With Chinese and European data disappointing and Weidmann commenting on the
futility of the 'firewalls' (as we
discussed earlier) ahead of the discussions later this week,
European equities dropped their most in almost three weeks over the last
two days closing right at their 50DMA (the closest to a cross since
12/20). Credit markets (dominated by financial weakness) continue to slide as
the LTRO euphoria wears off. The LTRO Stigma, the spread
between LTRO-encumbered and non-LTRO-encumbered banks, has exploded to
over 107bps (from under 50bps at its best in mid Feb) and is now up
over 75% since the CDS roll as only non-LTRO banks have seen any improvement in
the last week. Aside from Portugal, whose bonds seem to be improving
dramatically on the back of significant Cash-CDS basis compression as opposed to
real-money flows as the spread between Bonds and CDS has compressed from
500bps to 250bps on the back of renewed confidence in CDS triggering,
sovereign bond spreads are leaking wider all week with Italy and Spain
worst.
Europe's broad equity market dropped most in 3 weeks and ends right at its 50DMA...
And financials are bearing the brunt of the selling as LTRO-encumbered banks have been battered realtive to non-LTRO (so much for that non-existent Stigma eh Mario?)...
Credit and equity moving together though XOver remains a little excessive relatively speaking which is noteworthy given its more high beta nature. This suggests the pressure is focused on the financials (which in turn drags the IG (main) index down (wider))...
Sovereigns have been leaking wider all week in bond-land (less so in CDS as bonds catch up to them)...
but Portugal stands out (removed from chart above for scaling) down 130bps this week - which is driven seemingly by a dramatic compression in the CDS-Cash basis as confidence in sovereign CDS encouraged risk-takers back into the trade - i.e. basis traders willing to accept less premium for CDS non-trigger risk as the basis is massively wide compared to others still,..
Charts: Bloomberg
Europe's broad equity market dropped most in 3 weeks and ends right at its 50DMA...
And financials are bearing the brunt of the selling as LTRO-encumbered banks have been battered realtive to non-LTRO (so much for that non-existent Stigma eh Mario?)...
Credit and equity moving together though XOver remains a little excessive relatively speaking which is noteworthy given its more high beta nature. This suggests the pressure is focused on the financials (which in turn drags the IG (main) index down (wider))...
Sovereigns have been leaking wider all week in bond-land (less so in CDS as bonds catch up to them)...
but Portugal stands out (removed from chart above for scaling) down 130bps this week - which is driven seemingly by a dramatic compression in the CDS-Cash basis as confidence in sovereign CDS encouraged risk-takers back into the trade - i.e. basis traders willing to accept less premium for CDS non-trigger risk as the basis is massively wide compared to others still,..
Charts: Bloomberg
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