EUR 8.84 For Business Accounts Only

The Morning Track quiet-ending

- The Morning Track – Quiet Ending? by Bob Savage
http://track.com/articles/the-morning-track-quiet-ending/

After a long week of trading, markets are seeing relative calm for Friday with a partial Greek debt deal and an BOJ on hold the key stories. What is notable is that JGBs are flat in 10Y and the rest of EU periphery ignored the Greek 19bps drop in yields. The Greek deal has IMF support with standby arrangement but the Greeks don’t get the ECB PSPP inclusion yet (and likely never will), nor do they get any debt relief as the IMF wanted, at least until 2018 as the burden get kicked down the road again. The Eurogroup gives E8.5bn and will promise a deal for restructuring later. Also notable overnight is that the hangovers from the FOMC and BOE remain in play as Gilts are lower along with the belly of the US curve. The more negative stories about real rates rising with FOMC hike and lower inflation, mixed with BOE divided over hiking and BOC talking about hiking – all that hangs over today and sets the week apart with a new driver. Owning risk assets when real rates are mo
ving up is dangerous. The higher actual volatility in markets hasn’t yet translated into higher expected future risk – but if we continue to chop it will. This is a quiet ending to a rough week for oil, gold, EUR, JPY, EM and the bond markets along with global equities. The long-only passive risk portfolios suffered and appear to be sulking today. The key for trading is a mix between the USD recovery and the US bonds consolidating. The USD maybe forming another short-term bottom but whether the hike is sufficient to reverse the bigger trend remains unclear.