Anyone who went to bed with the EURUSD about to breach 1.30 to the downside may have been surprised this morning to see it trading nearly 150 pips higher. Checking the headlines for news of a Greek deal however would be futile, as one did not occur. Instead what did, were more promises of a deal being "imminent" even as Greece is doing all it can to appease intransigent creditors, offering GDP upside warrants (something that did not work too well for Argentina [19]), with the IMF stating it demands guarantees that this time Greece will follow through with promises. Oddly enough the German demand for fiscal overrule has gotten lost in the noise but is certainly not forgotten and last we checked Merkel has not withdrawn this polite request. Still futures are up, primarily on a smattering of better than expected PMIs, in China and Europe. Alas, the Chinese PMI beat as discussed last night, was more of a cold water shower as the market had been hoping for much more defined promises of PBoC intervention and instead got a lukewarm Goldilocks economy which could last quite a bit longer without RRR-cuts. As for European PMI numbers being better than expected, we only wonder if these now correlate with the prevailing unemployment rate throughout the Eurozone.
Bloomberg summarizes the key events defining overnight mood:
- Upside manufacturing PMI surprises for China, Sweden, Norway, Italy, Germany, U.K. and EC
- Bund, Treasury yields higher; most EU sovereign yield to bund spreads tighter, with significant tightening for Belgium, Italy, Portugal, Spain
- Portugal, Italy and Spain lead Bloomberg’s Sovereign Debt Movers, with yields falling as borrowing costs declined at Portugal bill sales and as Reuters reports talks between Greece and private creditors could wrap up today - Reuters [20]
- Bondholders may get sweetener tied to revival in Greece’s economic growth that would ease impact of accepting lower coupon, people with knowledge of talks said
- U.S. manufacturing probably grew at a faster pace in January, ISM’s factory index is forecast to show; the Treasury at 9am will announce the sizes of next week’s 3-, 10- and 30-year refunding auctions
- Germany sold EU5b 10-yr bunds (a reopen of the 2% Jan. 2022 issue) at an average yield of 1.82% vs. 1.93%; borrowing costs also fell at the U.K.’s auction of 5% 2025 bonds
- Commodities mostly moderately higher, led by silver +1.9%, 0.6 std. devs. {FIFW GLCO <GO>}; exception is nat gas -2.9% on continued Exxon drilling despite low prices