Monthly Archives: December 2011

The MorningSnapshot- 12/28

This morning Italian 10yr bonds rose at an auction of $11.8 billion dollars of debt. The spread between Italian Bonds and German Bunds is around 490 bps in early morning trading. Also worth mentioning- Spanish spreads are down to 311bps.

Markets are down, with the S&P 500 -0.57% (9am CST), the Euro Stoxx 50 -0.46%, and the Nikkei 225 closed down -0.20%. A surge in the ECB’s balance sheet to a record high has highlighted the growing risks in Europe, and threatens to snap a 5-day rally in the S&P 500. Lending to euro-area banks jumped $280 billion dollars (€214), to €879 billion in the week ended Dec. 23. Its balance sheet increased €239 billion euros to €2.73 Trillion euros.

U.S. 10yr treasuries are currently testing resistance at 1.968%, and the BOFA/Merrill Lynch MOVE Index, an indication of treasury market volatility, has increased +8.72% to 94.80 from its 12/15 low of 85.43.

Commodities are higher, with the S&P GSCI Commodities Index up +0.68% led by price advances in agriculture and energy.

U.S. credit markets continue to tighten- with USD LIBOR/OIS up to 49 bps, the 10Y 3M yield curve spread at 155 bps, and the BAA premium to treasuries at 336bps. The U.S. LIBOR/OIS spread is up +299.13% since its 8/1/11 low of 12.3 bps.

The MorningSnapshot- 12/27

This morning the S&P 500 is little changed after economic data came out showing a drop in U.S. home prices, and investors are obviously still concerned about the European Debt Crisis. Overseas, the Nikkei 225 closed down -0.46%, and the Euro Stoxx 50 is almost unchanged as of 11am CST. U.S. 10Y treasury yields rose 18 bps last week and now trade around 2.014% YTM. Commodities are slightly up, with the S&P GSCI commodity index up +0.68% on the day.

Obama is set to announce his nominations for two vacancies on the Federal Reserve Board tomorrow according to a report from the WSJ. He will choose Harvard University finance professor Jeffrey Stein and Jerome Powell, who was undersecretary of the Treasury for domestic finance in the early 1990s.

Tomorrow’s economic line-up includes Jobless Claims, the Chicago Purchasing Manager data, and Pending Home Sales.

The MorningSnapshot- 12/21

The ECB loaned 523 euro area banks 489B Euros ($645B), almost double the median estimate of 293B Euros from a Bloomberg survey. The ECB also loaned $33B for 14 days in a dollar offering, up from $5.1B just a week ago. While the 489B euro take up shows banks’ “liquidity needs are being amply met,” says Jonathan Loynes, chief European economist at Capital Economics, he remains skeptical it will ease the sovereign debt crisis.

MBA Mortgage applications for the period ending Dec. 16 came in at -2.6% versus a 4.1% estimate. Although this indicator is volatile, it indicates purchases and refinancing have slowed- proving that the lowest borrowing costs on record are not enough to spur demand in the housing markets.

The Bank of Japan (BOJ) downgraded their outlook of the economy for the second month in a row, but chose not to boost monetary stimulus- citing easy domestic financial conditions. Improvement in business sentiment has been sluggish, and exports & production have remained “more or less flat.”

At 7:50am CST, S&P futures were down -0.138%, the Euro Stoxx 50 is down -0.62%, and the Nikkei 225 has closed up +1.48%.

I sure wish politicians in Europe (heck- here at home too) would pay attention to the quote I’m using this morning. Have a great day folks- thanks for reading.

The MorningSnapshot- 12/20

S&P 500 futures, currently trading in London, are up +1%, and Treasuries have been falling leading up to the release of U.S. housing data. Builders likely began working on more homes last month, according to Bloomberg economists.

*Updated at 7:30 CST- U.S. Building permits rose to a high, and builders broke ground in November on the most houses in over a year. Starts increased 9.3% to a 685,000 annual rate, about 50K over estimates.

The Euro Stoxx 50 is up +0.93% this morning, and the Nikkei 225 is up +0.49%.

I will follow this up with another note sometime this morning.

The MorningSnapshot- 12/19

Morning Commentary
The world is likely a better place this morning, after North Korean dictator, Kim Jong Il, dies at age 70. It appears likely he suffered a stroke in 2008, and may have also battled with pancreatic cancer, but the ultimate cause of death appears to be a heart attack, according to reports from South Korean news sources. Kim Jung Il ruled for 17 years, during which time he defied the world by building nuclear weapons, while allowing his people to starve. Shortly after the news was released (around 12pm in Tokyo)- the MSCI Asia-Pacific Index was down 1.9% and S&P futures were down 0.5%.

Overnight Asian markets remained down, with the Nikkei 225 down -1.26% this morning. The Korean KOSPI hit a low of 1750 and then rallied to 1777 on the day. As of 7am CST this morning- S&P futures are trading +0.329% higher on the day. The Euro Stoxx 50 Index is up +1.14%, right along the same range as most other Euro equity indices.

Euro-area finance ministers are trying to meet a self-imposed deadline for drawing additional aid through the IMF and put together new budget rules. They hold a conference call at 3:30pm Brussels time regarding $261B in IMF funding and the mechanics of the Dec. 9 agreement at the EU summit on the so-called “fiscal compact”. France will sell up to $9.1B of bills after Fitch lowered their outlook of the nations credit rating (France has a debt-to-GDP ratio around 82.4%).

ECB President Mario Draghi told the Financial Times (FT) that countries choosing to exit the euro would be confronted by greater problems such as, “big inflation” and the fact that those countries would still have to implement austerity measures, “but in a much weaker position,” FT quotes Draghi in an interview. Governments, companies, and central banks alike still continue preliminary planning measures for the break-up of the euro zone, despite most analysts indicating the chances of such an event are slim, less than 20%. I would personally take the over on that bet, given the current environment.

Technical Notes
The VIX Index closed last week just below its support around ~24.5 (the Oct. 28 low), and with the 50 day EMA set to cross below the 100D EMA, the index may be set to trend lower.

U.S. 10Y Treasury yields extend their fall to 1.8354%, near all-time lows, as the Fed continues extending the maturity of its holdings (Operation Twist). Support is the Oct. 4 low of 1.72%, near the record Sept. low of 1.67%; look for resistance at the 50 DMA at 2.06%.