Greece headlines

June 30th, 2015 9:43 am

Via Bloomberg:

BFW 06/30 13:33 Greece Asks for 2-Yr Bailout Program From ESM: PM’s Office
BN 06/30 13:30 Greece Asks for 2-Year Bailout Program From ESM: PM’s Office

Greek PM Tsipras Asks European Union for a New Bailout Program
2015-06-30 13:37:24.189 GMT

By Eleni Chrepa and Theophilos Argitis
(Bloomberg) — Greece’s government has asked for a two-year
bailout program from the European Stability Mechanism, according
to a statement from the office of Prime Minister Alexis Tsipras.
The request is to cover all of the country’s financial
needs for the next two years, along with a debt restructuring
plan, the Greek government said in the statment.
The government will continue negotiations seeking a
“viable agreement” within the euro zone, it said.

Home price Appreciation

June 30th, 2015 9:31 am

Via Millan Mullraine at TDSecurities:

US home prices rose in April at its slowest pace in 8 months, gaining 0.3% m/m following the upwardly revised 1.0% m/m advance the month before. This was a weaker pace of home price appreciation than the 0.8% m/m rise expected by the markets, though it marked the 9th consecutive monthly gain in this indicator. Prices were higher in 11 of the 20 cities covered, which is a far weaker performance than the previous month when all 20 cities recorded price gains. On a year ago basis, the pace of home price appreciation decelerated, falling from 5.0% y/y to 4.95 y/y. The 3-month annulled pace also slowed, falling to 10.2% from 12.6%. On the whole, this report reflects some weakening in home price momentum which could be the result of diminished pricing power for sellers as supply (which has been a key constraint in home sales activity) begins to rise. Overall, we remain constructive on the housing sector and we see the moderation in price gains as a healthy re-balancing in the housing market dynamics.

Overnight Flows

June 30th, 2015 6:39 am

Central banks selling 4 year sector to buy 7s through 10s.

Central bank buyers of 5s.

Central bank sellers of 3s.

What to Watch Today

June 30th, 2015 6:37 am

Via Bloomberg:


* (All times New York)
* Economic Data
* 9:00am: ISM Milwaukee, June (prior 47.7)
* 9:00am: S&P/Case-Shiller 20-City m/m, April, est. 0.8%
(prior 0.95%)
* S&P/CS 20-City y/y, April, est. 5.5% (prior 5.04%)
* S&P/CS 20-City Index NSA, April (prior 175.2)
* S&P/CS U.S. HPI m/m, April (prior 0.12%)
* S&P/CS U.S. HPI y/y, April (prior 4.14%)
* S&P/CS U.S. HPI NSA, April (prior 168.03)
* 9:45am: Chicago Purchasing Managers, June., est. 50 (prior
* 10:00am: Consumer Confidence Index, June., est. 97.4 (prior
* Central Banks
* 6:00pm: Fed’s Bullard speaks in St. Louis
* 7:50pm: Bank of Japan issues Tankan report
* Supply
* 11:30am: U.S. to sell $30b 4W bills


June 30th, 2015 6:26 am

Via Marc Chandler at Brown Brothers Harriman:

The markets remain off-kilter.  The dollar has recouped a little of the ground lost yesterday.   Reports in a Greek paper that Tsipras may be reconsidering Juncker’s proposal may prevent a deeper pullback in the euro, which found a bid near $1.1135 after approaching $1.1280 in yesterday’s spectacular reversal. Over the next two days, there are an estimated 3.3 bln euro options struck at $1.12 that are set to expire.

Asian equities traded higher, with the MSCI Asia-Pacific rising almost 1%.  The Nikkei gapped lower yesterday, and although it gained almost 0.7%, it did not even enter the gap.  A break now of yesterday’s lows (~20093) would suggest strengthen the technical case of a more significant (island) top and warn of the risk of deeper retracement of the Nikkei 26% rise this year through last week.  The other significant large market rallies in Germany and China have already been nearly halved.

The PBOC rate and reserve cuts over the weekend failed to stem the sell-off yesterday, but additional liquidity injections, reports that China may cut the stamp during on equities, and talk that new IPOS may be shelved, may have helped today.  The Shanghai Composite initially fell through yesterday’s lows but recovered strongly to finish on the session highs, just below yesterday’s highs for a 5.5% rise.

