At the right price, buyers show up

Following yesterday’s successful auction of 3 and 10 yr paper in Portugal, new Spanish and Italian debt was met with solid demand. Spain sold 3 yr notes with a bid to cover of 2.1, up from 1.79 in the last one in April but the yield was 130 bps higher. Italy sold 3 mo and 12 mo bills with solid demand. Both Spanish and Italian spreads to German bunds are narrower as a result and CDS are lower. With the PIIS (ex G) countries able to tap the capital markets, the new Euro SPV may not have to be used as long as it continues. Trichet at 8:30 will tell us his thoughts and will likely take comfort in these successful auctions. The euro is rallying in response and we wait specifically on what he says about future ECB bond purchases and the Germans will be listening closely. Also helping the euro was a comment from the head of China’s social security fund that said the euro will survive. Considering their holdings, he has to say that.

BP is rallying 10%+ after yesterday’s sharp selloff after UK politicians finally spoke up and told Obama and his administration to lighten up on the harsh rhetoric against one of their biggest and most important companies. The spill is a disaster and BP deserves an enormous amount of blame but imagine if it was reversed and UK politicians were beating up a major US multinational on a daily basis, US politicians wouldn’t stand idle. The BoE and the ECB left rates unchanged as expected. Brazil raised rates by 75 bps to 10.25% and New Zealand hiked rates by 25 bps to 2.75%, both as expected. Australia reported a better than expected jobs # for May of 26.9k vs the consensus of 20k. Adjusting for population size it would be like the US adding 370k jobs. China’s actual May export figure was +48.5%, well above expectations of 32% and about in line with yesterday’s leak.

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