G3 Recap 6-21-11

Main Items:

  • Greek Confidence vote expected at 5PM EST. Assuming it passes, the austerity vote is expected next Tues, 6/28. Socialist Party insiders said that PM Papandreou seemed likely to succeed in passing the austerity package, having secured more support within the party. NYT
  • Eurogroup chairman J-C Juncker commented yesterday, "We have stipulated that the ESM [European Stability Mechanism, still due to become operational in
    mid-2013] will not have preferred creditor status for loans for countries which are already in a support programme. This should help countries under such programmes to be able to return to markets".
  • The lending capacity of the EFSF would be raised to EUR440bn from EUR250bn, on account of the guarantees from euro area governments being raised to EUR726bn (with the "overguarantee" raised from 120% to 165%).
  • The next Eurogroup meeting will now be on 3 July rather than 11 July, and is intended to disburse the EUR12bn scheduled for Greece.
  • US Existing Home Sales printed at 4.81 in May vs 4.8 exp and 5.05 prev
  • Canadian Retail Sales less Autos was flat MoM in April vs 0.6% exp and -0.1% prev.


  • German Zew Survey of Economic Sentiment dropped to -9 in June vs -3 exp and -3.1 prev. The EU survey dropped to -5.9 vs 6.1 exp and 13.6 prev.
  • UK CPI Trends Total Orders improved to +1 in June vs -5 exp and -2 prev. Selling Prices increased to 27 vs 26 exp and 24 prev.


  • Looks like markets are set to continue this bounce for a bit. Most of the negatives have been priced in for now
    1) Macro data has stopped surprising on the downside so much, (core retail sales were pretty decent last week)
    2) The Greece situation is going to be resolved without a default for now.
    The market tone is also positive. EU yields are broadly higher or unchanged today despite a pretty horrible Zew Survey.
    Technically, things are also looking constructive. 5yr Tsy yields maybe in the middle of a double bottom, and the S&P has bounced off the 200 day moving average.

    On the back of this, EUR could get a bid. This chart from Citi shows how EURUSD 25 delta risk reversal skew are at extreme levels:

  • This got sent around: a man robs a bank of $1 to get free health care in jail until he is old enough to qualify for Medicare. Unfortunately, he did not ask for enough money! NYT