French, Italian CDS Hit Record, Yen Resumes Climb

After a brief intermission in which even the robots apparently took some long overdue shut-visual sensor, things are back in motion, with both French and Italian CDS pushing out to record wides, France hitting 150, 7 bps wider, while Italy rising 15 bps to over 405 bps at last check. And what is more disturbing for all those who keep pounding the table that Spain should blow up first dammit so stop looking at Italy, Italian 10 Year yields just surpassed those of Spain, for the first time since April 2010. Elsewhere, as Bloomberg reports, the Yen has resumed its rally as the BOJ, has ceased its intervention after spending over Y4 trillion according to some accounts, only to realize what we said from the beginning: the yentervention will fail. "Both BOJ and SNB have made clear they oppose further currency appreciation but absence of other safe-haven alternatives means the yen and swiss franc will remain in demand", Lutz Karpowitz, strategist at Comerzbank, writes in note. And some more observations courtesy of Bloomberg: "Confidence is waning over EU policymakers’ ability to contain debt crisis, Derek Halpenny, strategist at BOTM-UFJ writes in note. These will make it all the more difficult for BOJ to find intervention success in yen. Without further BOJ intervention, intensifying risk aversion will result in further yen gains, Halpenny adds." What is ironic is that the Italian stock market is rebounding rapidly from overnight lows of -3.and 5%, is now green courtesy primarily due to alleged additional ECB bond purchases of Italian bonds, which rumor has in turn stabilized Italian financial stocks which are, as expected, soaring. We are confident this response will be as transitory as all other central bank interventions.


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