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Euro VIX Jumps As ECB Pumps

Tyler Durden's picture


Depending on whether you look at broad liquid risk markets or narrow manipulated 'repressed' illiquid markets, your take on today's European action will be different. Equity markets were crushed. Corporate and Financial credit spreads blew wider. Volatility (Europe's VIX) exploded over 36%. So far so good? But Italian and Spanish bonds rallied. It seems EUR96 was the line in the sand that the ECB (or their proxy banks) decided was enough for Spanish 10Y bonds and that was where they were defended to (though we are suspicious why ECB would step in now after 4 months absence). There was eventually some notable divergence between underperforming Spain and outperforming Italy by the close (+40bps on the week vs +27bps). We suspect that much of the sovereign outperformance was a combination of Sovereign CDS-Bond basis traders (buying bonds and buying protection in Spain to lock in that wide spread) and a replay of the short financial credit, long domestic sovereign credit trade (as in banks will underperform the sovereign if things hit the fan/wall). That is the flow that was evident when looked at across markets. All in all, a terrible end to an awful week and hopefully we have helped explain why sovereigns outperformed (technicals) as CDS remain at wides and stocks at lows.

Stocks and credit plunged...


Euro VIX surged...

and while sovereigns looked like they improved...

but the CDS-Cash basis is the real signal (not real money buyers)

and the Financials vs Sovereign trade was very active early on (and once it had been put on...look how the sovereigns leaked back wider...)

it appears like it was sovereign basis traders and financial-sovereign pairs traders that were to blame for the optical improvement - don't believe your eyes.

Will Boaz Weinstein claim JPM and Spain scalps?

Charts: Bloomberg

Your rating: None

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Fri, 06/01/2012 - 12:08 | 2484481 the 300000000th...
the 300000000th percent's picture

Send more unicorns!!

Fri, 06/01/2012 - 12:43 | 2484617 Temporalist
Temporalist's picture

Fortunately the markets have priced in unicorns.

Fri, 06/01/2012 - 12:09 | 2484483 Cognitive Dissonance
Cognitive Dissonance's picture

".....As ECB Pumps....."

But.....but....but I thought the ECB checked to the Fed?

Looks like everyone is pumping on the sly. Too bad it won't help the sovereign Titanic at this point.

Fri, 06/01/2012 - 12:10 | 2484498 LawsofPhysics
LawsofPhysics's picture

Yes, and yet commodities go down (largely on a strong dollar), gee you would think that the central banks and financial houses have figured out how to "print" resources.  Just the same, I think I will continue to take the other side of that trade.

Fri, 06/01/2012 - 13:36 | 2484944 johngaltfla
johngaltfla's picture

Not only won't help but can't help because the pace of injection is too low. Check out the charts of seven major European equity markets to see what has happened since the 2008-2009 tops in some of them which tells everyone that Europe is DOOMED:


7 Charts Indicate Why Europe is Doomed

Fri, 06/01/2012 - 12:08 | 2484486 Al Huxley
Al Huxley's picture

Really digging this rhyming theme in the headlines today.

Fri, 06/01/2012 - 12:08 | 2484487 firstdivision
firstdivision's picture

ECB prints so DXY falls 0_o 

Fri, 06/01/2012 - 12:12 | 2484502 piliage
piliage's picture

Gosh. And here I thought that the EU had fixed the banking problems in March and this was simply profit taking... silly me. (does this really need a sarc tag? I hope not...)

Fri, 06/01/2012 - 12:12 | 2484507 El Oregonian
El Oregonian's picture

Reminds me of a 60's cereal commercial: "VIX are for Kid's!"

Fri, 06/01/2012 - 12:12 | 2484508 LawsofPhysics
LawsofPhysics's picture

Lots of real sellers, no real buyers of the paper shit.  Wake me when the bids are zero and there are some real consequences for the bad behavior of these paper-pushing fucks. same as it ever was.

