Complete conflicted, planted and rumor-based schizophrenia overnight.
Daily US Opening News And Market Re-Cap: September 13
by Tyler Durden
Complete conflicted, planted and rumor-based schizophrenia overnight. An article in the FT saying that the Italian government is working on measures to facilitate the sale of the Italian government paper to China provided positive sentiment to the market early in the European session.However, the move was short lived on the back of market talk that China will not buy Italian bonds but instead seek various infrastructure investments, which resulted in a sell-off in equities. Equities came under further pressure after an article in the WSJ wrote, citing an unnamed BNP Paribas executive, that the bank could no longer borrow USDs from the money market, which also resulted in a sharp decline in Eurodollar futures. Weakness in equities provided support to Bunds, and the Eurozone 10-year government bond yield spreads with respect to Bunds generally widened. Particular widening was observed in the Italian/German spread leading up to and following a lacklustre 5-year Italian BTP auction, where the yield hit an all time high. Elsewhere, EUR/USD traded in negative territory during the European session, however did come off its earlier lows as the USD-Index weakened, together with comments from the Italian Prime Minister who said that the Italian Parliament will approve the budget proposals tomorrow. Also, AUD/USD remained under pressure following worse than expected business conditions/confidence data from Australia overnight. In other forex news, GBP/USD lost ground after BoE’s Posen said that the central bank should resume its quantitative easing programme.