Notes From Underground: The issue of European debt has gone mainstream

Back to the Futures –

The media has now gotten the message on the debt problems of the PIIGS, and is driving the financial news headlines. This has certainly removed the U.S.’s shortcomings from the limelight.

The unemployment on Friday was fairly benign as to what the market anticipated. However, the issue of the dire debt situations of several states will be on the front burner after the Germans come to the rescue to resolve the immediacy of the European debt problems. If Germany doesn’t rise to the task, it will be up to Bono to do several debt relief  concerts. After the late rally on Friday, the risk on trades are sensing that a relief package will be forthcoming to prevent a run on collateral.

Presently, the EURO is trading toward its 24-hour highs but is not in sync with the European debt markets as the German/Greek spreads have widened out 9 basis points to 359. The widening spread would point to the EURO softening, but so far the EURO holding towards its highs makes us think something is afoot. The other spreads are about where they were at the close of Friday. Interestingly, all the commodities that were hit hard last week are holding their early gains lending more credibility to some movement to the DEBT short-term relief scenario. We will let the markets be out guide.


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