland, and the banks learned from Lehman what to do when it's time to hide.
That's healthy, indicative of a smoothy functioning financial system, and certainly bullish.
what is BOTM?