In a sharp turn around from the open, Italian and Spanish 10yr government bond yield spreads over German bunds trade approx. 10bps tighter on the day, this follows several market events this morning that have lifted sentiment.
Firstly from a fixed income perspective, both Spain and Greece managed to sell more in their respective t-bill auctions than analysts were expecting and thus has eased concerns ahead of longer dated issuance from Spain this Thursday. The Greek news also comes ahead of the deadline for the Greek buyback which is scheduled at 1200GMT today. In terms of other trigger points for today's risk on tone the December headline reading in the German ZEW survey was positive for the first time since May 2012 coming in at an impressive 6.9 M/M from previous -15.7 with the ZEW economists adding that Germany will not face a recession. Finally, reports overnight have suggested that Italian PM Monti could be wooed by Centrist groups which means that if he wanted too the technocrat PM could stand for elections next year albeit under a different ticket. As such yesterday's concerns over the Italian political scene have abated and the FTSE MIB and the IBEX 35 are out performing the core EU bourses.
In FX the notable mover as been the CHF, which has weakened significantly under speculation that the SNB may embark on negative deposit rates when they meet this Thursday. This comes after UBS sent a note to clients today that they would join Credit Suisse in charging bank clients for CHF deposits as of next week. Separately talk over the SNB floor has also resurfaced and further fuelled the move higher in EUR/CHF but nothing official has been seen or heard from the central bank.
Looking ahead highlights from the US include trade balance, wholesale inventories and a USD 32bln 3yr note auction, however, volumes and price action may remain light ahead of the key FOMC decision on Wednesday.
Print 11:14, 11 Dec 2012 - Market Analysis - Source: RANsquawk
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