Tag: Euro
May
Buy, buy, buy
Going for carry continues to be the name of the game, while the consideration of the credit risks involved seems once again to be a secondary concern. The risks of a bond bubble are no doubt in the air, but this trend has not run its course.
FX Comment: follow down?
A lean data week ahead. With soft FOMC and ECB messages last week, will other central banks follow suit?
April
Spain and Greece soon outpacing France and the Netherlands?
It is a well-known fact that the outlook for individual Euro-zone countries is far from uniform. However, it is a misperception that all the northern countries would be doing better than the southern European ones.
Ray of light in Euro-zone credit numbers
If you torture the data long enough, it will confess. One can find hope in today’s Euro-zone credit numbers for March, though if you are pessimistic, the data offers a lot for you as well.
Can negative be positive?
The concept of negative nominal interest rates has usually been considered something possible only as a short-term market aberration. Not anymore. Could negative interest rates really save us?
Welcome to the world of wild mood swings
Big market moves have caught a lot of attention in the past few days. Where is the world going?
Slovenia – vulnerable but very different from Cyprus
While investor have reason to worry about Slovenia, comparisons to Cyprus seem hugely exaggerated.
March
Be careful what you wish for
The EU appears to have fast-tracked its plans for bank resolution in earnest, at least based on the comments from the Eurogroup President Dijsselbloem. Such plans are another blow for the funding outlook of banks, and risk escalating the euro crisis again.
This deal sends more constructive signals – credibility still hurt
A deal on Cyprus was finally reached this morning. Unlike the earlier agreement that basically sent the message that all depositors in troubled banks should immediately withdraw their money, the terms of this agreement actually send a more constructive message. Still, days of wrangling and bad suggestions earlier have hurt the credibility of Euro-zone decision-makers further.
Wealthy Germany – and even more wealthy Italy and Spain
Private households in Spain and Italy are much more wealthy than German households. This is one of the results of a study that the Bundesbank published yesterday. Interesting finding and interesting timing given all the discussions about who should and who can bear the burden of adjustment in Europe.
Italy heading towards a AAA rating?
The recent report by the ratings agency Standard & Poor’s shows most countries studied have actually already made a lot of progress in addressing their increasing age-related spending compared to 2010, even though a lot of work remains. One of the most striking aspects of the report is the progress seen in Italy, which could see its rating rise notably going forward.
Cyprus votes no before voting yes
The Cypriot parliament yesterday rejected the proposed bailout including the controversial levy on bank deposits, putting the future path of Cyprus very much in question again. However, as the alternative for the bailout for the country looks much worse than the terms of the aid package, Cyprus will most likely have to accept the terms in the end.
Strong Irish bond launch tells us much more than the weak Italian auctions
Despite today's weak auctions, the risk of an Italian auction actually failing looks remote. In fact, one should not give too much weight to the performance of individual auctions. Italian troubles will be reflected first on secondary markets, not on weak auction demand. The strong Irish 10-year bond launch carries a stronger message.
Latvia: On track to adopt the euro in 2014
The government of Latvia today submitted a request to the European Commission and the European Central Bank to evaluate the eligibility of Latvia to become a member of the euro area. This is another formal step on the road to …
February
Italian politics in a dead end – any way out?
The one thing that seems clear after the Italian election is that nothing is clear at all and uncertainty will linger on. As Bersani put it: Italy is in "a very delicate situation."
Not such a big rush this time
The ECB announced today 356 banks would return a total of EUR 61bn of the 3-year money they took from the central bank in the second 3-year LTRO early last year. The numbers illustrate that a considerably amount of excess liquidity will remain in the system for a long time, keeping overnight rates close to current levels. The banking system in general will heal only slowly.
Not so fast
Regulators have been forced to backtrack on many of their most ambitious reforms lately, due to fears that big reforms could really hit the markets and the real economy very negatively. This trend now also continues regarding the planned margin requirements for derivatives, while more “fine tuning” of the planned reforms no doubt lies ahead before any actual implementation.
Now for the second big one
The other bigger one-time repayment of ECB 3-year loans will take place next week, when the second 3-year LTRO will have its first repayment date. The repayment interest is likely to come below the EUR 137bn seen in the first operation. That said, as we have seen a notable correction lower in short interest rates since the first repayments, risks are tilted towards higher rates and a steeper money market curve ahead of Friday’s data.
Italian elections – what if Berlusconi wins?
Italian general elections, due 24-25 February, are nearing and hence we take the opportunity to sum up our views and add a scenario, where Berlusconi unexpectedly wins the lower house. The election is most likely to produce a favorable outcome …
Draghi optimistic but “monitoring closely”
The ECB left key policy rates unchanged as widely expected. Draghi struck an optimistic tone, but was maybe slightly more concerned about the LTRO repayments and EUR strength than most had expected.
”Valuuttasodassa” olisi vain voittajia
Euroalueen kansalaisten on turha valittaa, että olemme ilkeämielisen hyökkäyksen kohteena, kun Japanin ja USA:n keskuspankkien elvytystoimet saavat euron vahvistumaan näitä valuuttoja vastaan. Valuuttakurssiliikkeet ovat vain tavanomainen reaktio keskuspankkien elvytystoimiin. Jos tämän nähdään heikentävän euroalueen kasvua, Euroopan keskuspankki (EKP) voi reagoida keventämällä rahapolitiikkansa.
Siesta no more
Political risk has been on the rise again in Spain and Italy lately, serving as the latest reminder that the risks inherent in these countries have by no means gone away. As the Spanish corruption scandal is far from resolved, while Italy is headed for uncertain parliamentary elections, market tremors will likely continue in the near future.
ECB preview: Is Draghi concerned about LTRO repayments and EUR strength?
I expect no change in rates, no new non-standard measures and no change in bias. Is the ECB concerned about large-scale LTRO repayments draining liquidity? Is the ECB concerned about the rise in short rates and strengthening of the EUR?
January
Banks rush to repay the ECB – at least initially
The ECB announced that 278 banks will repay a total of EUR 137bn of the 3-year loans taken from the central bank. The amount paid was higher than many had expected, and has put upward pressure on rates. However, one should not draw the conclusion that monetary policy was about to see an abrupt tightening and that rates would be heading higher for good.
Tappaako vahvempi euro euroalueen toipumisen?
Viime vuonna euroalueen taantumaa vaimensi merkittävästi viennin lähes 10 prosentin kasvu euroalueen ulkopuolelle. Viennin kasvua selkeästi avitti euron heikkeneminen, joka paransi euroalueen vientiteollisuuden kilpailukykyä. Vaikka maailmankaupan kasvu tyrehtyi lähes täysin, euroalueen viennin kasvu jatkui vankkana.
Portugal is back
Portugal followed in the footsteps of Spain’s hugely successful bond launch yesterday, making a comeback to bond markets for the first time since its bailout from other Euro-zone countries and the IMF. The Portuguese bond sale was just the latest reminder that confidence towards the Euro zone is returning.
