Markets Close Higher As Japanese Exodus Sparks European Bond-Buying Frenzy

While Japanese stocks plummet further during the admittedly thin European day session extending their losses from the Japan day-session, it seems the cats have been herded to the next high beta junk market - European sovereign bonds. Spanish and Italian bonds rallied 12bps today for their best day in over a month! European stock markets also benefited from Mrs. Watanabe's scramble ending the day up around 1% (Italy +1.4% despite Grillo's comments on the inevitability of a debt restructuring). Amid all this euphoria, European corporate and financial credit markets were not playing along at all. US equity futures got a helping hand from a ridiculous shunt in AUDJPY and CADJPY (FX carry) which lifted S&P futures 10 points off overnight lows. Treasury futures drifted tick-for-tick lower with S&P futures gains (implying around 3-4bps rise in yields). Obviously volumes were light and markets were thin. The USD is ending unchanged as JPY corrects lower and AUD higher but Gold and Silver are up 0.5% and 1.2% respectively.


Japanese weakness continues -


so the cats herd into another market... European Sovereign spreads have best day over a month...


European stocks gained around 1% on the day but credit markets were not as impressed.

In the US, Treasury futures ticked lower in price with each tick higher in S&P futures..


and the ramp in US equity futures is clear with the kink at around 10ET due to the Bank of Israel's rate cut...


Charts: Bloomberg