In spite of all the exuberance of front-running the ebullient print/buy response of a dysphoric request for help (that may never come - just like QE3 if market levels remains elevated), Spanish and Italian 10Y bond spreads are only now just making it back to pre-Draghi 'let-down' press-conference levels - and holding steady. The basis (the spread between CDS and bond spreads) has compressed dramatically as bonds have outperformed with the 'hope' of a substantial SMP enabling an illiquid bond market to remove whatever event risk (PSI/haircut/subordination) premium was priced in cash and not CDS. The front-end of the Spanish and Italian curves is softening modestly 7-10bps (though admittedly off compressed levels) but with Spain and Italy stock markets up 12 and 9% from Thursday close respectively - and well above pre-Draghi levels (even as German and Swiss rates stumble along the bottom on a safety bid) it seems whatever volume there is (which is tepid at best) is marginally lifting the unshortable irrepressible equity market (which is outperforming credit markets notably now).
10Y Italy and Spain reverted back to pre-Draghi disappointment speech levels but holding steady...
[5]
as the basis compresses (bonds outperform to meet CDS' more ebullient view of things)...
[6]
but stocks continue their relentless rise...
[7]
especially compared to European credit and financials...
[8]
Charts: Bloomberg