Macro Strategy – Watch EU consumer confidence and PMI
We will see a lot of PMI data, but behind these data points we take an increasing interest in consumer confidence. A trough in this measure will surely convince us even more of the European macro trough (see ‘Global Alpha’s Winter 2013 Roadshow’). Our model, see fig 1, is indicating a potential upside move, and we think a data print of -22 is in the cards. This could then base the trough in European consumer confidence, a much needed development indeed. Of course, we note that we are far away from the consensus, but we were so on the ZEW print as well… As such, we enter these data points with a risk-on momentum, long EURUSD and short Bund.
This is big
Spain saw an unprecedented flood of orders for its new 10-year benchmark, the strongest sign yet that the market conditions have seen a material improvement. Only the yield of around 5.4% serves as a reminder that Spain is still facing some problems – quite significant ones for that matter. With this kind of demand, Spain is making good progress in meeting its huge financing needs for the year.
FI Strategy – LTRO and the early repayment option
On Friday, January 25, the ECB will announce the first amount to be repaid of the three year LTROs. We estimate EUR 200bn to be paid back during 2013, with limited market impact in the short term.
ECB to start buying soon?
When the ECB announced its Outright Monetary Transactions (OMT) programme last autumn, Spain was expected to take advantage of the programme rather quickly. The activation of the OMTs would have required an aid programme for Spain, which the country was reluctant to apply for. Could Ireland become the first direct beneficiary of the programme?
We don’t want your money
Banks will have the first chance to repay the 3-year money borrowed from the ECB on 30 January. Early repayments are likely to give rise to pricing of higher short rates and cause some jitters of tightening policy. Despite the repayments, plenty of excess liquidity will remain, keeping short rates very close to current levels.
And then there was one
The rating agency Standard & Poor’s affirmed Finland’s AAA rating, and changed the outlook for the rating from negative to stable yesterday. After the move, Finland is the only Euro-zone country to have a triple-A rating from all the three major rating agencies with a stable outlook. The move also signals how S&P has seen the effect of the Euro-zone debt crisis fade
Spain to a flying start with its 2013 issuance
Spain sold a total of EUR 5.8bn of bonds today, which was more than the indicated EUR 4 to 5bn target range for the auctions. This represents just shy of 5% of the estimated total long-term borrowing requirement for the year. Today’s news was certainly positive for Spain, but one should not get too carried away. Spanish issuance needs going forward are daunting.
It’s not all gloom in Greece
Greece is starting to see some light at the end of the tunnel, even though the country still has a long way to go. Economic confidence has seen a sharp rebound in the past few months, and is now at its highest level since the country received its first bailout in early 2010. Even the outlook for Greece is thus not all gloomy.
The fear of overregulation frightening the regulators themselves
The Basel Committee on Banking Supervision announced yesterday it had agreed to considerably loosen its new liquidity requirements. The relaxation of the rules illustrates the regulators are not particularly willing to risk another big hit to the economy due to heavy regulation.
December
Some pigs can fly
What do Portugal, Ireland and Italy have in common? Their government bond markets have all produced a return of more than 20% in 2012. These numbers handily beat the around 4% return from German bonds. In fact, among larger Euro-zone countries, Germany has been the worst performer in 2012.
Many Euro-zone countries with sizable borrowing needs also in 2013
2012 is drawing to a close. Despite worries of the contrary, both Spain and Italy have been able to satisfy their borrowing needs via the bond market – albeit with quite a lot of help from the ECB. Still, the issuance picture suggests especially Spain will face notable challenges ahead.
Collateral rules make safest assets even richer
New rules concerning the collateral needed to back derivative positions as well as new liquidity requirements will have major consequences for financial markets in general. Even though the rules are not final yet, it seems increasingly clear that we will see increased demand for the highest-quality assets going forward.
FX Comment: Fed-up?
Will Fed fire more guns - against the USD?...
Setback ahead for Italian bonds?
Italian bonds have seen almost stellar performance lately, with the year-to-date return from Italian bonds in general standing at close to 20%. Profit-taking and a correction higher in yields look likely at some point. Such a move may have started yesterday, as the future of the government was put in doubt.
FX Comment: His name is Cliff. Fiscal Cliff.
Not much resolute action on the global Markets last week, neither much consistency. But lots of events/data this week to get some action on...
November
Agreement on Greece not exactly boosting credibility
Despite remaining uncertainties, it looks likely that Greece will receive its money. Equally likely, going forward Euro-zone countries will have to take further losses on their exposure to Greece, while the outlook for the country remains clouded to say the least. The cost of the numerous meetings on Greece has been a further erosion of credibility.
Euro-zone outlook not as gloomy as recent headlines suggest
Recent headlines regarding the development of Euro-zone confidence numbers have been too gloomy. Today’s confidence data offers more hope that at least slightly better times will be ahead for the Euro-zone. Even though there is no denying the fact that confidence remains low, every recovery has to start somewhere.
Spain with few funding problems – in the short term
The short-term funding outlook for Spain remains favourable, but big challenges are still ahead. Spain runs the widest primary deficit in the Euro zone, meaning the country needs to attract plenty of new money to fund the government. The market pressure for a bailout remains very limited – for now.
Tide turning in Euro-zone credit ratings?
The rating agency Fitch revised its outlook on the Irish BBB+ rating from negative to stable yesterday. Apart for Estonia, this was the first positive rating move during the Euro-zone debt crisis. Is the wrath of the credit rating agencies now behind?
Massive drop in Euro-area industrial production
Euro-area industrial production numbers for September showed the sixth largest monthly drop since 1990, but still positive growth on average in Q3 compared with Q2 and hence there is still some scope for a positive surprise in tomorrow’s GDP release.
Monetary policy already tightening in the Euro zone
While the ECB has continued to introduce new measures to make its monetary policy more accommodative, in some respects policy has actually become tighter, and may continue to do so going forward. More specifically, the excess liquidity in the Euro-zone banking system has fallen quite clearly already from its highs.
FX Comment: On the Defensive
Paradox of risk: it is highest exactly when it seems it is lowest. FX markets are to catch the cold soon...
Do not forget all the progress made
Even though different countries have made a varying amount of progress, while the many times rather ambitious targets have often been missed, it would be a misconception that no positive development would have taken place. Especially if one looks at the development of the current account, most countries are not that far away from balance any more.
ECB in wait-and-see mode
The outlook has not changed and hence new easing measures are not justified at this point. If anything, the ECB could be considering new measures to improve monetary transmission in the periphery. We view tomorrow's meeting as market neutral.
October
Euro-zone banks not about to boost a recovery any time soon
The results from the ECB’s latest bank lending survey (Q3) only add to worries that credit growth is not going to support an economic recovery any time soon. The results thus add to downside risks for the economy. The dark clouds hanging over the Euro-zone economy are not going disappear any time soon.
Another successful bond sale for Italy
Italy’s successes continued on the bond market today with the launch of a new 5-year benchmark, which the country was able to sell with a yield of less than 4%. The near-term funding outlook for Italy thus looks rather comfortable, while in the longer-run major challenges remain.
