In Der Spiegel we trust!!
Euro Bund futures were trading 0.58% lower to 141.28, the slide was attributed to a Germany's Der Spiegel article stating that the ECB'S new bond buying plan could include an upper limit on the price of troubled bonds, above which its purchases would kick in. (The article was discussed in our Morning Meeting).
The news drove Spanish 10 year government yield down 4.11% to 6.178 and Italian 10 year Btp 0.83% lower to 5.738. But the real impact is seen on the 2 year node on both yields' term structures the Spanish node fell 9.76% to 3.401 and the Italian comparable was 1.44% lower to 3.012.
The news gave steam to this summer rally sending European Indexes higher, the Stoxx50 gained 0.61% to 2,471.53, the German Dax rose to 7,040.88 or 0.64% higher, the top performers were the southern European markets with Spain 0,94% higher to 7,632.40 and the Italian Ftsemib 1.13% higher to 15,295.46.
In the Italian market, Banca Monte dei Paschi di Siena is under the spotlight, the world's oldest bank may become the first Italian lender since the 90s to have the government as a shareholder as the company weghs further goodwill writedowns. Bloomberg reports.
- Monte Paschi, which is borrowing 3.4 billion euros ($4.2 billion) by selling bonds to the state, must give shares to the Italian Treasury in lieu of interest on the debt if it reports an annual loss, according to a law approved this month.
The stock rose 15.23% on the news to 0.2489 Eur.
While we are writing the following headlines was blinking:
- “RTRS – GERMAN FIN MIN SPOKESMAN SAYS DOES NOT KNOW OF ANY ECB PLANS TO TARGET BOND SPREADS”.
So we got from one side the spokesman who invalidates the Der Spiegel report, on the other side the Bundesbank which said today according to Reuters that it remained critical of the ECB's plan to intervene in debt markets to reduce Spain and Italy's crippling costs, saying this was the reponsibility of states rather than central banks.
- “The Bundesbank remains critical of the purchase of euro system sovereign bonds, which comes with considerable risks for stability,” the Bundesbank wrote.
- ”Decisions about a possibly even broader mutualisation of solvency risks should be anchored in financial policy, meaning with the governments and parliaments, and should not occur via central bank balances.”
The Euro futures lost early gains versus the greenback, after Reuters published the news, the common currency traded as high as 1.2372$, it was now trading at 1.2321$ at session low. European equity futures did not followed the common currency move lower, instead they were holding onto early gains.
Hopes and the fears installed by the ECB “threat policy” are so high that investors are refraining themselves from taking short positions.
My question is can this behavior lead to a great disillusion??
Originally posted at www.77sigmatrading.com
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