Fri, 06/01/2012 - 12:12 | 2484510 slaughterer
slaughterer's picture

Big thing expected over weekend, which will be amplified on Mon./Tues. trading.   Advise unwinding directional EZ sov and financial shorts, as well as covering EUR shorts before going home for weekend.      

Fri, 06/01/2012 - 12:20 | 2484538 Itch
Itch's picture


Fri, 06/01/2012 - 12:29 | 2484576 Cognitive Dissonance
Cognitive Dissonance's picture

I don't think they will "fix" this thing just yet. They need to flush several dozen more S&P points before the "print now" outcry provides enough political cover. 

Fri, 06/01/2012 - 12:13 | 2484514 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

Tyler Durden demolishing someone called Brian Wesbury on Twitter. It's like a martial artist redirecting his enemy's attacks against him.

Fri, 06/01/2012 - 12:16 | 2484518 blueskies123
blueskies123's picture

The PPT is making sure the US markets don't fall further today, they have drawn a line in the sand with the lows reached at 11AM and everytime the markets keep bumping up against those lows, they get pushed back, more algo bots buy to stop the shareprices from falling. I don't know why they're fixed on stopping the S&P500 from falling below 1283 and NASDAQ bottom today is 1264, no matter what. so those must be the fixed numbers they've programmed into the system. right PPT staff?

Watch the markets recover in a slowmo meltup starting NOW and then a flurry of last minute selloffs at the end that the PPT couldn't stop.

Fri, 06/01/2012 - 12:17 | 2484525 Roland99
Roland99's picture

Is that why the IBEX shot up right before close then?


Or have those across the pond finally caught on to that 5min. pre-close melt-up that's oh-so-prevalent here?


Fri, 06/01/2012 - 12:17 | 2484528 monopoly
monopoly's picture

Dollar moving lower, Hmmmmm!

Fri, 06/01/2012 - 12:17 | 2484531 fonzannoon
fonzannoon's picture

Former Red Sox pitcher Curt Schilling says he poured much of his personal fortune into his Providence video game company — and that apparently included a stash of gold coins.

In February, the day after 38 Studios released its first game, Schilling posted 3,200 gold coins — worth roughly $5 million at current prices — as collateral for a loan from Bank Rhode Island in Providence, according to financing statements filed in Massachusetts.

Fri, 06/01/2012 - 12:19 | 2484535 Grimbert
Grimbert's picture

Berlusconi says Bank of Italy should print Euros if the ECB won't:




Fri, 06/01/2012 - 12:19 | 2484536 Shizzmoney
Shizzmoney's picture

Check out this really weird Chinese Euro 2012 commerical that is showing all type of violent and predictive "End of World" and "False Flag Attacks on London Olympics" images:


Watch this video before the YouTube secret police take it down. I've seen a few versions of this Chinese commercial for the Euro 2012 Cup over the last few weeks, but it never stays up for more than a few days before it suspiciously disappears.

For the last few years, rumors suggested that the London Olympics will be the location for a false flag attack. The video above uses symbolism to expose the potential incident.

Fri, 06/01/2012 - 12:22 | 2484547 Yellowhoard
Yellowhoard's picture

If we don't get some kind of rabbit out of the hat today before the close, this market is going to crash into the bell.

Nobody is going to want to be long going into the weekend.

Fri, 06/01/2012 - 12:27 | 2484561 razorthin
razorthin's picture

All eyes R on AMERIKA, AMERCIA and the SPX 200 Day MA.  Breach with conviction and it is lights out for everyone.

Fri, 06/01/2012 - 12:29 | 2484578 Lionhead
Lionhead's picture

Passengers are boarding the lifeboats right now. Listen for that "sucking sound." http://tinyurl.com/78ucuj4 

Fri, 06/01/2012 - 13:05 | 2484726 Cupid Stunt
Cupid Stunt's picture

Lehman Weekend ?

Fri, 06/01/2012 - 13:36 | 2484945 CvlDobd
CvlDobd's picture

My subscribers are losing their ass on my long stocks reco this AM.

Good thing I shorted stocks priced in gold at that time.

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