What if the eurozone breaks up?
The analysis explores four eurozone break-up scenarios: i) Greece leaves the euro, ii) several countries in difficulties leave, iii) Finland exits on its own accord, and lastly iv) the entire eurozone splits up into two or breaks up altogether. We take no stand on whether the eurozone will remain as it is, or will it change or break up totally.
Eurosceptic forces unable to capitalize in Finnish local elections
The Eurosceptic True Finns party failed to produce the kind of surge in popularity in yesterday’s Finnish local elections that was seen in the parliamentary elections of 2011. Even though the euro policies were not directly at poll, the results should de-crease the pressure for the government to change its euro policy. Finland remains very committed to its membership in the Euro zone.
FX Comment: time for break-out?
"Risk off" signs emerged, but contained so far...this week may be decisive
Market pressure on Spain eased further
Spanish bank deposits rose for the first time in six months in September, while foreign investors have reportedly been more active in Spanish bond auctions lately. Overall then, market pressure is not a particularly strong argument calling for a quick aid request by the Spanish government – political considerations currently play a bigger role.
Go for pick-up via maturity extensions in Finnish bonds
With short rates virtually at zero, the search for pick-up is definitely on. In this market, Finnish bonds present excellent opportunities, offering safety coupled with pick-up over German bonds without making big sacrifices in terms of credit quality.
FX Comment: the macro week
Enough of talk, this week is more about the macro - more signs of economic improvement are needed to maintain the risk on trends...
Italian funding outlook brightened notably
Italy has really managed to get its wealthy household sector involved in funding the government. The country placed a massive EUR 18bn BTP Italia bond yesterday, a new 4-year government bond linked to Italian inflation. This was the biggest Italian bond issue ever.
All EUR countries in violation of their own convergence criteria
Not a single Euro-zone country currently meets all the Maastricht criteria, i.e. the ones used to judge, whether an EU country is eligible to join the Euro zone. This does not set a particularly good example for the countries striving to join the euro – not that there would be that many of those at the moment.
How would ECB bond purchases affect the level of interest rates?
The effect of the ECB’s bond purchases should be felt also outside the bond markets directly targeted by the interventions. The purchases should put in general downward pressure on the maturity segment targeted, but cause upward pressure in longer maturities (on average).
New Financial Forecasts: Another EU summit, another clearance?
There are only minor changes to this weeks financial forecasts.
FX Comment: if anything – blame politics
China kicks off the week with better than expected foreign trade and money supply data released over the weekend, and will remain in focus this week...
Spanish aid request a step closer
Pressure on Spain is mounting again, with S&P downgrading the country to the lowest investment grade rating, Moody’s likely to go a step further soon, while calls for independence in Catalonia are not exactly calming. Higher yields will likely be needed to persuade Spain to make an official aid request.
Navigator – centralbankslikviditet lyfter marknaden
Tillståndet i Europa fortsätter att vara synnerligen besvärligt men det resulterar inte i någon krasch. Så har det varit i fyra år och det kan fortsätta i minst fyra år till. ECB har tagit över IMF:s roll som finansiär av Europas problemskuld. Pengar betalas ut så länge länderna står ut med Angela Merkels taggiga omfamning.
Raportti – Mitä jos euroalue hajoaa?
Tarkastelemme neljää skenaariota euroalueen hajoamisesta: Kreikan eroa, useamman ongelmamaan eroa, Suomen oma-aloitteista eroa ja viimeisenä koko euroalueen jakautumista kahtia tai hajoamista kokonaan. Emme ota kantaa siihen, säilyykö euroalue nykyisellään, vai muuttuuko tai hajoaako se.
ECB staying put – time for the governments to act
The ECB seems rather comfortable with the current situation, and clearly sees it is up to the governments to take the next steps. The more important next step will be an aid request from Spain, but it might still take at least several weeks for such a request to surface.
Nordea WebTV: Euro-zone – signs of improvement
Despite the somewhat calmer market moods lately, the Eurozone debt crisis remains far from resolved. In this Nordea WebTV presentation Head of Global Research, Steen V. Grøndahl, discusses recent developments in the Euro-zone.
Tough questions, few answers
Both the ECB and the Bank of England will announce their latest monetary policy decisions tomorrow, but neither is expected to do much new at this stage. Draghi will probably dodge the toughest questions on the ECB’s announced bond purchase programme, while BoE is more likely to take the decision on expanding its bond purchases next month.
EUR: Moral hazard in the air
Moral hazard may be one reason to the declining uncertainty in the Markets which is to EUR support...
Where can we find more money for Greece?
There are several options to give Greece more time to reform its economy but trickier still is convincing the IMF the debt remains sustainable. In any case, it looks all but certain that Greek debt will need to be restructured again - sooner or later - meaning losses for the public-sector creditors.
New financial forecasts: To ask or not to ask? That is the question
Focus on Euro-zone problems continue. We don't expect economic key figures to surprise on the upside. Risk on/risk off to ebb and flow and we're keeping our forecasts mostly unchanged.
FX Comment: action time?
After a few weeks of dull action and lack of significant data, we have full of potential drivers to keep us busy this week...
September
Spanish banks need €59bn
UPDATED: Spanish banks need EUR 59.3bn. Less than expected but markets have been disappointed before. We believe this is a step in the right direction.
Things that make me go ‘hmm’…
Mission Impossible for the Euro-zone? A new party in Austria wants to drop the Euro. Could they inspire others?
French budget relying too much on tax increases and economic growth
Overall, the composition of the French budget is disappointing. Relying mostly on tax increases does nothing to tackle the problems on the French public sector. In addition, tax increases are more harmful to the growth outlook of the French economy as well as its competitiveness.
Euro-zone inflation still stubbornly high
Despite expectations of limited price pressures, Euro-zone inflation surprisingly accelerated from 2.6% y/y to 2.7% vs. the Bloomberg consensus estimate of 2.4%. Even though inflation is not really the main thing on the ECB’s radar at the moment, especially the more hawkish members of the Governing Council will pay attention to these numbers.
Spanish budget only a small step in the right direction
Spain made important steps in presenting its 2013 budget yesterday, but a lot of work remains. More structural reforms need to be detailed, while the Spanish rating could be cut to junk by Moody’s as early as today. It still seems higher bond yields will be required to convince Spain to ask for more help.
EUR convertibility premium: confidence trumps everything
Spain delivered on its budget plan yesterday, so access to ESM and thereafter ECB funding seems closer now. The budget was positive news to EUR. The next positive thing will be Spain officially applying for aid which can come any time now.
Quo Vadis Europe? A Euro crisis presentation
Here part of the presentation from today's lunch session at EuroFinance
Fresh sentiment numbers point to deepening Euro-zone recession
There wasn't much good in today’s confidence numbers, strengthening the message that the Euro-zone situation may get worse before it improves. Still, we would not disregard the message given e.g. by the manufacturing PMI.
