Overnight Sentiment - Futures Jubilant After Italy Places €11 Billion In Bills

Tyler Durden's picture

If yesterday was risk off on concerns Europe is sinking following last week's disastrous Spanish long-term auction, today is risk on after Italy managed to successfully place 91 and 361-Day bills, in line with expected amounts, if at much higher yields, and lower Bid To Covers. Specifically, Italy sold €3 billion in 91 day bills. The yield soared from 0.492% on March 13 to 1.249%, while the Bid to Cover plunged from 2.23 to 1.81. Same for the 361-Day Bill auction, where €8 billion in Bills (in line with target) were sold at 2.840%, double the yield of 1.405% from a month ago, and a Bid To Cover just modestly better: from 1.38 to 1.52. As usual the market continues to blatantly ignore the thin white line of bond issuance: every Bill and Bond auction that matures within the maturity (3 Years) of the LTRO will succeed: period. It is the ones maturity longer than 3 years - such as Spain's last week - that are the test. Comparing one to another is apples and oranges. But risk on don't care, and as a result futures are surging disproportionately, even as Spanish and Italian bonds are just modestly tighter following the bond results. But we will once again meander whack-a-mole style from auction to auction until the market is reminded of this little nuance. In other news, Iran just announced it is following its cut in Greek and Spanish exports, by halting exports to Germany next, while continuing the theme of 2011 Deja Vu, Indonesia's Aceh was struck two hours ago with a massive 8.7 Earthquake, with an 8.8 aftershock off Sumatra, coupled with a tsunami warning. Luckily, there are no initial reports of casualties or major damage.

For the rest of the overnight summary we go to BofA:

In focus

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Market action

Asian equity markets finished mostly lower as Euro area worries caused the regions investors to go into risk off mode. The Hang Seng fell the most falling 1.1% while the Japanese Nikkei lost 0.8%. On the flip side, the Shanghai Composite finished 0.1% higher while the Indian Sensex finished flat. The Korean Kospi was closed today.

In Europe, equities are rebounding from their two month low as investors dive back into the market to pick up bargains. Leading today's advance are the region's automakers and banks. In the aggregate European shares are 0.6% higher. Blue chips are enjoying a 1.1% lift while German and French listed firms outperform the broader market as well, up 1.0% and 0.8% respectively. Shares trading in London are lagging behind the market aggregate up only 0.3%. At home, futures are pointing to a strong rebound from yesterday's sell off. The S&P 500 is set to open up 0.8% higher.

In bondland, Treasuries are backing up across the curve. The five, ten and thirty years issuances are all 3bps higher with the 10-year yield currently trading at 2.02%. In Europe, peripheral yields are rising. Spain's 10-year note is approaching 6% as the note's yield rose 16bp today to 5.78%. The Italian 10-year is up 21bp to 5.45%.

The dollar is weakening against a basket of other major currencies. The DXY index is 0.4% higher. Commodities are mixed with WTI crude oil up 67 cents to $101.70 while gold is down $3.85 an ounce to $1,656.05 a barrel.

Today's events

It will be a busy day for the US economics team. At 8:30 am, we will be sorting through two economic releases: import prices for March and the trade balance for February. Import prices are expected to rise 0.7% in March, stronger than the 0.4% increase in February for this non-seasonally series. However, as earlier jumps in imported crude oil prices disappear from the annual calculation, the year-on-year growth rate should decelerate to 3.2% from 5.5% in February. We expect little change in the trade balance in February, with a deficit of $52.5bn.