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Spain Bond Drubbing Continues As Stocks Surge

Tyler Durden's picture





 

Spanish sovereign bonds ended the week at all-time record wide spreads to bunds, pushing back up near 7% yields today before falling back into the close, and +55bps on the week. This is a 50bps underperformance of Italian sovereigns on the week, while Spanish stocks notably outperformed Italian stocks on the week (though faded notably today having been unable to regain Monday's opening highs). German Bunds also deteriorated notably relative to Treasuries on the week (the biggest wekly jump in Bunds-Treasuries in almost 7 months) and while equity and credit markets reconverged into the weekend - with position-squaring evident - as the shifts in Swiss rates suggest all is not well under the surface as repatriation flows drove EURUSD up over 115pips on the week to near its Sunday-night opening highs (amid a 200 pip range). Finally for all the ebullient US investors, we note that Europe's VIX was bid notably higher today to near a 3 week high relative to US VIX as hedges into the weekend were very prevalent.

It seems the end of the week in Europe - just like in the US - was about position-squaring as early-week protection (cheap macro overlays in MAIN - Europe's investment grade index) was sold back and stocks and credit resynced...

with Spanish stocks (pink) rallying the most on the week (though fading today and unable to reachMonday's opening highs) and Italy underperforming (red).

 

And clearly Spain (red) bonds diverged notably in the last two days from the rest of European sovereigns - especially Italy. Also note the green curve which reflects the almost 18bps decompression of German Bunds over Treasuries this week (as 10Y bunds rose 12bps while 10Y Treasuries are down around 6bps from Europe's close last Friday)...

leaving Spanish 10Y spread to Bunds at an all-time record high...

but Bund 10Y yields rose the most relative to 10Y TSYs in almost 7 months!

as hedgers were active into this event-heavy weekend as Europe's VIX ramped relative to US VIX (for now)...

Charts: Bloomberg

 


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Fri, 06/15/2012 - 12:01 | Link to Comment The Monkey
The Monkey's picture

Central banks cometh.

Fri, 06/15/2012 - 12:04 | Link to Comment NotApplicable
NotApplicable's picture

That big sucking sound you hear is them picking up everything that isn't nailed down.

Fri, 06/15/2012 - 12:10 | Link to Comment CommunityStandard
CommunityStandard's picture

Thanks for clarifying.  I thought the sucking sound was some servicing in exchange for more ECB funding.

Fri, 06/15/2012 - 13:07 | Link to Comment ACP
ACP's picture

Yes, because no matter what happens, everything is A-OK as long as stocks go up.

Fri, 06/15/2012 - 12:03 | Link to Comment bidaskspread
bidaskspread's picture

Steps to make a 100% return in under 7 months.

Step 1: Accept stolen money from a thief. http://www.bloomberg.com/news/2012-03-23/mf-global-s-corzine-ordered-funds-moved-to-jpmorgan-memo-says.html

 Step 2:  Be put on the bankruptcy committee on thief’s company. http://www.reuters.com/article/2011/11/08/mfglobal-bankruptcy-creditors-idUSN1E7A627A20111108

Step 3: Look at bankrupt company asset and cherry pick best asset. Find asset and offer a fire sale price, Purchase illiquid assets with stolen money for $39.1 million (LME) and have buyers in hand that will pay more.

http://www.reuters.com/article/2011/11/23/us-mfglobal-lme-jpmorgan-idUSTRE7AM1RP20111123

Step 4: Return a portion of stolen money to improve public image and reduce legal expense.

http://www.bloomberg.com/news/2012-05-18/mf-global-trustee-seeks-to-get-700-million-in-u-k-suit.html

Step 5: Review offers that value the asset (LME) for $103.4 and potentially sell netting $64.3 million.

http://www.bloomberg.com/news/2012-06-15/hong-kong-exchanges-to-acquire-lme-beating-out-ice.html

And that is one way the rich get richer. Vomit bags anyone?

Fri, 06/15/2012 - 12:06 | Link to Comment NotApplicable
NotApplicable's picture

Not bad work, if you can get it. I guess.

