Just like during the holiday "break" the market is euphoric, however, briefly, on the fact that Italy sold Bills , however many, in a period protected by the 3 year LTRO. And just like the last time this happened, about two weeks ago, this auction shows nothing about the demand for Italian paper longer than 3 years, which unfortunately Italy not only has a lot of, but is rolling even more of it. And none of this changes what World Bank President Zoellick told Welt yesterday, namely that the Europe’s interbank market is frozen and continent’s banks only lend to each other through ECB due to a lack of confidence within the financial industry, World Bank President Robert Zoellick is quoted as saying by German daily Die Welt. He continues: "If European banks don’t lend to each other, how can others in the U.S. or in China be expected to do it." Anyway, here courtesy of Bloomberg's Daybook are the key overnight events as we prepare for the ECB 7:45 announcement and subsequent conference.
- EU peripheral bonds surging after borrowing costs fell at offerings of Spanish and Italian debt.
- Spain sold almost double the amount planned and Italy met its EU12b target.
- Spain sold EU9.98b ($12.7b) bonds maturing 2015 and 2015, compared with a target of as much as EU5b, while the yield on Italy’s one-year bills fell to 2.735% from 5.952% at the previous sale
- Investors are interpreting Sarkozy saying that France losing its AAA isn’t “insurmountable” -- to mean that France has accepted the inevitable. The question now is whether Standard & Poor’s will follow through with a threat of a two-level cut.
- Greece will have to exit the euro area as it struggles under a mountain of debt, a senior lawmaker in Chancellor Angela Merkel’s party said
- Week’s Treasury auctions conclude with $13b 30-yr bonds. WI yields 2.995%; drew record-low 2.925% at December auction. 10-yr notes sold yesterday were awarded at record 1.90%
What to Watch:
- ECB’s Draghi will keep the bank’s main rate at 1% today, according to most economists in a Bloomberg survey, after cutting it twice in last two months and flooding the banking system with record amounts of cash
- Bank of England’s Monetary Policy Commmittee will keep its main rate at 0.50% and maintain its GBP275b bond-purchase target, according to a separate survey
- Royal Bank of Scotland Group Plc will cut 3,500 jobs at its investment bank over the next three years as it jettisons unprofitable cash equities and mergers advisory operations