Around 5 a.m. the EDT the Italian Auction results were announced, the European market rallied because it was not a failed auction, meaning they sold what they intended to sell, the rally is in the white box, the market topped when it realized the auction internals were horrible. They sold 3, 9 and 11 year BTPs. The 3 years came in at yields of 7.89% compared to 4.93% at the Oct. 28th auction. The 9 year saw 7.28% vs 5.47% a month ago and finally the 11 year at 7.56% vs 6.06%. Those levels of interest are simply unsustainable.
We had a lot of other interesting developments overnight:
-AMR American Airlines filed for bankruptcy.
-Iranian student protestors threw gasoline bombs at the UK embassy and set it on fire, and in a scene reminiscent of the Iran/Contra affair, students took between 6-8 British diplomats hostage. This after some strange events over the last two weeks and yesterday in which Iranian missile facilities under strange circumstances, mysteriously exploded. USO is up 1.5%, but it's hard to say whether it is because of this, which is what I spoke about yesterday as a danger of shorting oil, or as a function of a higher Euro.
-As we saw yesterday with home prices, the Case Shiller Home Index dropped for the 5th month in a row in y.o.y results confirming continued weakness in housing-another reason I still like SRS long.
I'll be loading the Credit/Risk indicators and see where we stand.
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