12 Jul 2012 – " Under Pressure " (Queen & David Bowie, 1981) http://youtu.be/a01QQZyl-_I After days in a row of close to home behaviour, Asia fell out of bed overnight (-1.5-2%, but China). 10 YRS JGBs at record 0.77%. No big trigger seen, outside the surprise BOK rate cut as reminder that things were going slow there, too. The US closed better than started, although here as well only due to a pre-close rally, as the weaker European close and interpretations over what meant “a few” and “some” when poring over the FOMC minutes were initially less rosy. The FED, like the ECB, seems happy to mutter that it may have something up its sleeve, should things get awry. No immediate support, though. European open hence better bid in EGBs and down 0.75% in equities. Credit a bit wider. EUR in the low 1.22s. Commodities still range bound. Italy (ahead of the bill auction) and Spain (on the back of the late undeterred catch-up movement and yesterday’s austerity package) still doing fine; the first at 5.73% (having lagged its Iberian peer a little yesterday), the second hitting through 6.50% for the first time in a week. Likewise, the catch-up of the Soft to the Hard Core seems unstoppable, as the AFB group is lurching 7-9 bp forward again with France hitting new 10s all-time lows at 2.22%. French CPI at 2.3% a tick higher than foreseen, unchanged to May. German Wholesale Prices lower at +1.1% after 1.7%. EZ Industrial Production actually better than expected at -2.8% YoY after revised -2.4% (fcst was -3.2%), but lowest since Dec 2009. Pushing the EUR to test the low 22 without actually testing. Greek Unemployment hitting a 22.5% high in Apr (from 21.9%). Italy sold its targeted EUR 7.5bn 12m bills at 2.697% (down from 3.972% last month). Bid to cover lower, given the price. Need to round up things and close the week with tomorrow’s sales of EUR 3.5bn new 3 YRS (last 5.30%. COB 4.77%, 20bp wider than the tightest print today), next to EUR 1.75bn in 2019 (6.10%, mid June), off-the-run 2022s (last 6.19%, 2 weeks ago) and 2023 BTPs. MEA MAXIMA CULPA. Ok, I have to admit I messed up big time on the ECB deposits, confusing the right date of the start of the reserve maintenance period (11 Jul) with the start of the week… Silly me! So yesterday’s analysis is just wrong. So, yes, 0% on deposits drove down the amount to EUR 325bn yesterday, the lowest since late December, from prior EUR 809bn. Then again, most money was just shifted to the current accounts held at the ECB (jumping from EUR 74bn to 540bn), some of which being actually remunerated as well. Need to see the speed of replenishment, though. With short bills and EGB bonds in the negative, 0% ain’t that bad, after all. Will keep wiping that egg off my face for the rest of the week… Running out of stamina by late morning with equities held down by the EUR, held down by EZ IP figures, holding down Peripherals back to little changed. Fat big Risk Neutral with negative bias. EGB prices would tend to show that the money is on bonds and the market is hunkering down, awaiting some shoe to drop. Unsupportable tick by tick thriller on the EUR 22 mark. Tick Tick Tick. With 21 flashing, some stops in Bunds and added pressure on equities. Peripherals turning negative again, the first such pull-back on Spain since the rally in 10s started Monday late morning and had been pretty much one way since. Under pressure… Heavy mood with markets barely reacting on (holiday-shortened) Claims at 350k (fcst 372 after revised higher by 2k 376k), focusing on growing continuous claims at 3304k and prior revision higher to 3318k. Pushing EUR further lower to 1.217 and weighting as ROff. US equities opening right away negative with the S&P through 50d MOV, adding further pressure on European risk. Nothing more specific in negatives, but mood sliding. Titbits about Merkel’s advisor thinking Germans would need a referendum to sign off the ESM; ECB’s Knot telling rates could fall further if the economy was as well; Dutch wanting the collateral from Spain as well, if given; a further nationalized Spanish bank; IMF to lower its outlook. No bombshell. Just bits and pieces that add to the gloom. Under pressure… Can’t keep count of EGB all-time lows anymore: let’s simplify by saying that the whole non-Peripherals EGB universe up to 5 YRS has traded new all-time lows today. Under pressure… BKO on record close at -0.042%. Bunds yielding positive starting at 3 YRS out. New Issues mainly restricted to Nestlé selling EUR 500m 7 YRS in less than an hour at MS +15 (from initial talks at 30) and Italian gas distributor helping itself for a second serving after last week’s inaugural benchmark with EUR 1bn long 6s at MS +370 (some 50 through BTPs). Yesterday’s Anheuser deal ended up being a bubbly USD 7.5bn. Pressure on tap… Closing levels: 10 YRS Yields: Germany 1,25% (-2); Finland 1,60% (-3); Luxembourg 1,67% (-2); Netherlands 1,68% (-2); Swaps 1,75% (-4); EU 2,12% (-3), Austria 2,15% (-3); France 2,24% (-7); EIB 2,35% (-4); EFSF 2,47% (-2); Belgium 2,68% (-6); Italy 5,90% (+9); Spain 6,60% (+6). 10 YRS Spreads: Finland 52bp (+1); Luxembourg 42bp (+0); Netherlands 43bp (unch); Swaps 50bp (-2); EU 87bp (-1); Austria 90bp (-1); France 99bp (-5); EIB 110bp (-2); EFSF 122bp (unch); Belgium 143bp (-4); Italy 465bp (+11); Spain 535bp (+8). EUR swap curve 2-5 YRS 38bp (+0,0); 5-10 YRS 68bp (+1,0) 10-30 YRS 43bp (+1,0). 2 YRS German BKOs closed -0,042% (-2,6) and 5 YRS OBLs 0,30% (-2). Main at 168 from 168 (unch); Financials at 277 after 280 (1,1% tighter). SovX at 275 from 278. Cross at 665 from 660. Stoxx Futures at 2225 / -0,8% (from 2243) with S&P minis at 1324 (-0,8% from 1335, at European close). VIX index at 19,4 after 18,5 yesterday same time. Oil 84,9/99,6 (WTI/Brent) from 85,0/99,1 (-0,1%/+0,5%). Gold at 1559 after 1576 (-1,0%). Copper at 340 from 341 (-0,3%). CRB at EU COB 288,0 from 290,0 (-0,7%). Baltic Dry down a third day to 1121 from 1146… Even without the massive 2008 sell-off, we had bit of summer slumps over the last years. Under pressure… EUR 1,219 from 1,224 ECB deposits at EUR 325bn after EUR 809bn (see above) Greek bonds guesstimates: Down 50bp with 2023s at 25% and 2042s at 21%. All levels COB 17:30 CET Tomorrow: Periphery: Italy Fri CPI (prior 3.6%) // Spain Fri CPI (prior 1.8% YoY) // Greece Thu Unemployment US: Fri PPI fcst 0.2% after 0.7% YoY Awaiting Chinese GDP release. Click link on title or below for today’s musical support: http://youtu.be/a01QQZyl-_I Um ba ba be Um ba ba be De day da Ee day da - that's o.k.