Recap 10-31-11

Main Items:

  • Late in the day, Papandreau announced that there will be a country wide referendum in January on the new EU deal. An opinion poll published on Sunday showed that more than 60 per cent of Greeks were opposed to the terms of the new bail-out. FT
  • MF Global filed for bankruptcy.
  • MoF intervened across Yen crosses. They sold an estimated 5-6trn Yen. The intervention came on the last day of the month, helping exporters looking to repatriate overseas earnings before closing their books.
  • Chicago PMI declined to 58.4 in Oct vs 59 exp and 60.4 prev
  • Dallas Fed improved to 2.3 vs -5 exp and -14.4 prev
  • Berlusconi ruled out early elections and said the current legislature in Rome will last until 2013, according to an interview published yesterday in Corriere della Sera.
  • Italian 10yr yield spread over bunds hit new highs. Trichet said that markets ‘over-interpreted’ Draghi’s support of the SMP. Reuters is reporting the SMP was in the market on Mon buying Italian debt after yields spiked.


  • EU CPI estimate was unchanged at 3.0% YoY in Oct vs 2.9% exp. Italian CPI drove the surprise, coming in at 3.8% vs 3.5% exp and 3.6% prev
  • EU Unemployment increased to 10.2% in Sept vs 10% exp and prev. It matched the cycle high.
  • UK M4 Money Supply declined to -1.7% YoY in Sept vs -0.6% prev
  • South Korea Mfg Business Survey declined to 82 in Nov vs 86 prev.
  • Japanese Mfg PMI increased to 50.6 in Oct vs 49.3 prev


The price action suggests we got a big equities to bonds asset allocation shift this month end as prices moved sharply between 3PM and 4PM, between the treasury futures close and the stock market close. The Greek referendum news certainly helped, but hit the wires before the move in prices.


3 thoughts on “Recap 10-31-11

  1. Headlines from a BoAML conf call this am Lnd time on the Greek referendum:
    – if the Troika does not release the ‘agreed’ 8b euro now in 1H-nov , a disorderly default is certain;
    – the Troika may have now , after referendum call and slippage in tax collection etc, enough reasons
    NOT to pay out the 8 b euro;
    – the next key moment is the Greek Govr Confidence Vote this friday. If negative, new elections in Jan;
    – Greece has 10b euros bond maturing in Dec and 14b euros bond in mar’12;
    – the Greek Gov currently only pays out salaries + pensions and can’t pay anything else;
    – the referendum will basically only give a yes or no to the PSI and aid package (incl 50% haircut) that
    was agreed in the EU summit last week;
    – in Greece, one cannot hold a referendum on something that already has been approved by Parliament;
    – it will NOT be a referendum on Greece staying in or out of the Euro. A majority of Greek voters want to stay
    in the euro;
    – Greece has no Plan B. If Plan A fails ( 8b euros coming in and EU aid package etc) it’s falling out of
    the sky without a parachute.

  2. Default may make an iota sense if Greece weren’t running a primary deficit. Sure hope Papendreou is a good teacher of sovereign finance 101.

  3. Yeah, it’s tough to see what will turn this around until Friday at the earliest, when the parliament votes and payrolls come out. If the ECB is a more activist CB maybe we could see relief earlier, but judging by the price action of BTPs, (+25bps today!) they’ve checked out.
    Papendreou & co could try to sway the vote and explain the bank runs that will happen if they vote No, but the arguments against that are that the populace is both uneducated and emotional about the issue, as well as the fact that simply by saying that, a bank run will occur and Greek banks go under anyway.

    I saw headlines earlier that several PASOK members have defected, and the majority is now just 151. Also, hearing reports that PASOK members are calling for Papendreou’s resignation. This apparently comes from the Greek media, so it’s not clear how reliable it is, but obviously this doesn’t bode well for the confidence vote on Friday.

    Hearing that referendum may get called off now, but even if it does, will the new deal pass parliament?

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