14th Jun - US Close: Where's McGyver when you need him?

Now this was an interesting day. Only one day to go before the weekend. Today we saw the Spanish bond yields reaching the dreaded 7% and an emergency meeting (very hush hush) by senior Spanish rulers. Reuters released a poll showing that half of bank economists outside Europe believe someone will leave the club in the next twelve months. To round up the day, we saw a classic "announcement game" tactic - a rumor from "G20-sources" that central banks are ready for coordinated intervention, should the need arise.

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News Roundup – Between The Hedges

Markets – Between The Hedges

Recap – Global Macro Trading

The Closer – alphaville / FT

Market Commentary – A View from My Screens

Asian Morning Briefing – BNY Mellon

Tyler’s European Summary – ZH

  Peripheral Stocks Pump As Spanish Bonds Dump

Tyler’s US Summary – ZH

  Coordinated Rumor Ramps Risk

TV: Bloomberg, CNBC, BBC

Debt crisis: live – The Telegraph

The Euro Crisis Blog – WSJ

Tracking Europe’s Debt Crisis – NYT

FX Options Analytics – Saxo Bank

European 10yr Yields and Spreads – MTS indices

  

From BNP Paribas

THE CENTRAL BANK RUMOR

Central banks ready to combat Greek market storm – Reuters

Central banks from major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the outcome of Greek elections on Sunday causes tumultuous trading, G20 officials told Reuters

On Central Bank Rumors, Big Boobs – The Reformed Broker

EURO CRISIS

EFSF and ESM Funding Explained in Detail – Why Italy is Ok with it – TF Market Advisors

There is so much confusion about the ESM or EFSF funding costs. How it works, how it affects countries, etc. Here is how it works.

Euro zone survival is in the eye of the beholder – MacroScope / Reuters

nearly half (17 out of 35) of those employed by institutions based outside the euro zone – British, North American, Scandinavian or Swiss – expected to see at least one country leave the currency union over the next year.

Euro Zone, part 1,000,000,000… – Kiron Sarkar / The Big Picture

The EZ is heading towards a fiscal union, which means a political and transfer union – very much similar to the US. Sure it could bust up before that, but I believe that, kicking and screaming, it is heading that way.

Which Eurobonds? – Project Syndicate

Any solution to the eurozone crisis must meet a short-run objective and a long-run goal. Unfortunately, the two tend to conflict… The version of Eurobonds that might work as the missing long-term enforcement mechanism is almost the reverse of the Germans’ ERF proposal: the “blue bonds” proposed two years ago

Lucky little Cyprus – alphaville / FT

Finance ministers in the PIGS countries must be green with envy. On the one hand, there’s the good old eurozone and on the other is a state fund, namely that of Russia. It would be the second time Moscow has stepped in.

Those Crazy Austrians… – The Big Picture

Maria Fekter, an Austrian Finance Minister, who seems intent on sowing further confusion about the next potential bailout recipient – Italy.

FX Markets Bracing For Major Event – ZH

Option volatilities increasing ahead of…something

Economist Gartman Says Austerity in Europe Is `Lunacy’ – BB (mp3)

World Weekly podcast: is the eurozone doomed? – The World / FT

EURO CRISIS: ECB

ECB Tells Court Releasing Greek Swap Files Would Inflame Markets – BB

two internal papers drafted for the central bank’s six-member Executive Board. They show how Greece used swaps to hide its borrowings, according to a March 3, 2010, note attached to the papers and obtained by Bloomberg

Just What Is Mario Draghi Hiding? ECB Declines To Respond To Bloomberg FOIA Request On Greek-Goldman Swaps – ZH
Draghi was a key executive at Goldman at precisely the time when none other than Goldman Sachs was hired to create and facilitate the active hiding of the true extent of the Greek debt problem.

The TARGET2 circle of life – Sober Look

A default on TARGET2 is a loss to the creditor nation even if the legal creditor is a central bank. And when one nation defaults to another, the pain is spread to the citizens, whether the default is on bonds, loans, or TARGET2 liabilities.

EURO CRISIS: GERMANY

Has Germany reached its limits? – The World / FT

In previous pronouncements on the fate of the single currency, Merkel has tended to take the line that Germany will do whatever it takes to save the euro. Not any more. Today’s speech makes the point that there are limits to what can be asked of Germany.

Bundesbank: Policymakers Should Refrain From "Wild Goose Chase" of Higher Firewalls; Merkel Warns "Limited German Resources"; Sensationalist Silliness – Mish’s

Germany insists that a fiscal union must come first while Spain, France, and Greece want a banking union of any kind first. A fiscal union requires massive treaty changes and ratification by German citizens. So would a banking union. The deadlock ensures more delays, but time is up.

Germany’s Haven Status Fades as Crisis Bill Mounts: Euro Credit – BB
the fourth bailout of a euro member stokes investor concern that the currency bloc’s biggest economy will be left picking up a mounting tab.

Howard Davies Says Germany Will Agree to Mutual Debt – BB (mp3)

EURO CRISIS: SPAIN

S&P: "Spanish Home Prices To Drop Another 25%" – ZH

Roubini’s Greene Discusses Spanish Credit Rating – BB (mp3)

Spain Borrowing Costs Soar After Moody’s Downgrade – TIME

Spanish Bank Borrowings From ECB Surpass Italian – ZH

Spanish bank borrowings from the ECB: at €287.8 billion, this was a €24 billion increase from April, €235 billion from a year earlier

"It's Not the Situation Room" Says Spain After holding Emergency Cabinet Meeting – Mish’s

The four members of the executive who held the unusual meeting refused to answer questions

EURO CRISIS: ITALY

Italy’s Five Star movement isn’t funny for Monti – City A.M.

Instead of planning new grand European projects, Monti should re-focus his attention on the domestic reform programme. This is not the time to have your head in the EU clouds. As the rise of Beppe the comedian illustrates, public support for the euro in Italy can no longer be taken for granted.

EURO CRISIS: GREECE

Greek Banks Under Pressure – WSJ

Customers Increase Withdrawals as Major Foreign Lender Plans Potential Exit (some very nice interactive graphs on the sidebar)

FED WATCH

Devil's Advocate – Tim Duy’s Fed Watch

I think you can tell a story that the most recent data is not sufficient to move Fed forecasts, in which case it remains possible that the Fed does not implement any changes next week.  I have to admit to being a little nervous that we get a Fed "leak" over the next few days in an effort to reset expectations ahead of the meeting.

F-O-M-C sitting in a tree…. – alphaville / FT

Credit Suisse notes, among others

OTHER

Spain & Italy Moving Closer To The Edge – The Short Side of The Long

Multiasset market commentary

Three years and counting – PIMCO

The New Normal called for long-term deleveraging that would lead to lower growth than society had been accustomed to. It called for more modest investment returns across asset classes, as the leveraging of the economy reversed course. It called for increased regulation and reduced globalization. Most importantly, it said there would be no V-shaped recovery that is typically seen after a recession. It would be a long, hard adjustment period with sustained high unemployment. It also called for a transition of stress from private balance sheets to sovereign balance sheets.

The Eurozone, Swiss National Bank, Market Strategy – David Kotok / The Big Picture

We conclude that the massive expansion of the SNB balance sheet and the commitment to the peg now combine to make the Swiss 10-yr bond the European benchmark. Switzerland is considered the highest-quality, most truly AAA-rated credit in Europe.

EMEA Weekly, Week 25 – Danske Bank (pdf)

Macro data tells Polish central bank to cut

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