Overnight Sentiment: More Of The Same

Tyler Durden's picture

Overnight: just more of the same, as markets collapsed, first in Asia, then in Europe, on ever more concerns what a Greek exit would do to Europe. The most important story of the night was a report in Dutch Dagblad claiming that ECB has turned off the tap for Greek bank liquidity: "At the end of January, Greek banks had received EUR73 billion in liquidity support from the ECB, but this amount has dropped by more than 50% now, according to the newspaper. The ECB is cutting back support because Greece has been holding off on recapitalizing its banking system, despite receiving EUR25 billion in funds for that purpose, the paper says." Whether this move is to force Greece to blink (even more) by making the previously reported bank run even more acute, or just general European stupidity, is unclear but it is certain to make the funding stresses across all of Europe far more acute. The news sent all peripheral bond yields soaring, and the EURUSD tumbling to under 1.27 briefly.

The two saving graces were a 5 Year French and 10 year German bond auctions which both priced at record low yield. From Reuters: "France sold its 5-year benchmark bond on Wednesday at a record low yield, Agence France Tresor said, in a sign of investors consider the country a safe haven amid renewed concerns about the euro zone's debt crisis... In the auction, France sold 3.651 billion euros of its February 2017 BTAN at a yield of 1.72 percent." and "Germany sold 4.1 billion euros of 10-year government bonds on Wednesday in an auction which met higher demand than at the bond's launch in April, when the sale was technically uncovered. Demand at the sale was above this year's average, with a bid/cover ratio of 1.5 compared with an average 1.36 at similar auctions so far this year. The Bundesbank retained 893 million euros of bonds. The average yield at the auction was 1.47 percent was the lowest on record for a sale of 10-year German bonds." So, as we noted, more of the same, with general fear and loathing in the periphery resulting in core strength for at least the time being, until the core itself tumbles under the tsunami of bad news. Finally, Europe will now have to operate in limbo for at least 1 month as Greece just announced the new elections will be held on June 17 with a temporary caretaker government ruling the country in the meantime. What can possibly go wrong.

Regarding bond internals, one country that is getting hit far worse than others is Portugal, whose bond yield have exploded, just as we predicted, the day after we realized that Dan Loeb is long and strong: the market has shifted away from IG9 being the pain trade, to forcing the HF consortium that bought up Portugese bonds on nothing but one big mechete catching operation, to puke blood until they are all forced to unwind their holdings.

As for the US: quiet session, which will likely see stocks ramp into the European close then tumble around 3 pm as the deja vu-ness extends to 9 days in a row.

From Bank of America:

Market action: Equity markets continue to sell-off

Given this negative macro backdrop, equity markets globally are coming under increasing selling pressure. In Asia, the Hang Seng dropped 3.2%, the cyclically-sensitive Kospi crumbled 3.1%, and the Nikkei fell 1.1%. Europe is down 0.6% in the aggregate. At home, things look "less bad" by comparison, equity futures are pointing to a modestly lower open. 

In bondland, the price action is somewhat choppy. While Portuguese 10-year debt is selling off sharply with yields up over 30bps, Spanish and Italian 10-year notes are holding steady. At home, the 10-year Treasury note yield is essentially flat close to rock bottom at 1.78%. Not surprisingly, the FX market continues to flag waning risk appetite with the DXY index rallying 0.2%, the highest since January. The euro is resuming its decline, with the EUR/USD cross down to 1.27. 

Commodities under pressure

As the market prices in a softer growth backdrop, commodities are down. WTI crude oil is down $1.50 to $92.50 per barrel, the lowest since early November. Industrial metals are taking another drubbing with copper down 1.5% and down roughly 10% over the course of the month. Finally, the yellow metal is losing some of its luster. Gold is off $7.50 to $1537 per ounce. 

Focusing on the good news, here is how strategists saw the record German 10 year bond issue.


"The bid/cover is a lot better than we saw last time, all the more remarkable for the fact that it was being sold almost 30 basis points lower. There was a bit of a concession being built for the last hour to ensure that it went. It's a lot better than the last time but not fantastic but that's going to be a feature for quite some time.

"The sense that things are going to look pretty ugly in the euro zone for a sustained period and therefore you want to be as safe as possible inevitably helps Bunds. There's not a lot of natural enthusiasm for it."