German auctions continue to struggle
Today's weak results highlight recent falls in German yields and volatility created by the news flow around Spain. The German auction procedure is experiencing weakness in the current environment and pressure is mounting for changes.
Spanish challenges mount again
Spain received a batch of bad news yesterday, which only underlines that the country still has a lot to do to bring confidence back for good. In light of yesterday’s news flow, it is certainly not hard to picture Spanish yields jumping again.
German confidence not bottomed out yet
Today’s fall in the Ifo index illustrates that the German economy also continues to face headwinds, and as one of the strongest Euro-zone economies, it is clear what weaker German numbers mean to other countries.
FX Comment: as long as we trust
After a week of consolidation, the outcome of the confidence game is in Spain's hands...
Euro-zone manufacturing PMIs mostly good news
Confidence in the Euro zone remains depressed and implies weak economic performance will continue. That said, it is positive we saw more signs that confidence would have at least stabilized. Germany and France saw very divergent development.
G10 Weekly: When QE becomes futile
In this issue we take a stance on QE, which we think will end up being futile.
Euro ongelmineen kuitenkin pysyvä
Euroalueen ongelmien ratkaisu on vielä kaukana. Jatkuvat kriisit ja poliittinen kinastelu pitävät yllä epäilyjä siitä, pystyvätkö poliitikot pelastamaan euron. Tässä kuitenkin helposti unohdetaan, että euron olemassaolo on viime kädessä poliittinen kysymys, ei taloudellinen. Toistaiseksi ei ole montaakaan merkkiä poliittisesta valmiudesta luopua eurosta.
EUR fundamentals: the “glass-half-full” look
We have heard a lot about the risks of the EUR collapse this year. The problems haven't been solved yet, but some fundamentals are already changing for the better...
Danish Central Bank readies to go solo
Within the next three months the Danish central bank will make its first independent rate hike since 2008.
Danish Central Bank readies to go solo
Within the next three months the Danish central bank will make its first independent rate hike since 2008.
New financial forecasts: Central banks taking out the bigger guns
The Fed’s new bond purchases and changes to the communication strategy illustrate that the Fed is determined to shift the US economy into higher gear, though we need action from Congress as well.
FX Comment: the hangover week
4-years into Lehman default (happy anniversary!), and the September so far has been positive for the risk sentiment. The currency debasement path has been chosen, and so far it has been successful in reflating the risky assets...
Dutch voters give firm support for the euro
The Dutch elections showed not all governing parties end up as losers because of the euro crisis, which was encouraging also for the Euro zone as a whole. It still seems likely that the tough austerity line the Dutch have been favouring will be relaxed to some extent.
Euro-area crisis management is on track
(Updated 11:22 CET) The results of the Wild Wednesday in the Euro area are generally positive for the Euro area and for the markets, at least so far (Dutch election pending). The German Constitutional Court allowed German ratification of the ESM and the European Commission’s proposal for a Banking Union were by and large as widely expected.
Commision proposes common supervision for all Euro-area banks
The European Commission published its proposal for a Banking Union today. The big lines of the proposal are in line with general expectations. The political struggle is just beginning…
Germany to lose another ally?
The Netherlands is unlikely to turn against the euro as a result of Wednesday’s elections, but the next government may see more eye to eye with e.g. France than Germany. The German led austerity line may thus continue to lose support, implying austerity targets are likely to be loosened further.
FX Comment: back to limited
Will Fed confirm the USD crush?
Is unlimited limited after all?
The likely amounts involved in the ECB’s OMT programme are unlikely to be huge, at least initially. However, it usually takes some time to win confidence back, meaning also the ECB will have to put some money behind its words.
ECB more or less as expected
The ECB keeps key interest rates on hold. ECB President Draghi announced some details of the ECB's new intervention mechanism called "Outright Monetary Transactions" (OMT) and easier collateral requirements.
Devil in the details
Euro's fate in ECB's hands today.
Euro Area: Restore confidence to end recession
Here is a presentation of our new Economic Outlook for the Euro area – Restore Confidence to End Recession.
Should we rather worry about failed German auctions?
In light of today’s terrible German 10-year auction, one could easily wonder whether it is German auctions and not Spanish and Italian ones that one should worry about. The EUR 5bn auction of a new 10-year German benchmark received only EUR 3.93bn worth of bids.
Mildly disappointing ECB on Thursday
The ECB is likely to disappoint financial markets mildly at this week’s meeting. Still, looking ahead, I believe ECB interventions will come and will be decisive.
FX Comment: something’s cooking?
QE1 + QE2 = 2 million new jobs. Easy.
August
Major event risks ahead for the Euro area
During the coming week's there are a number of major event risks on the Euro-area calendar. Here is a short presentation with my take on what to expect
Some reassurance from the successful Italian bond auctions
Today’s Italian bond auctions went rather well. It was reassuring that the country did not have any difficulties finding demand for its new 10-year benchmark, even though the upcoming ECB’s bond purchase programme is set to be targeted only on the short end of the curve.
Euro-zone bailout fund struggling to find demand
The EFSF barely received sufficient orders for its new EUR 3bn 10-year bond issue. This suggests, at least, the EFSF will have to pay a higher premium for future bond issues, which will also turn into higher funding costs for countries receiving financial aid.
Stærk CHF; kapitalflugt en afgørende faktor
Økonomiske argumenter for loft over CHF aftager. Kapitalflugt til Schweiz forhindrer afvikling af kursloft. Svagere CHF først ved fornyet tiltro til eurozonens og euroens overlevelse. Vi venter svagt lavere CHF i løbet af 2013.
Draghi on the future of the EUR
The ECB President Mario Draghi is one of four key Euro area leaders that have been given the task to come up with a vision for the future of the Euro area. A short article on the subject has just been released.
Buy Finnish 10-year bonds vs. the Netherlands
The Republic of Finland launched a new 10-year benchmark yesterday, marking the third new bond from Finland this year. Finnish bonds have many very valuable qualities in the current environment. We see more performance potential in Finnish 10-year bonds vs. the Netherlands.
Impression from Madrid (presentation)
Here is a presentation containing charts and comments supporting our general view on Spain
Pressure on Spain eases – at least temporarily
Spain received some good news today, as it was able to sell 3-month T-bills at a yield of less than 1%. Still, plenty of challenges remain, as illustrated by the continued outflow of Spanish bank deposits in July. Confidence towards Spain has not returned, and regaining it will take time.
Drop in German confidence implies challenges remain
Today’s fall in the Ifo index further illustrates that Germany cannot be an island within the Euro-zone debt crisis. Restoring confidence in it and the economy is crucial for the German economy as well. Until that happens, also the German economy will have a hard time performing.
Summer moved on
It has been a rather positive summer, with the risky assets and the cyclical currencies performing. But in the previous week we saw some key levels challenged across the assets.
Week Ahead: Fewer new policy signals in store than hoped for?
New policy signals are eagerly awaited from major central banks at the moment, not least from the US Fed and the ECB.
