The Eye Of The Eurocane Is Passing: Risk Back Off

It was fun while the Liesman rumormill lasted:

  • Italy CDS +12 bps to 460
  • Spain CDS + 8 bps to 375
  • Portugal CDS + 10 bps to 1,110
  • Ireland CDS + 18 bps to 736
  • Greece CDS: Many points upfront but running joke

The Euribor-OIS spread also enjoyed the three day respite and is now back in widening mode, up to 81, after three days of declines, and on its way back to the 2.5 year high of 89 bps from 5 days ago.

Elsewhere, Germany just sold E5 billion in 5 year bonds at the lowest Bid to Cover since the inception for of the euro, meaning interest in German paper is evaporating fast. From Reuters:

German government bond futures reversed gains on Wednesday after a sale of 5-year paper failed to draw enough bids to cover the amount on offer.


Bids at the auction totalled 5.115 billion euros, with 6 billion euros of paper on offer .


December Bund futures <FGBLz1> were last 1 tick lower at 135.87, compared with around 135.99 just before the sale

And from Market News:

The German federal government sold E5.0 billion in new 1.25%-coupon Series 161 five-year Bundesobligationen (Bobls) at an average yield of 1.22%, the Bundesbank announced Wednesday.


The bid-cover ratio, excluding retention, was 1.0, down from the 1.1 b/c at the previous Bobl auction in late June.


There were a total of E5.115 billion in bids for the auction, including E2.435 billion in competitive bids and E2.68 billion in non-competitive bids. The German government accepted 100% of the non-competitive bids.


The lowest accepted price at the auction was 100.08, and the average weighted price was 100.15. The Bundesbank accepted 100% of bids at the minimum price.


At Wednesday's auction, the government retained E1.0 billion of the issue for its open market operations, bringing the total tranche volume to E6.0 billion, as previously announced. The sale will settle on Friday, September 30. The S.161 5-year notes will mature on October 14, 2016.

And last but not least in cash land, Italian 10 year yieds rose to 5.63% while the 2 Years are 7 bps wider to 4.32%.

And adding insult to injury is PIMCO which told the Telegraph that UK GDP in the 2012-2015 will average 2.00%, not the 2.75% forecast, which will push governent unemployment higher.


No comments yet! Be the first to add yours.