Recap 5-16-12

Main Items:

· Yesterday afternoon Reuters reported that Greek banks saw EUR 700mm in deposit outflows on Monday and that the trend continued into Tuesday. FT reported that outflows exceeded 5bn since May 6th. This follows an 11.7bn outflow in 1Q. Domestic private sector deposits stood at 170bn at the end of 1Q, of which 66bn was in overnight deposits.

· The BoJ saw 480bn yen offered in 1-2 year debt versus the 600bn purchase goal

· Housing Starts improved to 717k in Apr vs 685k exp and 654k prev, but Building permits declined to 715k vs 730k exp and 747k prev.

· Nothing surprising from the FOMC minutes.


  • UK Claimant Count was unchanged at 4.9% in Apr vs 5.0% exp. Jobless Claims declined -13.7k vs +5k exp and 3.6k prev. The ILO measure declined to 8.2% vs 8.4% exp and 8.3% prev
  • Swiss Zew Survey declined to -4 in May vs +2.1 prev
  • EU Trade Balance improved to 4.3bn in March vs 3.8 bn exp and 3.7bn prev

Upcoming Data:

  • Thurs: US Initial Jobless Claims, Philly Fed, LEI, China Property Prices
  • Fri: Canada CPI
  • Mon: Chicago Fed
  • Tues: UK CPI EU Consumer Confidence, Richmond Fed Mfg Idx, Japan Trade Balance


Multiple asset classes are now near historical extremes. EURUSD is not far above the January lows of 1.2624. 10y Spanish yields, at ~6.25%, are about 50bps from November highs, but are close to levels which have historically coincided with SMP purchases. 5y US treasury yields are just off of February lows. The Italian MIB stock index is sitting at last year’s lows.

Furthermore, there are some signs that perceptions may have overshot, at least temporarily. With the failure of all attempts to form a Greek unity government, the fact that there will be new elections & the possibility of a large SYRZIA component is now broadly expected. But the election is still a month away and the ECB will continue to fund Greek banks in the interim. And finally, Citi’s G10 economic surprise index has bounced.

I think this all suggests there is a good chance for some sort of a risk bounce in the coming days.

Also note that the weak EUR has been very effective at improving the Italian Trade Balance. The 6m average Trade Balance is now at the highest level since early 2005, although it is still in a slight deficit. Unfortunately, income transfers out of the country remains large…

Separately, the strength in US multi-family housing starts continues:

The dichotomy suggests that housing construction can begin to have a more positive impact on growth even as it does not have a large effect on single family house prices.