Late-Day Equity Ramp But European Bonds Ain’t Buying It

Between the escalation in the Middle East and Olli Rehn pouring cold-water on the hopes and prayers of an imminent Spanish rescue-request, sovereign bond risk rose notably today. A late-day rampapalooza in EURUSD (another round of end-of-day repatriation?) signaled risk-on in the correlated monkeys and sure enough (in the US and Europe) stocks rose into the European close. The USD is remarkably unchanged on the week – despite the volatility in risk assets in general (zee stabilitee at the 1.27 peg seems the new normal) – as the Fed/ECB ‘agreement’ appears to have crushed the life out of yet another market-based signal – as EURUSD implied vol crashes to five-year lows.

European government bond risk (Spain red) was not buying into the hope (or whetever it was) that spurred stocks and EURUSD to levitate in the last hour of the European day…

 

and broadly speaking, EGB spreads rose (weakened) from the US open…

 

EUR strength seems antithetical to the general risk-off sense and implies a liquidty-based repat rather than positive belief… JPY weakness overnight on the chance of new elections and an uber-dove stepping in was generally ignored by the risk-on carry implications…

 

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