To print or not to print: the choice of whether to open the European Pandora's box, which as we suggested two months ago is an interesting but ultimately moot thought experiment, has suddenly become the only talking point for TV pundits desperate for eyeballs and suckers to buy their books, who are now experts not only on monetary policy but European monetary policy. And while 99% of these empty chatterboxes should be promptly muted, one person whose opinion we value in any regard is that of Jim Grant. Earlier today, with Bloomberg TV's Deirdre Bolton, he discussed not only the expected ECB response to the ever worsening contagion (while the ECB bought Italian bonds in the open market, and potentially primary against its charter, it is prohibited from buying French bonds which is why the OAT-Bund spread closed at record wides), but all the other developments in the insolvent continent. Here are some of the key sounbdbites, and, of course, the full clip.
rather outspoken Irishman told the world what he thinks about what then seemed like a groundbreaking event (and is now a daily occurence): the Irish bailout. A year later, the Financial News has caught up with the same gentleman, and we are delighted to share his latest somewhat politically incorrect thoughts on all aspects Wall Street, with our readers. The language in the video may resemble that encountered at a trading desk a little too vividly - you have been warned.
The inter-relationships between various credit market and equity market instruments is a regular part of what we discuss, and most importantly, using these potential dislocations to our advantage. The last few weeks have been awash with notes where we have pointed to divergences and convergences both within credit as well as across credit and equity - most recently today's credit-equity divergence. Peter Tchir, of TF Market Advisors, takes a deeper dive to address some of the reasons for the dislocations and why following the relationships we so vociferously highlight can be highly profitable.
Investment grade and high yield credit spread markets, which typically trade very closely coupled with equities, followed the path of the European session and completely negatively diverged from stocks today. IG and HY credit closed very close to its wides of the day while the S&P managed to limp up on average volume to close near the day's highs - after stagnating around VWAP for much of the afternoon. Into the close, we saw a similar pattern to yesterday as hedgers jumped in to credit and HYG (the high-yield ETF) dropped significantly and IG credit (a cheap hedge) lost ground. ES tracked risk markets (outside of credit) almost perfectly all day long - something we haven't seen in a few days - as today appeared very much a wait-and-see day with Europe's modest outperformance enough to quench sellers in equity positions for today at least. Commodities (ex-Oil) were largely unchanged as the dollar ended modestly lower as EURUSD oscillated on Merkel rumors and correlation trades. TSYs rallied off what was an awful 30Y auction but ended the day higher in yield and steeper in curve.
No Truth Coming From Mortgage Bankers Ass.