New Financial Forecasts: Big Bertha about to fire…
We are lifting our short-term interest rate forecasts but keeping the 2013 forecasts. We’re in the midst of updating our macro forecasts and will introduce 2014 financial forecasts in a fortnight.
Chief Economist’s Corner: Super Mario nowhere near ‘game over’
It is not for nothing that Mario Draghi, President of the European Central Bank (ECB), is sometimes referred to as “Super Mario”. Just like the super hero in the computer games, he faces almost impossible tasks.
Week ahead to be dominated by uncertainty
The dust has not yet settled after yesterday’s ECB press conference, where President Draghi dealt a blow to hopes that the central bank will quickly make huge bond purchases to address the Euro-area debt crisis.
ECB hints intervention, but gives few details
(Last update 16:12) The ECB is ready to buy bonds directly in the markets. The details remain unclear. Moreover the ECB is likely to cut interest rates in September.
July
ECB intervention possible
Some actions are possible at Thursday's ECB meeting, but a high degree of political uncertainty makes us believe that verbal support is what we will get. Intervention hints are possible.
No signs of a credit crunch, but still weak loan demand
ECB’s lending survey and the Ifo reading point to weaker growth momentum in the Euro area and support the view that the ECB will cut interest rates again.
Euro PMI stabilises
The flash Euro-area PMI stabilised in July. The numbers are bad but the situation did not worsen in July compared with June, which means that the ECB is likely to keep interest rates on hold at the August meeting.
New Financial Forecasts
We have updated our financial forecasts. We keep our forecasts unchanged calling for a further gradual weakening of the common currency and bond yields to move basically sideways.
Catch me if you can
Last Friday’s market moves was a healthy reminder that sleeping in the consolidating markets is a no-go.
Finland not about to leave the euro
Concerns that Finland will soon leave the euro are largely misplaced. The government remains very committed to the euro and not even the opposition parties are calling for an exit. Still, Finland will continue to play hard ball in future crisis management operations.
Better risk appetite alone not enough to lift yields
In the past weeks, bonds perceived to be the safest have performed at the same time as equities have. Despite the small pick-up on risk appetite, the safest bonds are likely to perform well also going forward, as the huge liquidity coupled with uncertainty about the future of the Euro-zone will continue to provide support.
Spanish bank recapitalisations may proceed
An agreement has been reached on the collateral Finland was demanding as a prerequisite for participating in the aid package for Spanish banks. It is all but certain that the Finnish parliament will approve its participation in the aid package, which would enable agreement on the first EUR 30bn to be provided.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
Better to lose some of your money for sure than to take a little more risk?
Belgium joined the growing group of countries able to sell T-bills at negative rates today, another illustration of what the huge liquidity coupled with a zero per cent ECB deposit facility rate does.
FX Comment: in the summer lull
When you read "markets rallied on hope for China stimulus" in one place and "markets rallied on data not as bad as feared" in another, you know the markets may be lacking direction.
Finnish stance makes fighting the debt crisis harder
A Finnish poll found 66% of people are against taking on further financial liabilities in the Euro-zone debt crisis, even if it leads to stability. With more negative opinions, compromises in the fight against debt become increasingly hard.
The plunge in the ECB’s deposit facility usage does not really tell us anything new
The usage of the deposit facility does not tell us anything about lending to the real economy in the short term. The money cannot disappear from the banking system: as long as banks borrow more from the ECB than is needed to fulfill the reserve requirements of the banking system, there will also be excess liquidity.
Difficult to sell your bonds? Why not force the wealthy to buy them
A German think-tank suggests forcing the wealthiest to buy government bonds, calculating it could lower German debt up to 9%. The idea is worth a closer look for Southern European countries but it doesn't solve long-term issues of where to find growth and balancing government budgets.
Some good news for Spain – but much remains unclear
The Eurogroup made only small progress detailing decisions from the June summit. Spain will have more time to reach its deficit targets and recapitalisation plans are taking shape. But a lack of detail and differing interpretations will cause uncertainty.
New Financial Forecasts
We have updated our financial forecasts. We are keeping our outlook basically unchanged, expecting choppy trading over summer.
FX Comment: glass half empty or half full?
The week of "NEINs", no hints of LTROs and QEs, and here we go...the Thursday-Friday moves erased partly (stocks, credit, commodities...) or fully (EUR) post EU-Summit rallies. Well, at least for the German iron lady the strategy is paying off...
ECB’s 25bp rate cut unlikely to be the final easing step
The ECB's easing measures are not likely to be over yet. However, it sees limits to what it can do, so Euro-zone governments need to do a big part of the heavy lifting, with the ECB making sure that its monetary policy helps the process.
Europas politikere vinder et slag mod spekulanterne
Jeg har netop publiceret en sommerartikel om betydningen af EU-topmødets resultater for danske virksomheder, og ikke mindst hvad vi alle skal være opmærksom på, som virkeligt vil kunne få optimismen tilbage… og væk med frygten for tab af hele kapitalen (”return of capital”).
A small tightening step from the ECB before more easing
We expect the ECB to cut the refi-rate by 25 bp at the meeting tomorrow but perhaps more interesting we also expect to see a cut in the deposit rate to 0.10%.
FX Comment: new record set
The rally after the Greek elections and the Spanish bailout lasted just a few hours. But the third attempt didn't lie - after the surprise outcome of EU Summit on the night to Friday got the markets insanely happy for the rest of the day. Poor are those who took on additional EUR short and USD long positions earlier in the week!
June
Quo Vadis Europe? Scenarios and thoughts on the future of the Euro-zone
European leaders are at a cross-road. Decisions need to be made. We give a brief run-down of some possible ways forward.
Week ahead: more weak data but do not worry – central banks are rushing to help
After all eyes being in Euro-zone events lately, next week’s heavy US data certainly has potential to catch the attention again.
Concrete measures instead of just words needed to really boost Spanish and Italian bonds
All in all, there was notable progress at the Euro-zone summit, and the boost to sentiment should last longer than two hours this time. However, a lot of details remain in the dark.
ECB already doing more
The calls for the ECB to do more have become ever louder lately, while the central bank has tried to play down expectations of more bond purchases or further extra-long refinancing operations. Nevertheless, at the same time the central bank has been increasing its support via its more conventional refinancing operations.
Finland extends the curve into the 30-year sector
The Republic of Finland has decided to extend its bond curve out to the 30-year sector, following the introduction of 15-year bonds in 2009. This presents a rare chance for investors, as Finland remains one of the very few AAA-rated EUR government issuers left.
New Financial Forecasts
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
Impressions from Madrid
I have been in Madrid looking for the other side of the story on Spain. Is the situation really as bad as we and the markets think and if not, why? I am surprised that the people I met were not more negative.
More evidence of Euro area recession increases chance of ECB rate cut
Today’s business surveys add to the evidence that the Euro area economy is heading back into recession and that the downturn is affecting the core economies as well as the periphery. This clearly supports our call for an ECB rate cut in July.
