Betting On The FED

European credit indices comfortably outperformed their equity counterparts, Monday, in a session where volumes were diminished by the Columbus Day holiday in the US. Spreads continued to feel downward pressure amid expectations that the next stage of quantitative easing is close to a formality, according to Markit Financial Information.

“The Greek bailout was unpopular with the prudent German public, and Chancellor Angela Merkel would probably be wary of granting Greece any more leeway.”

Gavan Nolan

“An unsatisfactory outcome from the weekend IMF meeting had little impact on spreads. China categorically rejected criticisms of its exchange rate policy, instead highlighting the loose monetary policy of the US. But the prospect of a currency war and beggar-thy-neighbour policies has less resonance with investors than the FED’s liquidity pump, though this may well change if the rhetoric becomes more aggressive.” vice president Gavan Nolan at Markit Credit Research writes in his daily alert.

A weaker than forecast non-farm payrolls report on Friday – not normally a catalyst for spread tightening – only served to firm up the consensus that the Federal Reserve will further expand its balance sheet before the end of the year.

The IMF was also at the centre of the main notable movement today.

Dominique Strauss-Kahn, the IMF managing director, says that the agency might be willing to extend its bailout loans to Greece beyond 2013.

Germany quickly issued a statement that made it quite clear that they would be unhappy with such an extension.

“The Greek bailout was unpopular with the prudent German public, and Chancellor Angela Merkel would probably be wary of granting Greece any more leeway,” Nolan notes.

Nonetheless, the news caused Greece’s spreads to tighten significantly and the sovereign market performed strongly throughout most of the day.

  • Markit iTraxxEurope 97.75bp (-4), Markit iTraxx Crossover 454bp (-15)
  • Markit iTraxx SovX Western Europe 141.5bp (-4.5)
  • Markit iTraxx Senior Financials 119bp (-4.5)
  • • Sovereigns – Greece 695bp (-25), Spain 208bp (-9), Portugal 383bp (-13), Italy 177bp (-7), Ireland 425bp (-5), Belgium 123bp (-1)
  • BP 141bp (-1)

TRADING HIGHLIGHTS:

Name Sector Volume Turnover €
NYSE EURONEXT Financials 134,000 2,767,803
STHREE Industrials 306,519 1,082,256
LONDON MINING PLC Basic Materials 160,995 600,862
MUNTERS Industrials 72,709 594,258
NOVAE GROUP Financials 109,369 434,557
REPOWER SYSTEMS Industrials 3,009 352,655
TOM TAILOR HOLDING Consumer Goods 24,350 339,454
CARL ZEISS MEDITEC Health Care 26,852 327,594
JUMBO Consumer Goods 60,000 318,000
A.G. BARR Consumer Goods 20,377 278,735

Top 10 ETF

Name Volume Turnover €
DJ STOXX 600 OPTIMISED BANKS SOURCE ETF 1,484,920 105,929,455
DJ STOXX 600 OPTIMISED BASIC RESOURCES SOURCE ETF 128,244 41,939,958
LYXOR INTL ASSET MANAGEMENT ETF EUR MTS7-10Y EUR NPV 209,089 25,894,724
DB X-TRACKERS – DJ STOXX 600 BASIC RESOURCES ETF 236,205 21,739,561
DB X TRACKERS – DJ EURO STOXX 50 ETF 683,510 19,329,663
DB X TRACKERS – MSCI EMERGING MARKET TRN INDEX ETF 621,630 18,367,500
DJ STOXX 600 OPTIMISED INDUSTRIAL GOODS & SERVICES SOURCE ETF 151,966 16,723,243
DB X-TRACKERS ETF DJES50 1C EUR NPV 500,000 14,965,000
DB X-TRACKERS II ITRAXX CROSSOVER 5-YR TOTAL RETURN INDEX ETF 104,567 12,241,136
DJ STOXX 600 OPTIMISED CONSTRUCTION & MATERIALS SOURCE ETF 62,001 9,855,144

Top 10 Trades

Name Sector Volume Turnover €
BBVA Financials 30,000,000 298,198,786
BANCO SANTANDER Financials 10,000,000 94,300,003
GECINA Financials 1,000,000 86,000,000
BAYER Basic Materials 627,772 33,410,027
UMICORE Basic Materials 1,000,000 33,410,000
BANCO POPULAR ESPANOL Financials 6,500,000 30,225,001
SNAM RETE GAS Oil & Gas 5,461,000 20,383,183
DEUTSCHE TELEKOM Telecoms 2,000,000 19,827,999
DEUTSCHE POST Industrials 1,500,000 19,755,000
NOKIA Technology 2,500,000 19,400,001

Major Movers

Name Sector Volume Volume (T-1) % Change
BBVA Financials 70,895,504 4,217,845 1581%
BANCO POPULAR ESPANOL Financials 13,864,888 1,397,678 892%
INFINEON TECHNOLOGY Technology 8,062,722 1,363,419 491%
TELECOM ITALIA Telecoms 22,312,682 7,974,433 180%
HIKMA PHARMACEUTICALS Health Care 3,769,365 1,350,926 179%
DEUTSCHE TELEKOM Telecoms 9,896,973 4,574,373 116%
DEUTSCHE POST Industrials 5,059,129 2,665,023 90%
BT Telecoms 6,625,224 3,844,888 72%
ITV Consumer Services 14,370,746 9,156,002 57%
SNAM RETE GAS Oil & Gas 31,393,314 21,017,338 49%
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