With Spanish bond spreads over 30bps wider from their open this morning, EURUSD has just broken its 200-hour moving average trading back close to 1.2500 for the first time since the summit. While this is an 75% retracement of the EUphoria, broad equity markets are only modestly off their highs (we assume on rate cut hopes - which is likely helping driven EUR down a little) - and yet corporate and financial credit spreads are at two-day lows. Hope fades even in equity markets where once we dig into the individual indices that most are down modestly (though Spain and Italy are down around 1%). We also note that Bunds have outperformed Treasuries by 20bps from the initial risk-transfer spike on Friday morning - though TSYs are closed today as Bund yields dropped 10bps from open to close today. On a side-note, Spanish 5Y CDS briefly traded wider than Ireland 5Y CDS today for the first time in two years.
Equity markets did fall a little today but remain up from late yesterday (blue line) but credit markets (both corporate and financial) are notably wider - at two day wides in fact - as the sovereigns start to give back their gains...
[9]
EURUSD has retraced 75% of its EUphoria...
[10]
as rate-cut hopes and a break of the 200-hour average seemed to provide the impetus on a quietish day...
[11]
Meanwhile, Spanish (and Italian) bond spreads are blowing back wider (with Spain almost back to 500bps over Bunds)...
[12]
and Bunds are notably outperforming Treasuries now (green line) - as is clear from the chart below as ITA/SPA spreads revert wider and risk transfer is priced back out of Bunds...
[13]
and for the first time in two years, Spain and Ireland are trading in line on a 5Y CDS basis...
[14]
With Treasuries closed, obviously the spread to Bunds is exaggerated but Bunds have rallied back all their 'risk-transfer' losses from the Summit...
[15]
Barclays remains -15.5% (lost around 1% more today) from last Thursday's open (pre-Liebor) and the FTSE was leaking lower into the close.
US equity futures are trading but very thin - currently unch having traded in a 6-7pt range from yesterday's day-session close. While many of the markets that constitute CONTEXT are closed, spreads and FX imply about a 5pt drop in ES at the moment.
Charts: Bloomberg