Fri, 06/15/2012 - 12:14 | Link to Comment q99x2
q99x2's picture

Here's another way. Banksters convince guillable young poor people that they will be defending their country if the go out a murder millions of innocent people with heavy high tech weaponry which blows the jaws off children and contaminates the lands with nuclear waste. They then move in and rape all the natural resources of the countries they invade. They will also use toture and often leave a technocrat in place to continue the torture for decades to come.

And they're about to move in with military force on America.

Fri, 06/15/2012 - 12:03 | Link to Comment SeverinSlade
SeverinSlade's picture

If Syriza wins and the CBs don't deliver outright LSAP, markets are set to be verrrrrrrrrrrry disappointed. 

Fri, 06/15/2012 - 12:35 | Link to Comment CClarity
CClarity's picture

Agree.  Markets are also set to be disappointed if Syriza doesn't win but coalition that does still asks Berlin for additional concessions, which they must have as they cannot meet terms, no matter "who" is in charge.

Markets also set to be disappointed if no formal help for Spain, yet with bond yield slipping back under 7%, that may be tabled for a little longer.  But fear not, the sparks to start the wildfire are flickering everywhere.  There will be an inferno, sooner than later, but not SURE where and when.

Fri, 06/15/2012 - 14:13 | Link to Comment Nobody For President
Nobody For President's picture

You are assuming that a coalition is formed that actually has the 151 parliment votes needed to govern.

Maybe a bad assumption.

Maybe we wind up with no government again, and a third round of elections is scheduled.

Maybe the Greece military says "screw this" and takes over.

Maybe, maybe, maybe...

The situation is more fluid than the usual fluid Euro soap opera...

The old Chinese curse applies: "May you live in interesting times."

Fri, 06/15/2012 - 12:04 | Link to Comment q99x2
q99x2's picture

Stocks are loving it today. VIX has been going crazy. Both up and down while stocks are always green.

Fri, 06/15/2012 - 12:06 | Link to Comment Manthong
Manthong's picture

More popcorn, please.

The three ring circus of evil is on display.

Fri, 06/15/2012 - 12:08 | Link to Comment junkyardjack
junkyardjack's picture

So credit converged to stocks?

Fri, 06/15/2012 - 12:17 | Link to Comment bagehot99
bagehot99's picture

Don't worry, it's all going to be fine. The EU told me so.

 

Fri, 06/15/2012 - 12:25 | Link to Comment Snakeeyes
Snakeeyes's picture

But Spanish sov yields are actually down along with all Europe sov yields.

http://confoundedinterest.wordpress.com/2012/06/15/greco-roman-wrestling-central-banks-prepare-for-turmoil-after-greek-vote/

And Greek yields were down 176bps today.

They died with their boots on with be the historical epitaph.

 

Fri, 06/15/2012 - 13:12 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

even the long bond has fallen from its 150.01 paint job!  L0L!!!

we will drink no ZIRP b4 its time

it's time!

Fri, 06/15/2012 - 14:14 | Link to Comment Nobody For President
Nobody For President's picture

I DO appreciate these little charts, Tyler.

Thank you.

Fri, 06/15/2012 - 14:56 | Link to Comment Grand Supercycle
Grand Supercycle's picture

Rally warning continues...

SPX & EURUSD bullish daily charts dominate further.

As mentioned, shorts will be slaughtered next week.

Fri, 06/15/2012 - 15:21 | Link to Comment hugovanderbubble
hugovanderbubble's picture

Hotkarl is bearish

Fri, 06/15/2012 - 18:11 | Link to Comment Itch
Itch's picture

Not sure about the repat flows in EUR/USD; the amount of long retail interest when Spain got that bailout was almost surely substantial, along with that the market took the opportunity to send an instant message about Spain, and probably ended up fearing they had over did it. I think the unwinding of those scenarios has led to this levitation, besides if it was repatriation it would atleast show up somewhere else.

Fri, 06/15/2012 - 23:47 | Link to Comment michaelsmith_9
michaelsmith_9's picture

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