Overnight Sentiment Improves Modestly, If Not Greek 1 Year Bonds Which Slide To Record 1114%

Following yesterday's broad risk off day, some positive sentiment has returned to markets despite ugly economic data from Germany, and an odd indefinite halt of trading of Greek bonds on the Milan Borse. As BAC notes, for the third straight day, Asian equity markets sold off, as investors are concerned about a Greece debt-swap deal. The regional MSCI Asia Pacific Index slid 0.9%, to finish at its lowest close in a month. The worst-performing market was the cyclical-sensitive Korean Kospi. Its economy, along with many other emerging Asia economies, is highly dependent on exports, so yesterday's data that showed that the Euro area's economy contracted in the fourth quarter added to the bad news. The Hang Seng also lost 0.9%, while the Shanghai Composite fell 0.7%. Japan's Nikkei lost 0.6% and the Indian Sensex fell 0.2%. In Europe, equities are rebounding from their biggest drop since November. Part of the rebound is investors returning to equities to buy the dip, while investors are also expecting a strong ADP employment report later in the day - at 8:15 am. In the aggregate, European equities are up 0.4%. At home, futures are pointing to a solid opening later today. The S&P 500 is set to open 0.5% higher. Elsewhere, German factory orders plunged -2.7% M/M on expectations, from a +1.6% December print, driven by a total collapse in orders from outside the Eurozone which imploded by 8.6% down from +12.1% in December (more shortly). And Europe is now bracing for a Greek default as the Milan Bourse earlier announced it has suspended Greek bonds from trading indefinitely - perhaps related to this is the fact that after trading in the triple digits yesterday, the Greek 1 Year just slid to an all time record 1114% - looks like there is not much value in that post-reorg Greek package offered to PSI volunteers. Finally, the deposit money held at the ECB barely budges, as it prints at €817 billion, down just modestly from yesterday's record print as Europe's banks brace for Thursday's PSI announcement with a big cash buffer.

Some more on market performance this morning via BAC:

  • Yields are backing up in the sovereign debt market, as investor's regain their risk appetite. In the US, the 10-year Treasury yield is 2bp higher, at 1.96%, while the long bond is 3bp higher, at 3.10%. In Europe, the UK gilt is 1bp higher, at 2.12%, and the German bond is trading at 1.79%, after rising 1bp. Meanwhile, peripheral debt is benefiting from the risk-on trade. Italy's 10-year note is 8bp lower, at 4.96%, and the Spanish 10-year is 4bp lower, at 5.06%.
  • In the currency markets, the dollar is weaker, with the DXY index down 0.1%. WTI crude oil is 57 cents higher, at $105.29 a barrel. Gold is higher as well, up $5.85 an ounce, at $1,680.18.


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