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News & Views: Monday, August 25
What you need to know for today's trading day.
Michael Sedacca    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Europe Government Bonds Surge as Draghi Signals ECB Closer to QE (Bloomberg)

French economy minister urges alternative to German austerity (Reuters)

China Developing an Operating System to Take on Microsoft, Google and Apple (NYTimes)

Burger King in Talks to Buy Tim Hortons in Canada Tax Deal (WSJ)

Roche to Acquire InterMune for $8.3 Billion (WSJ)

Views
CME's Globex session was halted for four hours last night due to technical issues and the open was delayed until 10pm ET from the usual 6pm. No reason has been given.

The largest gains in risk assets overnight were seen in Eurozone sovereign bonds. The 5yr Bund is down 5.6bps to 16.6bps, statistically below the term rate of 1bps over the five years. The same reaction is seen in Italian and Spanish 5yr bonds at 1.06% (-11bps) and 0.77% (-13.6bps). In his speech on last Friday afternoon at Jackson Hole, ECB President Mario Draghi warned about the sharp dropoff in inflation expectations in the Eurozone, specifically that the 5yr5yr forward, has declined to below 2%. He also pointed to shorter-term real rates continuing to fall, which were viewed as a dangerous progression. The central bank remedy for this is to provide more liquidity to synthetically increase inflation expectations - actual inflation is only 0.4% YoY and remains persistently low. The 10yr Bund - 10yr Treasury spread is nearing a record wide, currently at 145bps. The record wide is 169bps, although that only occurred for a single week and the prior is 153bps.

I found the speech by BoE Deputy Governor Broadbent the most interesting of them all, even though it had the smallest market effect. He noted that because credit demand still remains weak - outside of real estate - and debt levels high in the UK that the central bank can only tighten rates at a gradual pace. From prior BoE policymaker speeches we know that "gradual" equates to less than 100bps in hikes per annum. Some participants are worreid that central banks will get behind the curve and have to tighten very rapidly, such as 250bps-300bps in a year, which will shock global interest rates. At least for the time being, that case is removed from the table by policyamkers.

Greece is going to be re-opening its 3- and 5-year PIK bond issues to "increase liquidity in that part of the yield curve." The new bonds principal and coupon will be repaid using T-bills rather than cash. If the the liquidity statement is truly the case, that means the new issues were from a reverse inquiry - the market asked Greece to issue them. This is another example of investors dropping down in credit quality to get returns. Suffice to say this is a win for Greece, even if they do not have a cash issue the market is essentially giving them a blank check.

The entire French cabinet resigned this morning disputing economic policy as too austere and slavish to Germany. So there's that.

Overnight Data:
- German IFO business climate (August) down to 106.3 vs 107 expected, prior 108.0
- German IFO Expectations down to 101.7 vs 102.1 exp, prior 103.4

US Economics (Time Zone: EST)
 
10:00 New Home Sales (July) - expected 428K, prior 406K
10:30 Dallas Fed - exp 13.0, prior 12.7
11:30 Treasury to sell $29b 3-month bills and $25b 6-month bills
 
Earnings
 
After:
Prospect Capital (PSEC)

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

News & Views: Monday, August 25
What you need to know for today's trading day.
Michael Sedacca    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Europe Government Bonds Surge as Draghi Signals ECB Closer to QE (Bloomberg)

French economy minister urges alternative to German austerity (Reuters)

China Developing an Operating System to Take on Microsoft, Google and Apple (NYTimes)

Burger King in Talks to Buy Tim Hortons in Canada Tax Deal (WSJ)

Roche to Acquire InterMune for $8.3 Billion (WSJ)

Views
CME's Globex session was halted for four hours last night due to technical issues and the open was delayed until 10pm ET from the usual 6pm. No reason has been given.

The largest gains in risk assets overnight were seen in Eurozone sovereign bonds. The 5yr Bund is down 5.6bps to 16.6bps, statistically below the term rate of 1bps over the five years. The same reaction is seen in Italian and Spanish 5yr bonds at 1.06% (-11bps) and 0.77% (-13.6bps). In his speech on last Friday afternoon at Jackson Hole, ECB President Mario Draghi warned about the sharp dropoff in inflation expectations in the Eurozone, specifically that the 5yr5yr forward, has declined to below 2%. He also pointed to shorter-term real rates continuing to fall, which were viewed as a dangerous progression. The central bank remedy for this is to provide more liquidity to synthetically increase inflation expectations - actual inflation is only 0.4% YoY and remains persistently low. The 10yr Bund - 10yr Treasury spread is nearing a record wide, currently at 145bps. The record wide is 169bps, although that only occurred for a single week and the prior is 153bps.

