EURUSD Retraces 75% of EUphoria As Credit Underperforms Stocks

Tyler Durden's picture


With Spanish bond spreads over 30bps wider from their open this morning, EURUSD has just broken its 200-hour moving average trading back close to 1.2500 for the first time since the summit. While this is an 75% retracement of the EUphoria, broad equity markets are only modestly off their highs (we assume on rate cut hopes - which is likely helping driven EUR down a little) - and yet corporate and financial credit spreads are at two-day lows. Hope fades even in equity markets where once we dig into the individual indices that most are down modestly (though Spain and Italy are down around 1%). We also note that Bunds have outperformed Treasuries by 20bps from the initial risk-transfer spike on Friday morning - though TSYs are closed today as Bund yields dropped 10bps from open to close today. On a side-note, Spanish 5Y CDS briefly traded wider than Ireland 5Y CDS today for the first time in two years.

Equity markets did fall a little today but remain up from late yesterday (blue line) but credit markets (both corporate and financial) are notably wider - at two day wides in fact - as the sovereigns start to give back their gains...


EURUSD has retraced 75% of its EUphoria...

as rate-cut hopes and a break of the 200-hour average seemed to provide the impetus on a quietish day...

Meanwhile, Spanish (and Italian) bond spreads are blowing back wider (with Spain almost back to 500bps over Bunds)...

and Bunds are notably outperforming Treasuries now (green line) - as is clear from the chart below as ITA/SPA spreads revert wider and risk transfer is priced back out of Bunds...

and for the first time in two years, Spain and Ireland are trading in line on a 5Y CDS basis...

With Treasuries closed, obviously the spread to Bunds is exaggerated but Bunds have rallied back all their 'risk-transfer' losses from the Summit...

Barclays remains -15.5% (lost around 1% more today) from last Thursday's open (pre-Liebor) and the FTSE was leaking lower into the close.


US equity futures are trading but very thin - currently unch having traded in a 6-7pt range from yesterday's day-session close. While many of the markets that constitute CONTEXT are closed, spreads and FX imply about a 5pt drop in ES at the moment.

Charts: Bloomberg

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Wed, 07/04/2012 - 11:45 | 2586821 hugovanderbubble
hugovanderbubble's picture

Thx Tyler

Wed, 07/04/2012 - 11:50 | 2586834 fonzannoon
fonzannoon's picture

Bunds outperforming treasuries means Germany saying no soup?

Wed, 07/04/2012 - 11:58 | 2586858 falak pema
falak pema's picture

no soup yes goulash

Wed, 07/04/2012 - 13:02 | 2587026 slewie the pi-rat
slewie the pi-rat's picture

everything is screwed down tight but the commodities

bunds "outperforming" is something which happened today while

  • T's are up nicely
  • the dollar is back above 82
  • it's the fourth of july in "treasury" country

nothing is happening;  the checks are in the mail;  the entire global population uses paper fiat currencies which are fungible for anything

and the checks are in the mail

as i've been reporting in real time, TPTB just ran a staaahbeeeelietaaaay test on the entire global stsyem and it did just fine

coming into the goldilocksCrisisTM summit, slewie warned specifically AGAINST running the banks, b/c the fascist were ready if you did

well, run the banks now;  TPTB hafta deal w/ angela's ambiguous play, sports fans, and they are totally booked for the rest of the year.  hello?

as your uncertified yet totally-certifiable global financial advisory pi-rat, don't tryy for returns here; no counterparty anywhere in the EU can actually be counted on to deliver on any promise except:  give us yer money and we guarantee to give almost all of it back

put the money into PMs or a mattress or a locker at the health club

when they try to scramble and declare only electronic money legal tender, just say no

altho 80% of us BiCheZ have been totally conditioned to trust these asswipes with the "transfer" for every overpiced cup of coffee and salad we now buy,  please follow the 20% who understand rather than the 1% who deceive

if people are dumb enuf to try to send every egg and tomatoe thru central planning, i hope the non-central-power tripping types know where to aim that barrage of eggs and tomatoes

it will never get any easier than this

let's run with the wonderHorse fungicide here, ok, BiCheZ?



Wed, 07/04/2012 - 14:05 | 2587170 gjp
gjp's picture

I'm with the pi-rat here.  Make em walk the plank!

