Well its been a wild few days for bonds, stocks and currencies alike as the mixed messages on the bailout of Greece filters through to the market. The Eurodollar has had 200 point swing, where as the Bund fell 90 points on the first announcement of a possible Bailout before bouncing on denials.
The fact the EU has pledged its support to Greece, has given the market slightly more confidence, and this has resulted in a surge in front month STIRs, especially the Euribor, as we have rallied 10 full ticks in Jun10 and Sep10 Euribors, steepening the yield curve.
Greek bonds rose for a third day as European Union leaders demanded the nation’s government get its budget deficit under control, while stopping short of offering specific measures to help manage the country’s debt.
This is after a statement from Merkel and Sarkozy which echoed prior calls for Greece to clean up its accounts and gave the International Monetary Fund a monitoring role. French President Nicholas Sarkozy and German Chancellor Angela Merkel told reporters the statement is aiming to convince investors that Greece has the support of all stakeholders in its efforts to reduce its budget deficit.
Looking ahead, we are likely to get more details from the summit to keep our hands full, as well as Retail sales release from the US which will give us and Idea of how the consumer is holding up.
Have a good weekend!
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hi, waht do you think regarding the latest comments from Weber "FULL ALLOTMENT MODE FOR WEEKLY OPERATIONS WILL PROBABLY BE NEEDED FOR SOME TIME". For me this differs from Weber comments earlier this year (all non-standard measures will be unwound, Eonia will return to 1% over the year). It is more in-line with Nowotny comments this week... i.e. there is no clear timetable on removal of full allotment for weekly ops. In this case Eonia could stay lower than currently priced in July & Aug. Together with the comment "ABSOLUTELY AWARE OF THE NEED TO COPE WITH REPAYMENT OF 12-MONTH FUNDS IN EARLY JULY", it means there is less chance of an abrupt rise in Eonia in July, even if no more full allotment in 3m ops by that time.
ReplyDeleteI was short the reds in Euribor. Thought that they were extremely rich. But with this statement in mind, i think you have to play the lower for longer theme. I think you have a clearer picture in the US with a slightly more hawkish Fed. Maybe they change their wording at their next meeting in March. I'm short the EDU0 and I'm thinking about buying the EDU0EDU1 Spread. What do you think?
Hi Martin, I was thinking the same with that comment also. It is widely known that the central bank caters mainly for the German economy, but with German GDP being flat this quarter, it shows even the main powerhouse of the Euro zone, is still not fully recovered which suggests that withdrawel of measures will take some time.
ReplyDeleteI PERSONALLY think that there is some trouble looming with one of the EU banks still, so I think in the next meeting in March will outline that they will continue ops for as long as necessary.
As far as the ED spread, Bernanke's comments was very hawkish, but I cant see any tightening really happening till next year. People ive spoken with see a global rate rise as more of a likely scenerio rather then one central bank tightening first.
Its tough to call really, but really appreciate your comments.