Greece has a government – now for the hard part
Now the tough part begins: re-negotiating the terms of the Greek stability programme. The two sides are likely to be miles apart in their demands to begin with.
This was not it yet – bonds still likely to find support going forward
Despite the recent move higher in yields, there are still a number of factors supporting bonds. In the current uncertain environment, there is going to be a need for a safety asset.
G20 leaders very committed again – at least on paper
The statement from the G20 leaders contained a lot of good intentions again, but whether they will lead to any concrete implementation remains to be seen.
Do not over-interpret the plunge in the ZEW survey
The German ZEW survey of financial experts showed sentiment plunging from 10.8 to -16.9 in June. But there are a couple of reasons why we would not over-interpret the message of the survey.
Clean sweep for the French socialists
UPDATED - Hollande can rule supreme after winning a majority for his socialists party. That was the easy part... now he has to deliver on all of his promises.
Rates comment: This time the relief should last longer than just a few hours
One should not expect any major risk rallies or bond sell-offs on the back of the Greek elections, we already saw notable corrections in markets ahead of the elections.
FX Comment: Life after Greek elections
The world is still here today! The currency markets reacted positively to the outcome of Greek elections. The 17th of June was "make it or break it" for EUR in many eyes and hence no surprise the EURUSD jumped to 1.2748 on the news.
Greece stays in the Euro area (for now)
The pro-bailout parties secured enough seats to form a government at Sunday’s election. That is a relief to the markets, but does not solve the debt crisis.
Week ahead: looking beyond Greece
Most of next week will most likely be spent digesting the Greek elections results and (the chance of) possible stimulus measures, and few interesting entries in the calendar.
Quo vadis Europe?
Europe continues to look for solutions and coming up short. Germany cannot do it alone so perhaps time to think about those Bunds.
Sunday’s Greek Election
Our baseline scenario is that Greece will remain in the Euro area, BUT that requires forming a government as a first step.
Ultra-long rates with more upside potential
The changing regulatory environment means that there is little reason for insurance companies to receive in interest rate swap longer than 20 years. Paying in ultra-long (forward-starting) swaps or buying payer swaptions appear good strategies.
Cheføkonomens hjørne: Bendtner & Co. er pauseunderholdning i græsk valggyser
På søndag spiller Danmark en måske afgørende kamp mod Tyskland ved EM i Ukranie. Det kan meget vel blive en neglebidende affære, men set i det store perspektiv er resultatet af kampen dog vand ved siden af resultatet af søndagens græske parlamentsvalg. Et nyt protestvalg med yderligere fremgang til yderpartierne risikerer at føre til en græsk exit fra eurozonen og måske også EU.
Oops, should I have said that?
With 17 countries trying to reach common decisions, differences in opinions are bound to arise. The Austrian Finance Minister Fekter let it slip in a television interview that also Italy might need financial help.
Tricks to be used to avoid preferred creditor status in Spanish bailout loans?
According to a senior Euro-zone official via Reuters, the Spanish banks could be recapitalized using EFSF bonds to avoid the problem of the preferred creditor status of the ESM. The bailout could later be shifted to ESM, but the extended loans would not become senior to other debt.
New financial forecasts from Nordea – The Greek end-game
Greek elections and contagion risks still the major story. We are keeping our forecasts basically unchanged.
FX Comment: Lehman ahead…or not
The minute I read that Spain's Prime Minister's comment that he can now with light heart take off to the football championship this weekend ("now that the situation is resolved"), I knew the EURUSD would be relieved. And here it came, a jump to 1.2671 yesterday night. Or, was it because Germany and Denmark won this weekend? ...
Spain asks for help
The Spanish bailout will probably give some relief to the markets in the near term, but it is likely to be limited because it will not end the debt crisis, the Greek elections are still looming, and Spain may need more help eventually and risks downgrades following the bailout.
Week ahead: little risk appetite ahead of the Greek elections
Apart from the continued talks around when Spain will make the official request for aid to its banks, the Greek elections are definitely the main thing to follow.
Spanish bailout to surface this weekend?
According to Reuters, citing EU and German sources, Spain would request an aid package for recapitalizing its banks as early as tomorrow. Still, ahead of the Greek elections, the materialization of the aid package would likely lead to only another short-lived rally in risk assets.
Capital markets far from closed for Spain
Spanish bonds were definitely helped by today’s positive auction results. However, this does not illustrate increasing confidence that Spain would be able to tackle its problems on its own, but increasing hopes that Spanish banks will be recapitalized with the help of the European rescue funds.
ECB kept rates unchanged
Contrary to our expectations, the ECB kept interest unchanged at today’s meeting. We expect a rate cut in July.
Three survival questions for the Euro area
Can the Euro area survive a Greek exit? Will Spain ask for an EU/IMF bailout? What actions will be taken at the 28-29 June EU summit and will it be enough to secure the survival of the common currency in the longer term?
Q1: Can the Euro area survive a Greek exit?
We still find it most likely that Greece will remain in the Euro area, at least in the near term, but have to ask what happens if they do not?
Q2: Will Spain ask for an EU/IMF bailout?
The fate of the Spanish banking sector is one of the major risks facing the Euro zone at the moment. Spanish banks will likely need much more state help than Bankia alone requires, and this will be too much for the Spanish government to stomach.
Q3: Will the euro survive in the longer term
Politicians have started to show a sense of urgency, but decisive measures will take years to implement. Still the EU summit on 28-29 June might give some rough sketch of a road map for further integration.
Not all Euro-zone reform programmes destined to fail
Behind all the negative headlines, Portugal has made a lot of progress in reforming its economy. It thus seems that Greece has been the exception in not following its terms rather than that all the economic reform programmes would be destined to fail.
FX Comment: expecting more liquidity
Soon after the dismal Friday's US non-farm payrolls report the EURUSD was taken more than 100pips higher. The obvious reason for that is that of expectation for QE3 from Fed coming, which we had warned about multiple times...
Week ahead: the ECB to deliver?
After this week’s heavyweight US economic data, the spotlight is even stronger in the Euro zone again next week.
May
LTRO support for Italian and Spanish bonds behind
April data from the ECB revealed that Spanish banks actually decreased their government bond holdings by some EUR 3bn vs. average net purchases of some EUR 20bn in the prior three months. With a dark cloud hanging over the Euro zone at the moment, yields may need to rise notably to attract new investors to the markets.
Beware of curve flattening
Many have missed the upward move in short Spanish and Italian short yields lately. The rise in short rates is worrying both because it means that the country in question is facing high funding costs throughout the curve and since it signals increased shorter-term worries.
ECB to cut interest rates
After another round of disappointing survey data we believe the time has come for the ECB to cut interest rates.
The cost of bank rescues to continue growing in Spain
The cost for the Spanish government to aid its banking sector is mounting, while the weekend’s news of state aid to the troubled Bankia is unlikely to be the last piece of such news. In light of the development in many other countries, Spanish house prices still have a long way to fall, keeping the outlook for Spanish banks uncertain.