Wed, 07/04/2012 - 19:01 | 2587673 CreativeDestructor
CreativeDestructor's picture

Nein Zuppe, Ja EURO QE Die Bitchez

Wed, 07/04/2012 - 11:57 | 2586856 q99x2
q99x2's picture

Good day to kick the banksters out of the country and arrest the English banksters for treason. In 1776 we shot them on their way out.

Fuck Queeny and her mutant sons.

Wed, 07/04/2012 - 12:00 | 2586864 falak pema
falak pema's picture

you ready to shoot all of WS/FED and half of Senate who don't want to know about it?

Wed, 07/04/2012 - 12:06 | 2586880 sabra1
Wed, 07/04/2012 - 22:32 | 2587829 GMadScientist
GMadScientist's picture

Next time have them dress like a pimp!

Good thing they tried that shit in San 15 exits north and try mouthing off like that. Once.


Wed, 07/04/2012 - 12:12 | 2586879 q99x2
q99x2's picture

I'll take a dozen impetiouses and a quietish day.

Sambula Uga Soma Weet Weet.

Sambula Uga Soma Weet Weet.

Wed, 07/04/2012 - 12:07 | 2586870 FXPortent
FXPortent's picture

Germany needs to get out of the EU within the next year or so. The time is rapidly approaching where they will no longer be able to benefit from their export driven industries within the EU.


Too bad (/sarc) the plan to contain Germany only lasted about 60 years or so.


Seems like every other big "nation" (that's putting it politely) in europe is content with shooting themselves in both feet.


At least there is a somewhat positive spin on this:

 VWs/BMWs/Mercedes are excellent cars!


With American cars offered at horrible price points and mediocre safety/features, it's kind of hard not to go GERMAN these days.

Too bad the Chinese government workers have to give up their Audis in auctions! (Poor saps never saw the bubble coming)


Wed, 07/04/2012 - 12:09 | 2586886 fonzannoon
fonzannoon's picture

So the ECB cuts rates tomorrow and the Euro falls against theUSD hence Gold goes down in dollars and up in Euro?

Wed, 07/04/2012 - 12:17 | 2586911 Cdad
Cdad's picture

Hard to say...but you should be thankful every time gold falls during this global banking crime spree because some geeked up leverage junky has to sell his gold, or some twit HFT program decides he can game the only real currency it provides those with any real sense the opportunity to pick it up on sale.

Wed, 07/04/2012 - 13:34 | 2587110 bnbdnb
bnbdnb's picture

ECB does nothing.

Wed, 07/04/2012 - 12:09 | 2586887 1eyedman
1eyedman's picture

i mentioned a solution, germany leaving euro so to let euro depreciate for the latin/med countries, a while back.   but germany loves a weak euro.  if they go DM again, they may find themselves uncompetitive sudden slow of economy...or bunds in euros go like swiss, negative, and germany debt on a DM basis goes down dramtically, creating a very interesting dynamic with a new, low debt load country/currency.   

Wed, 07/04/2012 - 12:15 | 2586908 FXPortent
FXPortent's picture

The currency race to the bottom will be followed by the currency race to the top.


That being said, I wouldn't be surprised if there is a re-introduction of a gold standard amongst countries like Germany, Russia etc.


Something tells me that the Germans get a little giddy thinking of a possible DM reserve currency.




Wed, 07/04/2012 - 12:18 | 2586903 Cdad
Cdad's picture

Okay...3 hours of Bob Dimond redirecting questions and explaining his "context"...and I only have one question.  Is Europe open tomorrow?


Wed, 07/04/2012 - 13:29 | 2587101 slewie the pi-rat
slewie the pi-rat's picture


possibly even for withdrawals;  apparently, some people still have their assets in various "accounts"

imo, the new chevyChase europeonBankstering is about to open on ATM screens everywhere

the entire cellular comsat system will fry with everyone tryng to call his/her money to see when they can maybe get together, again...

what happened to the RBS story?  must be fine, now, huh?

L0L!!!  keep sparklering c_dad!

Wed, 07/04/2012 - 23:19 | 2587889 GMadScientist
GMadScientist's picture

Neither safe nor sane.

