Risk Off


Asian equities too a hit, posting their biggest two-day loss this year. The MSCI Asia Pacific Index dropped 1.2%. The losses were situated in the Hang Seng, which fell 2.2% and China’s Shanghai Composite, which declined 1.4%. Meanwhile, Europe is off 1.6% in the aggregate after the second take on Q4 GDP confirmed the 0.3% drop from the initial estimate. And, after yesterday’s sell-off, equity futures are pointing to a weaker open at home across the major indices driven in part by concerns that the Greek PSI will not get the required 75% participation as reported here yesterday. In the US, government bonds are in rally mode with the 10-year Treasury note yield down 4bps, to 1.97%; the long bond is rallying 5bps, to 3.10%. Across the pond, government bonds are performing as one would expect. Benchmark German bunds are rallying 4bps, to 1.78% while France, Italy, and Spain are selling off anywhere from 5 to 9bps. In the FX market, the US dollar is enjoying a flight to safety bid against major currencies. The DXY index is up 0.5%. Not surprisingly, with risk being taken off the table, commodities are taking a hit. WTI crude oil is down 60 cents, to $106.10 per barrel. Industrial metals are taking a hit too; copper is off 1.6% to its lowest level since mid February. In Europe, the LTRO continues to not work at all as the ECB deposit facility rose to a new all time record of €827 billion as cash parked with the ECB is not being used for any other purpose, and the net money from LTRO 1 and 2 is now less than the cash added to the ECB from Europe's banks.

via ML and GS


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