Morning Update
Dave is traveling this morning, so he asked me to provide an update on what is happening in the markets.
For starters, Europe is looking worse.
Spain had an auction fail. It raised €3.16 billion of bills versus a maximum target of €3.5 billion. Yields in Spain have soared. Spanish 10-year bonds are now yielding about 6.25%. The Euro-era record yield of 6.46% is now within sight. Last Friday the yield was at about 5.8%.
Italy looks no better. New Prime Minister Monti is having difficulty forming a cabinet. That doesn't bode well for smooth passage and implementation of all those hoped for austerity measures.
Other notes in rapid fire fashion:
- Merkel's party votes to allow members to voluntarily leave "the club".
- Greek Q3 GDP comes in at minus 5.2%. Ouch.
- Turkey bond yields climb to 2-year high.
- Euro dropping against USD. $1.3523 -0.0107. "Risk Off".
- Italian 10-year bond yields back above 6.9%. (Now over 7.00% level) = Bad.
- German investor confidence reading falls to -55.23 a 3 year low.
Some European GDP numbers did show modestly positive growth; particularly France and Germany.
Also, compared to the benchmark German Bunds, the spread on French, Belgium and Spanish 10-year bonds hit Euro-era records today.
Liquidity in European banks is tightening further and there are reports of substantial amounts of deposits being pulled from troubled area banks.
As a further note, recall that most if not all European banks are not required to mark-to-market their sovereign debt holdings. As yields on these various bonds continue to climb to new record levels the price, or current value, of these assets is falling in the market.
Yet the banks are not required to reflect that negative change.
So just how bad of a shape are they in?
Just asking.
Have a good one...
Curtis Bergquist
Options Manager: Daily Decision- PRO
P.S. Here's an unabashed pitch for Daily Decision-PRO Service - It's beaten the market handily for four months running now.
S&P 500 - Last 12 Month
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