Wed, 07/04/2012 - 12:18 | 2586912 Arnold Ziffel
Arnold Ziffel's picture

...and then there's more unrest/growing pains in China:


Protesters defy stun grenades to halt construction of $1.6 billion factory in China

Wed, 07/04/2012 - 12:21 | 2586921 RobotTrader
RobotTrader's picture

The stock market keeps getting stronger across the world.


SPY priced in Euros and Swiss Francs has broken out to new 4-year highs:,spy:FXY,spy:...|D

Wed, 07/04/2012 - 23:20 | 2587891 GMadScientist
GMadScientist's picture

What's that? You say the Zooro is down? Again? So soon?


Thu, 07/05/2012 - 02:25 | 2588057 Bunga Bunga
Bunga Bunga's picture

You forgot to mention the SPY in Zim Dollars technicals.

Thu, 07/12/2012 - 21:22 | 2601429 MeelionDollerBogus
MeelionDollerBogus's picture


robottrader trade-fail - goldpricemodel

Time to load up on what goes up when the market goes down.

FAZ calls - delta is too low

VXX calls are out - delta is negative relative to expected direction too frequently this week

RSU puts - I'm seeing so little open-interest I think I saw a tumble-weed

RSW (calls) - barely any better

FAS puts: also too low but in the right direction, until about 90+ in the strike price

I'd say load up on physical gold and GLD calls with more than 70 days and unload as soon as there's a 10% or more profit net of all fees, don't even worry about using margin.

Writing a GLD call with only 9 days left should be safe out of the money.

MS morgan stanley puts > 60 days ought to return nicely, just take the 10% or 20% profit when it shows up and never look back. Theta is unusually small and delta > 0.7 - take the money and run.

Wed, 07/04/2012 - 12:24 | 2586930 RobotTrader
RobotTrader's picture

Hard to believe the S & P 500 is high as it is with interest rates in the tank and no inflation.


Zero selling in bonds, despite the screeching and wailing of guys like Jim Rogers who say "This Can't Go On!!"

Paper rules.  No selling pressure in any of the bond ETF's last week:

Wed, 07/04/2012 - 23:21 | 2587893 GMadScientist
GMadScientist's picture

All "buns up" and ready for that "hot money".

You go girl.

Wed, 07/04/2012 - 12:29 | 2586940 RobotTrader
RobotTrader's picture

Highest reading in the McClellan Oscillator in the last 52-weeks, and the NYSE Summation Index is going straight up.


Huge breadth surge on the tape the last few days:

Wed, 07/04/2012 - 23:27 | 2587903 GMadScientist
GMadScientist's picture

How "trendy"...your TA faerie wand needs a charge.


Wed, 07/04/2012 - 12:36 | 2586949 XXL66
XXL66's picture

where is Van Rampuy when you need him...

Wed, 07/04/2012 - 12:44 | 2586988 magpie
magpie's picture

I propose he recites a haiku everytime EUR/USD closes in the green...

Wed, 07/04/2012 - 12:36 | 2586951 Vegetius
Vegetius's picture

And so the party winds down, a bunch of Hobo's called the GIIPS are eyeing the fat frau in the corner hoping get some action or at least another drink. The french dude is looking at the IOUs he signed with the people and mouthing the word "Merde" but his dear friends the unelected Euro trash are ready to get angry as they fear for their pensions and pay ---- ITS PARTY TIME!----

"The European single currency is bound to fail, economically, politically and indeed socially, though the timing, occasion and full consequences are all necessarily still unclear." -- Margaret Thatcher

Wed, 07/04/2012 - 17:30 | 2587564 CrawdadMan
CrawdadMan's picture

Bund-Greek/Irish/Spanish spreads keep getting wider. It's been over a week now, so it's safe to say that the invisible market queen doesn't want EURUSD to appreciate.

Wed, 07/04/2012 - 21:45 | 2587797 Tom Green Swedish
Tom Green Swedish's picture

Facebook Corporate Propaganda Machine.  Communism is the answer.

Wed, 07/04/2012 - 22:05 | 2587808 chinaboy
chinaboy's picture

Euro is down because American traders were stranded at beach on independence day . Buyers on holiday.

Wed, 07/04/2012 - 23:30 | 2587907 GMadScientist
GMadScientist's picture

Here's hoping that beach was Omaha.

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