Weaker growth momentum in the Euro area
Today’s disappointing numbers point to a significant contraction in the Euro area in Q2 and shows that the Greek crisis is spreading to the German and French economies. Risk of rate cuts from the ECB during summer.
Long German yields to become Japanese?
German yield levels already look very depressed relative to growth and inflation expectations. Still, at the moment the abundance of shorter-term worries prevails, and these worries are likely to push German yields even lower
Week ahead: Central bank intervention looming?
All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.
The €nd?
New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece's problems is not found.
ECB intervention looming
With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.
No growth in the Euro area in Q1
Today's key figure relases showed a somewhat better growth performance for the Euro area as a whole than expected.
Week Ahead: Most focus still on politics while economic data to weaken
The Greek situation will continue to grab the headlines. Euro-zone Q1 GDP will likely confirm the zone has fallen into another recession, while US April retail sales growth likely weakened notably compared to March.
Go for pick-up via maturity extensions in Monday’s Finnish bond auction
State Treasury Finland will re-open RFGB 1.875% Apr 2017 on Monday, 14 May 2012. With short rates virtually at zero, the search for pick-up in definitely on. We find maturity extensions from shorter German, Dutch and Finnish bonds into the 5-year Finnish auction bond attractive.
New hope in Greek coalition talks
News that the Democratic Left have tentatively agreed to participate in a grand coalition offers hope of a new Greek government being announced this weekend.
Euro-zone austerity strategy rethought
According to the Financial Times, Spain could be offered an extra year to hit the 3% of GDP deficit target. This is likely a step in the process, where the strategy of front-loaded austerity measures is rethought and economic growth given a higher priority.
Euro-zone debt worries continuing to push German yields to new lows
With German bonds enjoying strong momentum, yields could fall even further. The pricing of a risk of some sort of a Euro-zone break-up will likely increase on the back of the Greek situation, while the Spanish situation continues to be another source of uncertainty.
Greek political uncertainty
With 99% of the votes from Sunday’s general elections counted, the two “big” parties – the conservative New Democracy and the socialist PASOK – won 149 seats in the 300-seat parliament and hence lack two seats to form a majority coalition.
Hollande President, Greek coalition fails to win majority
Markets are expected to set out with a negative tone towards risk today after the uncertain Greek election outcome and the very soft US employment report Friday. Hollande won in France, as expected.
Let’s replace austerity with growth…
Everybody wants to switch from austerity to a growth agenda. But guess what? That costs money.. and who's going to pay?
NEMO: Europe heats up over the Summer
Our latest take on Nordic and Global financial markets and economies.
Not much new from the ECB
The ECB decided to keep interest rates unchanged at today's meeting and gave no new signals.
Concerns about Italian growth
Today’s PMI numbers increase the concerns about growth in Italy and confirms the gradually worsening growth momentum in the Euro area in total
April
Italian and Spanish yields jumping despite buying from domestic banks
Italian and Spanish bond yields rose notably in March despite continued support from domestic banks. This does not bode well for the future, as the pace of purchases by banks is not at least set to increase.
Credit ratings back in the spotlight
Yesterday’s move by Standard & Poor’s to downgrade Spain’s rating by two notches brought rating news back to the spotlight. More downgrades are likely in store, as austerity measures bite amidst an uncertain economic outlook.
ECB’s lending survey adds to growth concerns
The need for additional crisis measures from the ECB has diminished, but interest rate cuts have become more likely!
The fall of the Dutch government another setback for the Euro zone
The fall of the Dutch government illustrates how hard introducing austerity measures is in the core countries as well. If even the core countries show reluctance to meet the budget limits set by the EU, bringing back confidence towards the currency union and its rules is certainly not going to succeed.
New French President may be less focused on budget discipline
Presidential elections due on 22 April and 6 May. Conservative Sarkozy and Socialist Hollande are neck to neck for the first round, while Hollande looks like a winner for the run-off.
Successful Spanish bond auctions not taking away the pressure
Today’s Spanish bond auctions received, again, more attention than probably warranted as the results do not really tell us that much new about the underlying demand.
Spanish house price data only adding to worries about the country
Fresh data showed Spanish house prices falling by 2.9% q/q in the first quarter of the year. Until the housing market stabilizes, uncertainty is likely to prevail.
Spanish T-bill results not a reason for big cheer
The significance of today's successful Spanish T-bill sale should not be overplayed. The auction size was rather modest, though Spain did pay less for its 1-year funding compared to Italy last week. Thursday’s bond auctions will be more interesting.
Minor changes to financial forecasts
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Minor changes to financial forecasts
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Spanish banks well-prepared for upcoming redemptions
Most news stories only report the jump in overall central bank borrowing by Spanish banks in March, but miss the increase in funds Spanish banks have in reserve to meet future funding needs. The funding position of Spanish banks – like that of the Spanish sovereign – is actually relatively good at the moment.
A lot on the calendar next week, but positive surprises still scarce
We do not expect next week’s economic data offerings to convey a particularly encouraging message. Here is what we expect from the week ahead.
Italian T-bill yields jump but alarm bells not ringing particularly loud yet
Even though the recent rise in Italian yields is worrying, the threat of an immediate funding crisis remains limited. Still, the pressure on Italian bonds is likely to continue in the near future.
Liquidity boosting the safest assets again
The huge liquidity sloshing around is boosting the safest asset classes again, while Spanish and Italian bonds remain under pressure. This is likely to continue, until we see some better economic data again.
Bonds in demand ahead of the long weekend
Notable flight-to-safety demand has taken place today ahead of the Easter holidays. Even though the drivers are real, one should not over interpret the moves seen on thin markets ahead of a long weekend, with also tomorrow's US employment report creating uncertainty.
Draghi finds discussions about exit strategy premature
Steady as he goes was the keyword for the ECB meeting today. All interest rates were left unchanged and the ECB did not announce any new liquidity operations.
Spanish bond yields to continue to rise
Today’s Spanish auction results further illustrate that the support from the ECB’s 3-year refinancing operations is waning. Spanish yields will likely continue to lurch higher, leading to higher uncertainty about the Euro-zone situation again.
Differences in collateral rules increasing Euro-zone worries
The differing collateral policies implemented by national Euro-zone central banks put banks in various parts of the Euro-zone in different positions. Such policies increase worries about the cohesion of the Euro zone.
Risk-reward favours 2-5-year flatteners
The huge amount of excess liquidity in the Euro-zone banking system is still favouring a flatter curve, carry is positive for flatteners, while the curve tends to flatten, when short rates start to rise. The 2-5-year curve should still have flattening potential left.
March
The Eurogroup agrees to increase firewall to EUR 700 bn
Earlier today the Eurogroup announced that the total size of the Euro area's firewall will be raised from EUR 500 bn to EUR 700 bn. This is a welcome move - which should have a positive effect on markets as well - if they can be bothered to care now that the ECB has doped everyone with the two 3-year LTRO's.
