Warren Buffett: 'Not Clear' Europe Has Will or Ability to Resolve Crisis (Click for Story...)
Speaking at the EuroFinance conference, the recently chatty Jens Weidmann makes it clear that expecting the ECB to save the day is not a good idea. His comments, via Bloomberg, were enough to crack EURUSD under 1.37 and take EURJPY below Friday's lows - dragging risk assets lower across the board.
Italian 10Y spreads are almost back to unch after being 11bps tighter at their best.
*ECB'S WEIDMANN SAYS ITALY HAS `WORRYINGLY' HIGH DEBT BURDEN
*WEIDMANN: ECB MUST NOT SOLVE SOLVENCY ISSUES OF STATES, BANKS
*WEIDMANN SAYS MARKET FORCES HAVE `IMPORTANT DISCIPLINARY' ROLE
*WEIDMANN SAYS USE OF MONETARY POLICY FOR FISCAL NEEDS MUST STOP
Some early excitement in credit markets with XOver and senior financials gapping tighter - trying to catch up to equities - has started to show signs of weakness as EURUSD just lost late Friday swing lows and sovereign spreads start to decompress. Broad risk markets are indicating more weakness for S&P futures as US TSYs are rallying. The shift in EUR has had its largest impact on Silver so far as dollar strength is a drag on commodities (though we note Brent priced in EUR is +1%) - though copper enjoyed the Asia session gaining over 2.5% from Friday's close. With the Italian bond auction later this morning it is no surprise that EFSF bonds are well off their tight spreads of the morning already and as EUR-USD swap spreads adjust, they are pointing to further deterioration in EURUSD from here. This modest pessimism is already reflected in the short-end underperformance across the European sovereign yield curves as flatteners appear popular once again.
Radioactive Iodine Blankets Much of Europe ... Everyone Points Fingers
UPDATE: TSYs actually moving most on this news, yield down 1-2bps and 2s10s30s 3-4bps flatter pulling risk lower.
Given the extent of our discussions both today and over the last two weeks of the EFSF, Moody's confirmation of all that we have said should come as no surprise. In their Weekly Credit Outlook the rating agency, that hasn't accidentally downgraded FrAAAnce recently, cites weak demand and investor's cold reception of proposals as betraying the limits of EFSF's powers. This development calls into question the ability of the EFSF to fund itself in the markets at low cost. The success of the EFSF as a tool to stabilize sovereign debt prices and the success of the current euro area-wide support mechanism comes into doubt if that ability is compromised. Clearly traders are also starting to wake up to this reality as EURUSD drops below Friday's close and given the size of sovereign issuance on deck this week, it is not surprising.
Submitted by RANSquawk Video on 11/14/2011 - 06:18 Morning Briefing RANSquawk