5th January 2012: Did You Get A Bond Auction Calendar For Christmas? Sovereign Debt Yields – Watch This Space.

Quote of the Day:

Before borrowing money from a friend, decide which you need most.

American Proverb

Macro Overview

Bond Auction Calendar Is The New Thing To Watch In 2012

• It has already become clear that the sovereign debt bond market auctions are going to be the things to watch. I’d rather not wait for the news to hit the tape before I panic – this is something worth being pro-active about. So I’m trying to create a calendar which would help us project and look forward to when the most important auctions are taking place. Important meaning they have the most influence on global sentiment in the market place in general.
• This is a harder task than I first thought. We could argue that the US auctions are the most important in the World on account of their sheer size. But these auctions are not as sensitive because they are going really well and the US (unlike the Eurozone members) is not subject to structured political constraints, The Fed is the most pro-active and creative central bank and there are countries in a far worse fiscal predicament. On the other end of the scale a country like Greece or Portugal, while problematic for the Eurozone, is too small for its auctions to be of huge significance to the broader global economy and actually not in the too-big-to fail bracket of Eurozone countries.
• I’ve used a number of determinants to approximate which countries’ will face the most important/influential debt auctions this year. I will not disclose the calculations used but, for example, some of the determinants I used to approximate the potency of the auctions (some are verysubjective) are:
  • Size of Economy (GDP)
  • Economic Growth
  • Economic Growth Projections
  • Monetary Restriction (Eurozone Members)
  • Deficit Magnitude
  • Debt to GDP
  • Projected Deficit/Debt-to-GDP
  • Reliance on Foreign Creditors
  • Credit Market Confidence (Rate of Change) / CDS / Downgrade or Ratings Outlook
• This is the crude ranking my formula has given me as to the potency or relative importance of the auctions of the various states. It is a dynamic formula so it will be constantly changing, but not by much on a day-to-day basis. Of course you can already pick holes in this as each auction is very different, for even the same country, but like I said, this is the approximate ranking of auction importance on state-by-state basis according to my little model (ranked 0-10 with 10 the most important) – the results may surprise you a bit:
  • Weighting 10:   Spain
  • Weighting 10:   Italy
  • Weighting 8:   France
  • Weighting 7:   UK
  • Weighting 7:   Belgium
  • Weighting 6:   Japan
  • Weighting 6:   US
  • Weighting 6:   Greece
  • Weighting 6:   Ireland
  • Weighting 6:   Portugal
  • Weighting 5:   Germany
  • Weighting 2:   China

Important Dates For Your Calendar – January

• Here are some important dates for auctions occurring in January courtesy of Business Insider (see the link below)

Thursday, January 5: Francewill auction an estimated €7-8 billion ($9.1-10.4 billion) in 10-year and other long-term bonds (via KBC Group)

Tuesday, January 10:Austriawill auction €1.3 billion ($1.7 billion) in 5- and 10-year bonds

Thursday, January 12: Spanish 3- and 5-year bond auction

Friday, January 13:Italywill auction medium-long term bonds

Thursday, January 19:Francewill auction 5-year bonds

Thursday, January 19: Spanish 10-, 15-, and 30-year bond auction

Thursday, January 26: Italian long-term bond auction

Monday, January 30: Italian medium-long term bond auction

Monday, January 30: Belgian bond auction

Read more: http://articles.businessinsider.com/2012-01-03/markets/30583337_1_auction-bond-debt#ixzz1iahz9e6n

• I’m also including a little table shown to me (courtesy of ZeroHedge), here, showing some of the key dates for January and, importantly, the projected sizes of the deals coming. I’ll try and get some graphic up which will represent the landscape which would make it easier for us to follow together, dear reader.
• It’s gonna be an interesting few months…Brace yourself!

Market Overview

Markets Gone A Bit Freaky

• The Belgian Bills auction at the beginning of the week went well… really well. But then the French auction barely scraped through today and Hungary was a disaster. It is becoming clear that CDS spreads are not the only thing traders are looking at now, bond auction stats are on everybody’s radar. Hence the little project I commented on in the Macro section.
• Chart of the Day is the obvious one. The Euro well under the old 52 week low now.
• Now consider this Reuters article, Unicredit the huge (well it was huge) Italian bank put a footnote in the prospectus for its rights issue:

Concerns that the euro zone sovereign debt crisis could worsen may lead to the reintroduction of national currencies in one or more euro zone countries or, in particularly dire circumstances, the abandonment of the euro

• Yesterday, I cited Eurozone break-up as a black swan, a very low probability event, which would be “very painful”. May be I was wrong. Not about the painful part… may be I was wrong about it being a very low probability event!

Chart of the Day

Euro (Source: Bloomberg)

Events

Macro Events:

Update:

• US ISM Non-Manufacturing – 52.6 (decent number)

Alerts:

• US Jobs (Non-Farm Payrolls, Unemployment Rate)
• Brazilian Inflation (the YoY rate has been falling which ain’t a bad thing)

 

Corporate Events:

Results:

• HTC [2498 TT]

Dividends:

• AT&T [T], General Mills [GIS], Verizon [VZ],

Reading, Links:

Nothing Significant