"It's well covered, with a tight tail and more encouragingly for Bund bulls is that it shows that there is very good demand for the paper below 1.50 percent in yield terms. Given how peripherals have sold off over the past week, it's no surprise to see the Bund well bid and the fact the paper was well received should allow the rally to continue."


"I don't think the market had expected such an auction - 6.2 billion of nominal bids is the highest amount since September 2011."

"There will be a strong tendency for lower yields until we get to the Greek elections in mid-June."


"In these days with sub-1.50 percent German yields the bid/cover ratio is pretty decent and the one cent tail is stronger than average. It all indicates a strong German auction and that the safety theme remains intact."

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The Axe's picture

SP futures up   ha ha   joke

Sudden Debt's picture

go figure... this shit is pissing me off... trading with logic is the easiest way to go belly up these last few years...


Cdad's picture

Rally!  Rally!  Rally!

Let's go!  Let's rally this dog turd!

BandGap's picture

Me too. 

Pay no attention the the man behind the screen with no clothes.

This is how it should be before the fall.

Sudden Debt's picture

maybe the fall may take a bit longer...

okay... we blew our kids ability to pay back our debt...

even our grandchildren...

but why not spend their childrens future taxmoney to?

the next president after the next president will know how to fix it all?


BandGap's picture

Does it matter if you drown in 6" of water or at the bottom of the sea?

This has to be a complete failure, with no hope for an exit. It fits the model for previous collapses.

mick_richfield's picture

It will not be fixed by a president.  It will be fixed when people stop looking to presidents, and 'representative' legislators, and 'governments' -- just like they once stopped looking to lords and ladies.

theMAXILOPEZpsycho's picture

And surprise surprise I'm still yet to see any admission on zero hedge that Bernankes policies have been a success. Want an idea where the US would be without Bernanke's and obamas stimulus packages, take a look at europe right now - currency and markets tanking. So not only has Bernanke saved us from becoming a deflationary hell hole, he's done so without trashing our currency. I'm certainly enjoying filling up the tank with my dollars at them moment - thanks Ben!...of course most on zero hedge will be too bitter to realize this and would rather continue to tell themselves they'll one day break even on the silver they bought at $45 lol

valley chick's picture

bwahahahahahaha...thanks for the laugh psycho!  MDB is alot better though....

BandGap's picture

Someone had to go first, asshole.

Eventually this hits us, just a matter of time.

DebtSlaveZombie's picture

Reserve currency status is the most powerful tool in the currency world...  We won.  But at the expense of trashing the rest of the world.  Including us gold and silver owners.  But this is a battle right now, the war will still end very very badly for the dollar.  It will just take 3 to 5 years to play out.

Cdad's picture

You are kidding, right?  You have to be.  

Were it not for Benny and the TBTFs, we would long be out of this mess.  Deflation would have done its thing, and capital formation would have taken its due course once the TBTF banks were flat busted.  Instead, now what you have is a totally bogus market, with zero price discovery ability, currencies devaluation wars, massive misallocation of capital, bubbles everywhere that now need to be burst yet again, and I could go on...but I think I'll just assume that you forgot the "/sarc" at the end of your comment.

a growing concern's picture

Yeah, Jesus H Christ, let some companies fail, let some markets do their thing, let some executives go to jail, and all this would be behind us and we'd be well on our way to a bright future.  Instead, we're back at a 2007 setup, only this time the bubble is even bigger and the bailouts are going to have more 0s behind them.

Cdad's picture

Oh yeah...I forgot...now you have complete lawlessness within the financial services industry.  Uber bullish!

Cdad's picture

...now you have bank runs in Europe [ouch], market runs in America [because Average Joe figured this bogus market out two years ago]...the opposite of capital formation, you have companies merging into mega mega mega corporations...the destruction of market based competition, you have $15.7 trillion in debt...all that bailin' out has a price tag, you have you have corporate cash hording as a result of a runaway growth in TBTF govt, and on and on I could go.

You cannot break all market principles...and still have a market.

But again...you must have been kidding.

piliage's picture

Jumpin' Jesus on a pogo stick, at least MDB is satire... Do they let you out of the house without a helmet?

The BIG Elephant sized difference between Europe and the US is Uncle Ben can print anything he wants to and the Chinese will buy it until he runs out of ink. That will work until the Chinese can't or don't want to buy anymore....

The LAST thing the Chinese want is the US Dollar to appreciate, so Ben can fund it cheap...for now...