The focus remains in Europe.  The stock markets are recovering after extended yesterday’s loss.  The Dow Jones Stoxx 600 is off by about 0.4% near midday in London.  The Italian and Spanish bourses have moved into positive territory.    Bond markets are mostly steady to firmer.

Greece’s IMF payment is due today.  It is widely expected to miss it.   As we have noted, this in itself does not constitute a default by the rating agencies.  It will not be regarded as a credit event.  Although IMF’s Lagarde has used the word default, an IMF spokesperson has clarified that in official document “arrears” will be used to characterize the situation.  However, the failure to pay the IMF gives the ESM greater discretion to request expedited payments itself.  The next private sector obligation is a JPY20 bln Samurai that is due in mid-July.  Note that this is roughly the monetary cost of the referendum (140 mln euros).

The poorly constructed referendum itself is turning into a referendum on EMU.  That said, it is not clear what happens if Greece votes no on Sunday precisely how that leads to an exit from the euro area.  The Greek Finance Minister apparently has threatened to seek an injunction from the European Court of Justice to prevent this.  However, many suspect that if the ECB withdraws approval for ELA, the ensuing banking crisis, without means of recapitalization, could be a powerful push.

 A report suggests that the Syriza government may appeal to the ECJ to try to force the ECB’s hand, but its most recent decision on OMT suggests the ECB would be given wide latitude.  Ruling that the ECB can buy sovereign bonds under OMT is not the same thing as forcing it to grant ELA.

The referendum itself is confusing.  As former Greek Finance Minister Venizelos has noted, the government is asking the Greek people to vote against measures for which the Syriza government itself support 90%.   Moreover, the second financial assistance expires today.

When S&P cut Greece’s debt rating yesterday to CCC-, it said that the odds of Greece leaving EMU were 50%.    We suspect it is a bit lower than this.  Instead we see the Syriza government so frustrated by the inability to change Europe and the terms of the debate, or even to peel off some of the peripheral countries that it hoped would have been more sympathetic, that it is willing to self-immolate.    On top of the financial crisis, and the humanitarian crisis that Syriza so passionately identified, it will bequeath a political crisis.  A no vote could see the president of Greece resign and a yes vote would topple the Syriza government.  Yesterday, Tsipras hinted that he would resign on a yes vote.

The economic data seems of less consequence today. Still the Japan’s Prime Minister Abe cannot be happy with today’s reports. While total labor cash earnings rose 0.6% in May, this was mostly bonuses. Regular pay increased by only 0.3%, and real cash earnings fell 0.1% (consensus was for a 0.2% increase) and have not been positive since April 2013. Separately, auto production fell (-16.6% year-over-year after a 7.4% decline in April) and construction orders fell (7.4% after 12.1% fall in April year-over-year).

In the eurozone, the May unemployment was unchanged at 11.1%, and the preliminary June CPI was in line with expectations, easing to 0.2% from 0.3%. The core rate slipped to 0.8% from 0.9%. Germany reported a 0.5% rise in May retail sales, which was better than the flat consensus expectations. Unemployment was unchanged at 6.4% in June. Separately, the UK revised its year-over-year GDP for Q1 to 2.9% from 2.5%, even though the quarter-over-quarter pace of 0.4% was unchanged. Separately, the Q1 current account deficit was larger than expected at GBP26.5 bln.

In North America Canada reports April GDP. A small increase is expected at a 0.2% contraction in March. The US economic data includes CaseShiller house prices, which tends not to be a market mover. The Chicago PMI slumped to 46.2 in May but is expected to rebound back above the 50 boom/bust level.   Separately, we note that the Export-Import Bank charter will lapse. It can service existing contracts, but cannot make new loans. We anticipate that it will be revived in some form in the coming weeks. Lastly, we note that Puerto Rico, unable to service its debt, is requesting a moratorium.

Puerto Rico

June 30th, 2015 6:13 am

I will confess that I only followed the Puerto Rico story tangentially yesterday. However that story was not a tangent to people in that market place as there was real carnage in bonds issued by Puerto Rico. Here is an excerpt from a note I recived this AM from a muni trader which describes the extent of the sell off:

“The entire market watched as the benchmark Puerto Rico 8% of 2035 traded down to the high $60’s dollar price from a closing trade of $77 Friday afternoon.  Essentially, these bonds traded off 7 to 9 points or over 100 bps. “

Secondary market Corporate Bond trading yesterday

June 30th, 2015 6:05 am

Via Bloomberg:

IG CREDIT: Lowest Monday Session Since April; Spreads Widen
2015-06-30 09:51:26.289 GMT

By Robert Elson
(Bloomberg) — Secondary IG trading ended with a Trace
count of $10.8b vs $9.5b Friday, $11.8b the previous Monday. It
was the lowest volume Monday session since $9b April 6.

