Sentiment soared higher yesterday and continues to climb this morning on expectations the ECB may begin a new round of bond purchases to ease pressure on Italian and Spanish borrowing costs. This morning the U.S. 10yr benchmark rate climbed +4.5bps to 1.483% not even 10bps above the historic low of 1.387% reached earlier this week. European sovereign debt spreads to bunds have tightened significantly overnight; Spanish and Italian 10yrs are trading at 6.61% and 5.88% respectively. Equity markets around the world are in the green, with the S&P 500 up +0.36% and the Euro Stoxx 50 up +1.46% as of 9:45 EST; Asian stocks closed strongly higher.

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Sentiment turned around this morning and U.S. equity futures reversed earlier losses after ECB President Mario Draghi said policy makers will do everything in their power to ensure the survival of the euro. Globally equity indices are trading higher, with S&P 500 futures up +1.38%, the Euro Stoxx 50 up 3.03%, and Asian markets also showed strength. The dollar is taking a beating versus the majority of its major peers. In Europe, sovereign debt spreads to German Bunds have tightened significantly, and the Spanish 10yr is back below 7% (see chart on attachment) and its spread to bunds is back under 600bps. Commodities are mostly higher, with energy leading the way; Brent Crude is up +1.4%.

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Sentiment is positive this morning as the Spanish 10yr retreats from record highs after the ECB’s Nowotny said there are strong arguments for giving the ESM a banking license. The U.S. 10yr Treasury yield has rebounded from historic lows and is up +4.2bps to 1.43%. In Europe, sovereign debt yields are mostly lower, and spreads to German Bunds are significantly tighter. Futures on the S&P 500 are trading +0.427% higher, European stocks are all in the green with the Euro Stoxx 50 up +1.28%, and Asian equity indices closed slightly to modestly lower. Commodities are mostly modestly higher, with Brent Crude up +0.33% on the day.

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