Could Europe fund 15 trillion? Nope. Nobody would buy it, or I should say, nobody would buy it for under 6%.

This is hardly a success story, it's more like solving a heroin addiction with methadone.



theMAXILOPEZpsycho's picture

The Chinese don't want the dollar to appreciate?? lol oh yeh they must hate being paid for their exports in a strong currency...

the dollar is as good as - no scrap that, far better than gold, because its backed by the military, our economy, and our leaders who represent the kasparovs of the global chess game

CrashisOptimistic's picture

You don't understand oil.

You will.

Arius's picture

"our leaders who represent the kasparovs of the global chess game"

definitely, i second that ... people like Geithner are the top de la creme, but again this country is so rich in talent that even if we lose him someone else even better will replace him and the others - you can bet your last dollar ....

one thing though, why refer to chess when talking about some smart game .. how about using the term "the global futboll game" ... futboll is a real American game, whereas chess ... well. ...just smt people play in the rest of the world ... game for poor people with no resources to invest and play in grand stadiums ....

DebtSlaveZombie's picture

That should say "The news sent all peripheral bond yields soaring, and the EURUSD tumbling to under 1.27 briefly." Right?

DebtSlaveZombie's picture

OK.  Nvm.  It's fixed.  :-)

BandGap's picture

Another way to look at German bonds is the flight to safety. The safest house during a flood is the one on the hill.

And of course the German economy is holding up. Money is doled out creating more debt, and then debt is used to buy German goods. German GDP looks strong, Europe is saved and then gets more debt. Wash, rinse, repeat.

This is idiotic. This is like thinking California is saved because South Dakota is booming.

DebtSlaveZombie's picture

Is South Dakota booming?  Hmmm... Buffalo meat and plains real estate must be in a bubble...

Gordon Freeman's picture

I don't know if you'd call it a boom, but it's doing just fine.  Low unemployment, no income/corporate taxes, no pension bomb brewing, etc.  Pretty much the un-California.

navy62802's picture

So much for all the political bullshit coming out of Europe for the past 6 months. Who didn't see this coming from a mile away?

Boilermaker's picture

More of the same is exactly right.

The Fed is playing with the ES and already reversed out 10 handles since 2am based on NOTHING and now slamming the shit out of it.

Definately more of the same.  Same as it ever was.

The Reich's picture

ECB already denied it.

valley chick's picture

6 more days....that is all i need....duct tape this PIIG together... ;-)

Sudden Debt's picture

no need for duct tape... the spit goes in the ass out of the mouth...

LongSoupLine's picture

Aaaaand, it's gone.

All fixed...futures green.

distopiandreamboy's picture

FOMC minutes will vaguely mention easing; should be worth 15 S&P points

Rip van Wrinkle's picture

And a $50 dollar drop in gold 'cos nothing was mentioned about QE.

Boilermaker's picture

Something about 'available tools' and 'options on the table' is my guess.

Sudden Debt's picture

all logic... I just don't understand it...

guess they need pm's to be low before the print more shit in june/july I guess...

youngman's picture

Well tommorrow we have a Spanish bond sale to look forward too....

Someone will buy them with someone elses money....

and Facebook owners are dumping their stock...they added 85 million shares.....get it while you can...or get it while you scam....

Sudden Debt's picture

It's a dotcom....

to pass the time, help yourself to some more stock

spankfish's picture

The ECB is cutting back support because Greece has been holding off on recapitalizing its banking system, despite receiving EUR25 billion in funds for that purpose, the paper says."

So where did the money go?  Up the fat Greek lady's ass?  Bring on the Greek Riot Dog!  At least he is loyal and shows up for the daily riots and Molotov cocktail parties.

Vincent Vega's picture

From the article: 'the yellow metal is losing some of it's luster.' Good! Let it lose some more. I like to buy things that are on sale. The markets are getting just about right for an unleash of the QE kraken. <imho>

disabledvet's picture

so let me get this straight: the currency is weakening, equities are hitting multi decade lows, people aren't paying their taxes, their economies are in recession, and i'm suppose to be buying? I'll let the Chinese front run that thing...

AustrianEconomist's picture

Check out the latest from the Capital Research Institute (CRI)

The Greek Dilemma

RiverRoad's picture

Apparently it's just occurred to the EU to beware Greeks accepting gifts.