* 10-DMA $13.1b; 10-Monday moving avg $12.1b.
* 144a trading added $1.9b of IG volume vs $1.4b on Friday,
$1.8b last Monday
* Most active issues longer than 3 years:
* RAI 5.85% 2045 was 1st with 2-way client flows
accounting for 77% of volume, buying 3x selling
* BA 4.70% 2019 was next, client flows took 100% of volume
* GM 6.75% 2018 was 3rd, client flows at 89%
* HNZ 3.95% 2025 was most active 144a issue; client flows
accounted for 87% of volume
* Bloomberg US IG Corporate Bond Index OAS at 153.1 vs 148.3;
2015 high/low 147.3/129.6; 2014 high/low 144.7/102.3
* BofAML IG Master Index +146 vs +143; +129, the tight for
2015 was seen Mar. 6; 2014 range was +151, seen Dec 16;
+106, the low and tightest spread since July 2007 was seen
June 24
* Markit CDX.IG.24 5Y Index at 71.8 vs 67.5; 76.1, the wide
for 2014 was seen Dec 16; 55 was seen July 3, the low for
2014 and the lowest level since Oct 2007
* No IG issuance Monday
* Weekly Issuance Stats; Tenors, Ratings, Sectors
* Pipeline – IMTLN calls may end today; SYY added to list

Midnight Deadline

June 30th, 2015 5:56 am

Ed Conway (@EdConwaySky) reports that EU creditors have given Greece until midnight to reconsider creditors proposals.

Via Ed Conway at Sky News;

My EU sources say Greece has until midnight to reconsider rejecting the creditors’ proposals for a bail-out extension

New Talks

June 30th, 2015 5:50 am

A Greek newspaper reports new negotiations between Greece and its creditors. According to the Greek Reporter the negotiations would result in a promise by European creditors to restructure Greek debt.

Via the Greek Reporter:

Greece and its creditors are reportedly working on a yet new last-minute bailout deal ahead of a $1,8 billion loan repayment deadline to the IMF that the country does not have funds to fulfil.

The new improved deal will include a proposal with improved measures for Greece in pensions and sales tax and a much-wanted by the Greek government written promise for a debt restructure by the Eurogroup.

The first hours of Tuesday European Commission President Jean-Claude Juncker made another unsuccessful offer to Greek Prime minister Alexis Tsipras.

After the Greek government decided to hold a referendum asking its citizens to vote YES/NO on the bailout deal offered to debt-ridden Greece by its creditors, the Governing Council of the European Central Bank made a decision Sunday to freeze the level of emergency liquidity assistance to Greek banks resulting in the implementation of capital controls and fears of Grexit.

– See more at:

Regarding Greek Default

June 30th, 2015 5:43 am

A fully paid up subscriber forwarded this to me at about 406AM (about 90 minutes ago). I do not know the source as he did not identify from whom he received it:

BONDS: German government bonds are trading higher early Tuesday, again boosted by safe-haven buying as markets weigh up the implications of Greece failing to make its E1.55bln bundled debt repayment to the International Monetary Fund by the 2200GMT deadline. Whilst the major credit rating agencies have already stated a non-payment to the IMF does not classify as a default – note the Washington based lender doesn’t use the term default, but instead says Greece will be in arrears – it appears the real issues for Greece begin when the IMF managing director notifies the executive board of a missed payment within 30 days, but in this case will notify immediately, given the size and the potential risk to the fund. Failure to make the repayment today will cut Greece off from further IMF funding. Moreover, it is likely to trigger default clauses in other debt contracts. Indeed, the EFSF may also cancel, as it deems appropriate, “the whole or any part of the undisbursed amount,” according to the Master Financial Assistance Facility Agreement between the EFSF and the Hellenic Republic. Greece will officially exit the 2nd bailout programme at the close of business today and the ECB will decide tomorrow whether it intends to keep ELA funding going.