PIG and Japan and China! Oh my!

Moody’s downgraded Spain from its top rating but is only now in line with Fitch and still a notch above S&P. From the maturing 225b euros owed to the ECB, 29.4b euros were rolled into 6 day bills today and 104b into 3 mo bills yesterday. The less than expected take from the ECB has 3 mo Euribor up at the highest level since Aug 18th ’10 and 3 mo euro LIBOR rose to the highest since Aug ’09. With details and clarity out on the cost to Ireland for rescuing their banks, particularly Anglo Irish, PIG debt are rallying although the amount that may be needed was above expectations. The Irish government will also take more control over Allied Irish and that stock is down 30% today. Bank of Ireland doesn’t need more capital. Portugal also gave details on their budget and CDS is narrower in response. The Yen and Nikkei have almost given back its entire post intervention move and we have to believe the BoJ will be back in soon.

In response to the House passing what they call the Currency Reform for Fair Trade Act by a wide margin, a Chinese Foreign Minister spokeswoman said “We firmly oppose the US Congress approving such bills…We urge the US congressmen to be clearly aware of the importance of China-US trade and economic relations, resist protectionism so as to refrain from any damage to the interests of both peoples and people around the world.” As China is our biggest banker, this is a bad fight for our officials to be picking not even mentioning that it will do nothing to create new US based jobs and will raise the cost of everything we import from them.

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