German ECB member Asmussen has put it simply to the Greeks, especially Alexis Tsipras the leader of the Syriza party who thinks he has a mandate to make their forced upon austerity package “null and void,” by saying “Greece must know that there is no alternative to the agreed to restructuring arrangement, if it wants to stay a member of the euro zone.” Putting this ultimatum to the Greek people may see a more rational vote if there is another election in June. In the mean time, yields in Spain, Italy and France are jumping after being somewhat immune Monday and Tuesday to the results of the Greek and French elections. The Spanish 10 yr is back above 6% in particular and Spanish bank stocks are sharply lower as they and Italian ones obviously loaded up on sovereign debt over the past few months tying the fates of them even closer together. After a drop yesterday, 823.3b euros were deposited overnight with the ECB, the 2nd highest amount on record in light of the growing concerns. The iTRAXX European financial CDS index and European bank stock index are at levels last seen in Jan. In response to the above, US Treasuries continue to rally and coincident with that, Bankrate.com said the avg 30 yr mortgage rate fell to a new low of 3.78%. While we’re likely to reach a point where the Fed thinks they need to print more money to lower interest rates, the market right now is doing it for them. The MBA said refi’s rose just 1.3% but purchases were up 3.4% to a 4 week high. After two days of buying on the dips, the S&P futures are back near the 10pm Sunday night low.
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