http://www.zerohedge.com/news/facebook-plummets-all-time-lows-eur-exodus-crushes-commodities-slams-stocks
Submitted by Tyler Durden on 05/22/2012 16:24 -0400
Submitted by Tyler Durden on 05/22/2012 15:40 -0400
Submitted by Tyler Durden on 05/22/2012 12:38 -0400
Submitted by Tyler Durden on 05/22/2012 11:30 -0400
Facebook Plummets To All Time Lows As EUR Exodus Crushes Commodities, Slams Stocks
It was all going to plan until that early angst from Egan-Jones Spain downgrade was increased by L-Pap's 'sky-is-falling' Greek exit plans comments. Treasuries had leaked higher in yield and recoupled with stocks (after the divergence yesterday) but the USD (driven by EUR deterioration) was pushing higher (diverging from its recent correlation). This was dragging commodities lower but gently as stocks (especially financials) continued their dead-cat impressions. Even Facebook showed signs that the deluge of reality was coming off its shoulders. By the European close, stocks had pulled unhealthily high relative to risk-assets in general (once again) and credit was lagging a little. The Spain downgrade news stalled the EUR which began to slide - as did Gold and Silver along with USD strength - but Treasuries kept on limping higher in yield and tracking stocks, Then in the last hour of the day the L-Pap headlines - along with an increasing sense of deceleration (we saw heavy volume come in just after the European close - suggesting covering of the heavy volume up from the bounce lows yesterday) - and all the momo names started to lag with AAPL losing steam (more schadenfreude there after our comments yesterday) and then financials stumbled off their exuberant highs (though JPM managed a very good gain of over 4.5% still - as IG9 compressed for the first time in a few weeks). S&P 500 e-mini futures (ES) managed only a small loss but all the positive momentum was lost and large average trade size pressure came in at the close as it tried to get up to VWAP. VIX gained 0.5vols to close back above 22.5% and the term structure bear-steepened a little more. Yesterday's credit-led strength faded today, as skews normalized, with HYG losses and a renewed fear of the ETFs and indices leaking into the real bond market soon once again.Clusterbook is trading $30.80 after-hours with over 101mm shares traded!
Stocks (blue) and Treasuries (red) recouple today - sliding together at the close. USD strength (green) and Gold weakness was notably divergent from early Monday's tight correlations...
Stocks played catch up to credit (upper left) and broad risk assets (CONTEXT upper right) this afternoon as their exuberance once again got the better of them. Correlations dropped (lower right) but VIX pushed up to its equity/credit fair-value by the close (lower left)...
Facebook dominated headlines and fell to an after-hours and all time (all 2.7 days of it) low of $30.79 after trying and failing to regain the lows of yesterday...more exits (and more lawsuits)....
Gold and Silver recoupled briefly this morning but then silver's higher beta nature took over as the USD surged this afternoon. Oil and Copper remained joined at the hip but slid on the USD strength also...
The USD is up 0.65% on the week - so Gold and Silver are likely suffering collateral/liquidation issues on top of currency translation - but the message today (as seen above in CONTEXT) was much more about carry-trades being lifted as AUD and EUR (relative to the JPY) were unwound notably - especially at the close in the bigger higher volume selloff...(higher on the chart is USD strength)...
and....
http://www.zerohedge.com/news/eur-plunges-late-day-l-pap-scaremongering
EUR Plunges On Late Day L-Pap Scaremongering
With G-Pap talking of federalism all morning at Zeitgeist, the M.A.D. button was just pressed again by L-Pap as only minutes after we hear of a drop-in-a-bucket EFSF rescue fund for Greek banks, Dow Jones notes:
Preparations for Greece Euro Exit Considered, Papademos Says: DJ
and.....
http://www.zerohedge.com/news/your-bond-market-your-bond-market-fedroids-and-germany-goes-zero-coupon
This Is Your Bond Market. This Is Your Bond Market On Fedroids... And Germany Goes Zero Coupon
The following chart from Dylan Grice does a good job of demonstrating, once and for all, what is going on in the bond market.
And speaking of bond markets, a few hours ago the German debt agency announced that it will for the first time ever, issue zero coupon 2 year bonds, which as the name implies will pay zero cash interest. In other words, Germany, sick and tired of being the only good cash collateral in Europe, is gradually halting the payment of any cash interest on its paper. After all: why should it?
Germany will for the first time sell two-year bonds on Wednesday that won't make scheduled interest rate payments, a ringing endorsement of the safe appeal of German debt and a reflection of increased market nervousness over the composition and direction of the euro zone.
The German federal government Tuesday set a zero coupon on a new issue of two-year federal Treasury notes, or Schatz. Germany will auction €5 billion ($6.41 billion) of the two-year note on Wednesday.
While other countries have sold zero-coupon bonds in the past, these offerings were designed as such to meet demand from a certain group of investors rather than being a reflection of a country's slumping borrowing costs.
In contrast, a zero coupon on the new German note underscores a surge for safety, which has pushed yields on bonds perceived to be safe sharply lower. Investors are so nervous about the potential loss of capital that they are willing to forego interest rate payments just to protect their money by parking their funds in German debt.
Coming soon to a market near you: negative interest bonds, where one pays the government for the privilege of holding repoable collateral. This is not a joke.
and.......
http://www.zerohedge.com/news/egan-jones-cuts-spain-bb-bb
Egan Jones Cuts Spain To BB- From BB+
Love them or hate them, Egan Jones is always about 1 month ahead of the other rating agencies.
Spain has been weakened by the government deficit of 8.9%, the 24+% unemployment, the IIF's recent estimate of additional bank loan losses up to EUR260B, and possible depositor withdrawals. Over the past three fiscal years (i.e., from 2008 to 2010), Spain's GDP declined from EUR1.09 trillion to EUR1.07 trillion. Meanwhile, its debt mushroomed from EUR381B to EUR563B. The recently-reported quarters are of little comfort since the debt has risen to EUR 641B while GDP has been more or less flat resulting in a 67% debt to GDP as of 2010 (near 88% currently) and are rising. Social benefits are a major problem; while payments to the govt have been more or less flat over the past four years (up EUR 8 billion), payments from the government have been up EUR 44B). As a result, Spain is short about EUR50B per year for social payments, EUR20B per year for interest, and an additional EUR 30B for asset growth; hence the EUR100B per annum increase in debt. Unemployment is at depression levels of 24% while adjusted wage rates have declined.Spain will inevitably be faced with sizable payments to support its banking sector and for its weaker provinces. Assets of Spain's largest two banks exceed its GDP. We are slipping our rating to "BB"; watch for requests for support from the banks.As a reminder, once all the other rating agencies (and S&P already cut Spain to BBB+ a month ago, just 9 days after Egan-Jones again cut Spain from BBB to BBB-) cut Spain to BBB+ and lower, the country will see its haircut on ECB pledged bonds increase by another 5%, leading to collateral calls. More here.
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