I found the speech by BoE Deputy Governor Broadbent the most interesting of them all, even though it had the smallest market effect. He noted that because credit demand still remains weak - outside of real estate - and debt levels high in the UK that the central bank can only tighten rates at a gradual pace. From prior BoE policymaker speeches we know that "gradual" equates to less than 100bps in hikes per annum. Some participants are worreid that central banks will get behind the curve and have to tighten very rapidly, such as 250bps-300bps in a year, which will shock global interest rates. At least for the time being, that case is removed from the table by policyamkers.

Greece is going to be re-opening its 3- and 5-year PIK bond issues to "increase liquidity in that part of the yield curve." The new bonds principal and coupon will be repaid using T-bills rather than cash. If the the liquidity statement is truly the case, that means the new issues were from a reverse inquiry - the market asked Greece to issue them. This is another example of investors dropping down in credit quality to get returns. Suffice to say this is a win for Greece, even if they do not have a cash issue the market is essentially giving them a blank check.

The entire French cabinet resigned this morning disputing economic policy as too austere and slavish to Germany. So there's that.

Overnight Data:
- German IFO business climate (August) down to 106.3 vs 107 expected, prior 108.0
- German IFO Expectations down to 101.7 vs 102.1 exp, prior 103.4

US Economics (Time Zone: EST)
 
10:00 New Home Sales (July) - expected 428K, prior 406K
10:30 Dallas Fed - exp 13.0, prior 12.7
11:30 Treasury to sell $29b 3-month bills and $25b 6-month bills
 
Earnings
 
After:
Prospect Capital (PSEC)

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

More From Michael Sedacca
Daily Recap
News & Views: Monday, August 25
What you need to know for today's trading day.
Michael Sedacca    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

Europe Government Bonds Surge as Draghi Signals ECB Closer to QE (Bloomberg)

French economy minister urges alternative to German austerity (Reuters)

China Developing an Operating System to Take on Microsoft, Google and Apple (NYTimes)

Burger King in Talks to Buy Tim Hortons in Canada Tax Deal (WSJ)

Roche to Acquire InterMune for $8.3 Billion (WSJ)

Views
CME's Globex session was halted for four hours last night due to technical issues and the open was delayed until 10pm ET from the usual 6pm. No reason has been given.

The largest gains in risk assets overnight were seen in Eurozone sovereign bonds. The 5yr Bund is down 5.6bps to 16.6bps, statistically below the term rate of 1bps over the five years. The same reaction is seen in Italian and Spanish 5yr bonds at 1.06% (-11bps) and 0.77% (-13.6bps). In his speech on last Friday afternoon at Jackson Hole, ECB President Mario Draghi warned about the sharp dropoff in inflation expectations in the Eurozone, specifically that the 5yr5yr forward, has declined to below 2%. He also pointed to shorter-term real rates continuing to fall, which were viewed as a dangerous progression. The central bank remedy for this is to provide more liquidity to synthetically increase inflation expectations - actual inflation is only 0.4% YoY and remains persistently low. The 10yr Bund - 10yr Treasury spread is nearing a record wide, currently at 145bps. The record wide is 169bps, although that only occurred for a single week and the prior is 153bps.

I found the speech by BoE Deputy Governor Broadbent the most interesting of them all, even though it had the smallest market effect. He noted that because credit demand still remains weak - outside of real estate - and debt levels high in the UK that the central bank can only tighten rates at a gradual pace. From prior BoE policymaker speeches we know that "gradual" equates to less than 100bps in hikes per annum. Some participants are worreid that central banks will get behind the curve and have to tighten very rapidly, such as 250bps-300bps in a year, which will shock global interest rates. At least for the time being, that case is removed from the table by policyamkers.

Greece is going to be re-opening its 3- and 5-year PIK bond issues to "increase liquidity in that part of the yield curve." The new bonds principal and coupon will be repaid using T-bills rather than cash. If the the liquidity statement is truly the case, that means the new issues were from a reverse inquiry - the market asked Greece to issue them. This is another example of investors dropping down in credit quality to get returns. Suffice to say this is a win for Greece, even if they do not have a cash issue the market is essentially giving them a blank check.

The entire French cabinet resigned this morning disputing economic policy as too austere and slavish to Germany. So there's that.

Overnight Data:
- German IFO business climate (August) down to 106.3 vs 107 expected, prior 108.0
- German IFO Expectations down to 101.7 vs 102.1 exp, prior 103.4

US Economics (Time Zone: EST)
 
10:00 New Home Sales (July) - expected 428K, prior 406K
10:30 Dallas Fed - exp 13.0, prior 12.7
11:30 Treasury to sell $29b 3-month bills and $25b 6-month bills
 
Earnings
 
After:
Prospect Capital (PSEC)

Twitter: @MichaelSedacca

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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