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European Exuberance Fades In Credit
The last two days have seen a very dramatic rally in senior financials credit risk in Europe. While the rest of the credit and equity complex has stayed largely in sync, Senior Financials (SENFIN) have significantly outperformed (around 50bps tighter from midday Friday) and now trade a long way from where the underlying financials in the index would suggest. While SENFIN is naturally a higher beta play on any action in Europe, it seems like it is well over its skis here and with ES pulling back to its fair-value relative to a broad basket of risk-assets, and a general lack of news from Europe, we suspect that the last two days have been a short squeeze led by investors rotating out of their macro hedges and unwinding longs into strength or protecting their longs with more single-name protection.
Some technicals might be in play as investors look at senior-subordinated trades - betting on outperformance of senior spreads to subordinated spreads as conditions deteriorate - and it is notable that subordinated spreads are not flying with seniors as one would expect were this to be a real risk hungry rally. SENFIN is trading around 278bps relative to a 292bps fair-value derived from the underlying financials spreads of the index and SUBFIN is trading modestly wide of its fair-value which somewhat supports this thesis - hardly a positive even though SENFIN is compressing. The pricing assumes a 47% recovery in senior financials implies a total loss for subordinated financials (0% recovery).
Away from corporates and financials, Western European sovereigns are mostly tighter with Portugal, Ireland, and Austria the exceptions. However, CEEMEA and EM sovereigns are all widening further with Qatar and Ukraine among the worst along with Russia and Indonesia.
ES has pulled back more in line with broad risk assets this morning after its overnight exuberance. TSYs are rallying back off their high yields and the JPY crosses are also showing weakness as the dollar pops higher and metals/oil revert to a downwards trend after bouncing off mid-morning lows.
All-in-all, it seems the hope of the weekend is starting to fade rather quickly now and while we lurch from headline to headline, EUR weakness persists and spreads are trending wider in general if we scrape away the noise. It is clear that there is an up-in-quality surge here with higher yield (low quality/rated) European and US cash and synthetic credit all being sold this morning relative to investment grade.
Charts: Bloomberg
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Qatar? This is spreading like a cancer. And they buy the dollar. It is all upside down. And am the first to admit, this is tough to hold on to core positions in miners. But I have sold none.
With the headline from the Telegraph much earlier this morning ""Multi-trillion plan to save the eurozone being prepared" and coupled with the Zero Hedge article that the Shanghai Gold Exchange was apparently working together with COMEX to punish silver, in my opinion the best price lever for gold, it seems that the US, the Chinese and Europe are bumbling through a very poorly constructed effort to say:
EVERYTHING IS OK BECAUSE THE INFINITE TOXIC DEBT MONETIZATION PLAN WILL SOON RESUME AND IN EVEN MORE SHOCKING FASHION THAN BEFORE AND IN EUROPE TOO .... BUT DON'T WORRY THAT IT WILL BE HYPERINFLATIONARY BECAUSE, "LOOK THE VALUE OF REAL MONEY IS GOING DOWN" AND WE ARE HELPING IT GO DOWN BY COOPERATING TO FIX THE PRICE TOGETHER, AS ONE WORLD WITH ONE DREAM. WE ARE THE MARKET AND THE HELL WITH "FREE" OR "FAIR" MARKETS.
If ever there was a signal to take delivery of silver this was it.
Duffminster
I feel your pain. I'm holding on to all my miners too and my PMs. Just wish I had more dry powder to commit to the cause.
That which does not kill us makes us stronger. --Nietzsche
Nicht die Höhe: der Abhang ist das Furchtbare. -- Nietzsche
the most common and false religion is the worship of govt.
http://expose2.wordpress.com
We bounced off of 1,585. If that does not hold, look out below.
CRAZY week has started,....Nifty opened at 4840.....moved down to 4760...went up to 4875...and closed at 4837.....new-Moon on 27th (+), Moon-Venus conjunction on 28th(-) and F&O settlement on 29th.....
fasten ur seatbelts
Europe exuberance fades? Simple, just come up with a new rumor, at least it will get markets through close to live and spew the BS another day.
http://video.google.com/videoplay?docid=-7643457725474129538#
modern armies and the desert...................hmmmmm........
it is said that for every high tech weapon there is a low tech answer to that weapon. it came to me while watching this old film. the answer to the nwo is tribes...........return to the tribes ladies and gentlemen.............and ............we will....................
ahhh the long slow downward spiral to total collapse
gold & silver traders got killed pretty good...
i don't care what mish shedlock thinks about it, this whole take down is strange to say the least..........mishy poo is talking smack about the gold bugs and harping on king dollar. i drink to his bones...........oh its coming soon enough.........
Herd the cattle into a box canyon (Treasuries and its zero duration equivalent). Then slaughter all: devalue when everyone has been forced into the US notes.
All prior confiscations and dilutions will have no compare. TBTF means only households will bear losses.
Regardless what they do to PMs, sovereign and corporate credit is deeply subpar. You must question why such efforts are undertaken to force wealth holders into these most untenable positions.
will this take down , cause many of the gld and slv holders to abandon ship............? for physical holders, it matters not. been there done that. i shall not ever, and i do mean ever , capitulate to tyranny..........never............this little show they are putting on for the benefit of someone who gives a shit , i guess, is all very inspiring but it doesn't change my fucking viewpoint, not one bit. how can it? what has changed between this week and two weeks ago? not one damn thing. keep the faith ladies and gentlemen. this too shall pass.
Every big upswing seems to be labelled a 'short squeeze'...so how long can they rely on shorts throwing themselves into the fire providing the fuel to gun markets? I think the 'shorts' turn real soon and just sit it out.
It is not so much a matter of when you short, Dog...but what. Right now, consumer discretionary is marked entirely to fantasy. So...you hit those on upticks and then BTFD in metals against them. I think that trade is absolutely primed to work.
Just my opinion, Dog.
**and if it is not clear, I am talking single names here...not sector bets in discretionary**
Remove Annabelle!
News Flash....BlowHorn[CNBC]...Steve Liesman again....
More rumor mongering that the ESEFESFESRQJ fund in Europe is being discussed in terms of leverage. And this is good news because? Man, get your rumors straight, Mr. Liesman.
Hooray...more sovereign money flushed down the toilet at an even higher rate of leverage. Great. That should reverse the PM trade. Silver looks ready to go.
Meanwhile, the Federal Government here makes up 41% of GDP spend. That number won't be going down over the next 16 months. So, more monitization, more fiat, less US private sector job creation, less reason for foreign governments/people to hold dollars. This is going to get ugly soon
Let them bring gold and silver further.......I can put more fiat into work then.
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