As Twitter and CNBC come alive with European banks ripping higher (short-sale-ban and trading a pennies will do that), Spanish and Italian equity markets ramping (to recent swing highs and the top of a four-month range on de minimus volume), while EGBs basically stagnate; we thought a little cooling reality on this white-hot exuberance was necessary. Without really wanting to steal the jam out of Draghi's donut, since LTRO2, Spain and Italy 10Y are 175bps and 71bps wider; Europe's VIX is unchanged at 23%, France's CAC and Germany's DAX equity indices are +1-2%; and Spain's IBEX and Italy's MIB equity indices are -13% and 8.5% respectively. Recency bias, summer doldrums, and an incessant hope that the status quo can really re-emerge (be printed back into existence) among what is increasingly a global balance-sheet-recession (and shadow-banking collapse) among advanced economies is indeed a powerful driver but context is key.
European 10Y Sovereign Bond Spreads since LTRO2...
[9]
European Equity Indices since LTRO2...
[10]
and Europe's VIX since LTRO2 - Unchanged...
[11]
Charts: Bloomberg