The new Spanish government plays a dangerous game with its 2012 budget
Spanish yield spreads are rising ahead of the Spanish government’s presentation of a supplementary budget for 2012. We think the government can pull out of the crisis if the it keeps the momentum behind structural reforms and consolidation.
Spain and Italy still deep in the woods – German bonds to remain supported for now
Spanish and Italian bond yields are likely to continue to creep higher, as the support from domestic bank buying fades. Such market action will likely increase general worries about the course of the debt crisis, keeping German bonds well-supported.
Italian and Spanish banks continue government bond buying spree in February
Fresh data from the ECB show that Italian and Spanish banks continued to purchase solid amounts of government securities in February. No doubt the ECB’s 3-year LTRO is the main reason behind this move – driving Italian and Spanish yields lower.
ECB bond purchases only a shadow of their former self
The ECB's bond purchases have been very modest recently. Arguably, bigger purchases would not even have been necessary lately. However, the Securities Markets Programme of the ECB has become more of a blunt weapon also in general, and has less potential to fight the debt crisis, if the need arises again.
Disappointing Euro PMI’s send yield spreads wider
The decline in composite PMI was driven by a 1.3 index point fall in manufacturing PMI to 47.7 in March.
Greece returns to markets – that did not take so long
Greece sold EUR 1.3n of 13-week T-bills at a yield of 4.25% today, down from 4.61% in February and the lowest since last May. However, confidence in the country is not about to return.
US yields with more upside potential than EUR ones
The recent sell-off in bonds has shown little signs of abating. One only needs to look back to the past couple of years to see that yields can see a substantial jump without major changes in central bank policy.
EFSF funding costs close to Belgium
The main Euro-zone bailout fund launched a new 20-year benchmark at a cost closer to Belgium than France. Such funding levels do not exactly illustrate high confidence in the facility, while the high funding needs of the EFSF will put pressure on its funding costs to increase further going forward.
Italian yields below Spain again – are markets crazy?
Despite its high debt, the Italian situation actually looks much better compared to Spain on many measures.
Italian yields below Spain again – are markets crazy?
Despite its high debt, the Italian situation actually looks much better compared to Spain on many measures.
Positive Italian auctions supporting the positive sentiment
Today’s successful Italian bond auctions were another illustration of how the ECB’s 3-year liquidity injections have succeeded in changing the course for the government bond markets.
The Euro area: The ECB has done its part – now it’s up to politicians to solve the debt crisis
The ECB kept all interest rates unchanged at todays meeting. At the same time Draghi used the press conference to signal stable rates ahead, while further 3-year LTRO’s are off the table.
Euro area update: Target 2 imbalances worries the Bundesbank
After the record breaking allotment of EUR 523 bn in the ECBs second 3-year Long Term Refinancing Operation, attention has once again turned to the build-up of Target 2 balances.
February
Central Bank Watch: Another rush of liquidity to Euro area banks
The scene is set for further “risk on” after the ECBs second 3-year Long Term Refinancing Operation (LTRO) resulted in allotments of EUR 529.5 bn.
Markets too complacent
Considering the macro risks hanging over the global economy, we argue that markets may be too complacent. We see four downside risks that could materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.
Spanish and Italian banks went on a bond binge in January
Ahead of the ECBs next 3-year LTRO it is interesting to note that the first 3-year LTRO from December prompted Italian and Spanish banks to go on a bond purchasing spree in January.
Also Spain funding itself with rock-bottom rates
Spain saw its T-bill yields plunge in an auction earlier this week. 3-month bills were sold at an average yield of 0.40%, whereas still in November the corresponding yield was 5.22%.
The ECB’s second 3-year operation likely to disappoint
The ECB will release the results from its second 3-year operation next week and expectations have been set high that another huge liquidity injection would boost markets again.
January
A Greek haircut could go all the way
Greece seems to be very close to a deal on a voluntary debt rescheduling, which could be announced later this week.
EU summit is mostly work in progress
Three topics are worth mentioning about the EU summit Monday
Euro PMI’s point to stable ECB rates
Euro area PMI's surprised on the upside - driven by Germany.
Euro area turnaround on the way?
Making a case for why an improvement could be lurking beneath the fog of doom and gloom.
December
Cross Currency Basis Swap – Spread Narrowing in 2012
Taking the temperature of the cross currency basis swap market following the coordinated central bank actions to ease money market tensions.
German economy offers a candle of hope
German key figures are surprisingly on the upside.
FX themes in 2012 – Market Drivers and Effects
Our FX strategists have reviewed this years events and selected 9 themes that will drive the markets in 2012.
Danish callables are so yesterday
Our expert on the Danish covered bond market, Jacob Skinhøj, has taken the temperature on the Danish covered bond market following the ARM auctions, which were finalized this week.
November
Italy – where Europe meets its Waterloo?
Nordea's Chief Analyst on the euro area presents his view on the latest developments in the European debt crisis.
October
Euro area inflation stays high – unemployment points to ECB rate cut
Euro area inflation suprised on the upside in October, but we still think that most of the economic key figures are pointing towards an ECB rate cut in December. Not least the Euro area unemployment data for September, released today.
EU summit conclusions – A sufficient result for markets
After much nail biting European leaders finally succeeded: The series of summits among EU countries led to a comprehensive agreement on how the debt crisis can be contained, and a new financial crisis can be avoided.
Euro area PMI’s support the case for ECB rate cuts
Flash PMIs for the Euro area support our expectation of a 25bp cut in the ECB’s refi-rate before the end of the year.
Euro area PMI’s support the case for ECB rate cuts
Flash PMIs for the Euro area support our expectation of a 25bp cut in the ECB’s refi-rate before the end of the year.
September
FI Update: What to make of the Greek tragedy and the Fed debate?
In the late European session on Friday, the Spiegel story that Greece was considering leaving the Euro sent jitters through financial markets.
August
Renewed stress—is this ‘Lehman part II’?
It feels increasingly like "Lehman" when watching financial markets these days. But, contrary to 2008, the level of stress varies significantly from asset class to asset class. If the risk of a global recession escalates the level of stress will intensify further leading to risk off.
Allocation Update: Central bank rescue to help only gradually
Central bank rescue to help only gradually. The past couple of months have clearly brought a turn for the worse in two respects.
May
Allocation Update: Inflation fears recede temporarily
Inflation and rate hike fears have backed down in the past month, but with the economy continuing on the recovery track we think the retracement is just temporary.
April
Finnish elections – another risk for Peripherals
Yesterday’s Finnish parliamentary elections resulted in the EU-sceptical True Finns be-coming the third biggest party with 19% of the votes.
Most read
Latest tweets
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LOL. Homing from work
http://t.co/vIpu2iynIv -
@finansakrobat If U would make the same analogy with Public Enemy, who would be Flavor Flave, i.e, the guy who makes absolutely no sense?
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Do they still teach “money multiplier” at school? ECB vs Fed http://t.co/tRkb6sAEFT
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@cborjesson this is what happens when a 2 year gets an I-phone in his hands.
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Gccvgtvcr
