Throwback to the daily commentaries…
18th June 2012
Very choppy price action today saw markets quickly looking past the positive Greek election results where pro-Europe party New Democracy won with 30% of the votes and is expected to form a new coalition government with Pasok. Spanish bonds took it on the chin as markets reversed to risk-off on more Greek scepticism and broader Euro/Spanish problems with Spanish bonds continuing to get hit with 10y yield rising as high as 7.3% before backing down to close 7.16%. Core bonds opened lower but have since grinded upwards on the reversion with the bund future climbing over a point to close up 40 ticks. In the UK, the attention remained on Libor fixings which printed down another 2bps after Fridays 5bps crash. Market had priced a bigger drop and thus caused the Strip to partly reverse Friday’s move.
18th Sep 2012
Growth-sensitive assets are struggling to continue last week’s moves as the market continues to absorb the latest ECB and Fed actions and are now becoming wary that the eurozone remains vulnerable. Doubts about the timing of the Spanish bailout and the rising tensions between China and Japan over the Senkaku/Diaoyu islands provided some support for core bonds with bunds and gilts gaining another half a point on the day whilst equities continued to trade in the black (IBEX -1.1%, FTSE -0.5%). In the UK, 6s3s basis was heavily offered today (10y down 1bps) as the Libor fixings continued to come down whilst UK CPI expectedly printed down to 2.5% from 2.6% after the sharp rise seen the previous month in Olympics-related air fares inflation.
23rd Oct 2012
Grinding rally today fuelled by a combination of Moodys’ downgrade to five Spanish regions including Catalonia, media reports that Spain’s 2012 deficit will blow past 6.3% of GDP (already agreed with the EU) and instead will surge up to 7.3% and headlines from the Bank of Spain suggesting that Q3 GDP has almost certainly contracted 0.4%, making it even harder to meet the 2012 targets. Core bonds headed higher from the open with gilts gaining over three-quarters of a point whilst Spanish yields spiked upwards (+15bps) on the risk-off move. In the UK, the curve bull flattened on the rally with the STRIP pushing higher (greens up 6/7bps with front dec now below 50bps).