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Europe Closes At Day's Lows As Sovereign Curves Invert

Tyler Durden's picture




 

European equities marginally outperformed credit markets on the day but both ended dreadfully as markets went bidless into the close. Ending the day the lows, having retraced over 75% of the 9/23 to 10/28 swing rally, equity and credit markets are well into bear market territory as sovereign risk morphs back into financials and on into corporates. Sovereign spreads may look 'optically' marginally improved if one focuses merely on the 10Y levels, but a little more digging shows that almost without exception sovereign spread curves all bear flattened considerably today with the short-dated risk rising dramatically relative to mid maturities as jump risks become more and more of a concern.

Equity (now 25.5% off its Feb11 highs) started to catch up to credit into the close but closing at the lows into a low liquidity low volume long weekend suggests more than a little risk aversion. Equity, Credit, and FX markets are more in sync in Europe than in the US (where stocks remain a little exuberant still) and are back to 10/05-06 levels.

And if one looks down the 10Y column - you could be mistaken for thinking it was a good day for sovereign credit (aside from Belgium and Greece - and Austria off the chart). But it was the massive underperformance at the front-end that is most worrisome as inversions are more and more likely and bear flatteners appear the trade du jour. We suspect this is as much about the unwind of the crowded short-dated higher-yield trade than an actual spec flattener trade.

Charts: Bloomberg

 

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Wed, 11/23/2011 - 13:07 | 1907197 GeneMarchbanks
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What recession?

Wed, 11/23/2011 - 13:09 | 1907207 Mr Lennon Hendrix
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Call Oliver, he knows what to do!

Based on my math, we need to, [cough] print, and based off my math, it needs to be fractionaly reserved, so [cough] that means if Europe needs $3 trillion then we need to print $30 trillion.  I spent all week on my math by the way, so give me some credit.

Wed, 11/23/2011 - 13:17 | 1907227 The Big Ching-aso
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Not a recession.     Shrinkage.

Wed, 11/23/2011 - 13:23 | 1907262 GeneMarchbanks
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Significant shrinkage.

Wed, 11/23/2011 - 16:46 | 1908246 SRVDisciple
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I was in the pool!!!

(Sorry. Had to do it. Couldn't help myself)

Wed, 11/23/2011 - 13:18 | 1907232 Cognitive Dissonance
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How many recessions does it take to make a depression?

Wed, 11/23/2011 - 13:23 | 1907261 Doomsday Profit
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Just one....but it needs to be a Triple Lindy Dip: http://www.youtube.com/watch?v=rDMMYT3vkTk

Wed, 11/23/2011 - 13:35 | 1907326 Caviar Emptor
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It's just a garden variety recession! Really!! PLease say it is, please!!!

Wed, 11/23/2011 - 13:07 | 1907199 TeamDepends
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Print print print   print print print

Printing all the way

Oh what fun it is to print

Like Weimar, Zimbabwe Oh!

Wed, 11/23/2011 - 13:22 | 1907249 TeamDepends
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Dashing through the snow

'Cause you ain't got no home

2nd verse:  The Banksters all on blow

3rd:  The Banksters and their ho's

Wed, 11/23/2011 - 13:11 | 1907211 Snakeeyes
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Belgium Dexia Debt Woes, Germany’s Debt Issuance Debacle – Obama Spares Two Turkeys (NOT Belgium and Germany)

http://confoundedinterest.wordpress.com/2011/11/23/belgium-dexia-debt-wo...

 

Wed, 11/23/2011 - 13:15 | 1907222 Jonas Parker
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He spared Biden and Pelosi???

Wed, 11/23/2011 - 13:29 | 1907293 Tsar Pointless
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C'mon, don't be so damn partisan.

It was, in fact, Boehner and Reid he spared.

You're welcome.

Wed, 11/23/2011 - 14:05 | 1907452 john39
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there is more than one Party?

Wed, 11/23/2011 - 13:11 | 1907212 Tsar Pointless
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Now that Europe is closed, that frees up the algos to focus on just the US equity markets.

Afternoon meltup, on the way!

Wed, 11/23/2011 - 13:12 | 1907214 PicassoInActions
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can we have something positive, by mistake i picked up eur/chf at 1.2301 and losing big.

As soon as i recover you can have your negative market back.

Please some1 call Benya da Men and ask him to do something.

Wed, 11/23/2011 - 13:18 | 1907231 The Big Ching-aso
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I think the rumor mill is grinding to a halt.    

Wed, 11/23/2011 - 13:19 | 1907234 PicassoInActions
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that's sux

i need only 30 pips to be on the green and then i am out for vacation.

Can we start some kind of rumor that SNB is about to intervene at 1.2.3.....

 

 

Wed, 11/23/2011 - 14:59 | 1907700 earleflorida
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no it's not - just temporarily in neutral,... being put in reverse for christmas rally

no really?

Wed, 11/23/2011 - 13:13 | 1907216 FranSix
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Credit Markets deteriorate on the heels of MF Global:

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/23/bloomberg_ar...

Wed, 11/23/2011 - 13:13 | 1907217 slaughterer
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I would expect an EOD short-covering rally on the NYSE as tomorrow is a meeting between Sarkozy, Merkel, and Draghi, where Draghi was asked by Merkel to bring along "new ideas."

Wed, 11/23/2011 - 13:14 | 1907218 Cone of Uncertainty
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A turkey for me and a turkey for you.

Let's eat turkey in a big brown shoe.

Wed, 11/23/2011 - 13:35 | 1907327 Doomsday Profit
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A Sandler classic....thanks for the reminder: http://www.youtube.com/watch?v=-z27FKwupds

Wed, 11/23/2011 - 13:14 | 1907219 junkyardjack
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Cool, time for the US ramp up...

Wed, 11/23/2011 - 13:17 | 1907223 slewie the pi-rat
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bear flatteners?

right along the wall, there, with the screws, hooks, and hangers, sir!

next to the beer goggles. just left of them...

Wed, 11/23/2011 - 13:20 | 1907235 Captain Kink
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"bear flattener" alsways makes me think of those bear-hide rugs, head still attached, mouth agape... wondering what the hell happened.

Wed, 11/23/2011 - 13:42 | 1907364 slewie the pi-rat
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since it's a bear, it probably wasn't trying for a nickel in front of a...

...oh! the animal spirituality of it!

 

Wed, 11/23/2011 - 13:16 | 1907225 Mr Lennon Hendrix
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While Obama makes a mockery of our political system and "bypasses Congress to pardon a turkey".  He is the fucking joker!

Wed, 11/23/2011 - 13:36 | 1907335 Caviar Emptor
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Two turkeys, bud. Don't you read?? 

Wed, 11/23/2011 - 13:59 | 1907424 Mr Lennon Hendrix
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Not as well as Obama does.

Wed, 11/23/2011 - 13:18 | 1907228 Dr. Engali
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It's going to be interesting to see what happens in the European markets on a day when the U.S. markets are closed.

Wed, 11/23/2011 - 13:19 | 1907233 treemagnet
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Wheres my crash?

Wed, 11/23/2011 - 13:24 | 1907265 El Oregonian
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Germany told the other EU members "It's time for Tanksgiving. If you all don't start paying up we're going to send our Tanks.

Wed, 11/23/2011 - 13:33 | 1907322 Cone of Uncertainty
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Someone please pass the gravy.

Wed, 11/23/2011 - 13:54 | 1907402 pmcgoohan
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Dont we even need a rumour anymore?

Wed, 11/23/2011 - 14:21 | 1907512 Texas Fold-em
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The only prescription is...MORE COWBELL!

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