Overnight

Overnight as European markets opened, there was some good news; the EFSF after being downgraded successfully auctioned off $1.5 bn euros in 6 month bills at a yield of .2664% with a healthy bid to cover ratio. Spain issued $4.9 billion euros in 12-18 month bills with a target of $5 billion, the yields came in lower then their last auction. Belgium auctioned off $1.76 bn in 3 month bills at a higher yield of .429% compared to .264% previously and $1.2 bn in 12 month bills at a 1.162% yield compared to 2.167%. Even Greece sold $1.625 bn in 3 month bills at a lower rate, 4.64% vs 4.68% previously. Even Hungary held a successful debt auction of short dated bills.


The bottom line, even after the downgrade, EU countries are not having much trouble selling short term debt. Who knows if there was ECB "round-about" intervention, they did make some interesting comments about the ratings agencies. The real test will come later this week on Thursday when Spain has another auction with maturities out to 10 years. For today, the Euro liked what it saw.


The S&P is set to kick off the downgrade of what could be hundreds of European banks and insurance companies as early as today.


Overnight and this is kind of the strange part, the ECB's deposit facility hit another record high at $502 bn Euros. I wouldn't expect an increase if money, especially any LTRO money was being used to buy the short dated debt sold today. 


Yesterday it was the S&P's head of sovereign ratings warning of a Greek default, today it's Fitch's turn, telling Bloomberg that Greece is insolvent and unable to pay a March 20th $14.5 billion euro bond payment; adding that a restructuring of Greek debt would also be regarded by Fitch as a default.


As mentioned, Bloomberg reports:

Draghi Questions Role of Ratings Companies After Downgrades

Draghi said,

“I will never comment on ratings as such, but certainly one needs to ask how important are these ratings for the marketplace overall, for investors?” Draghi said late yesterday at the European Parliament in Strasbourg. “It seems to a great extent markets have anticipated these ratings changes and priced them in. We should learn to do without ratings, or at least we should learn to assess creditworthiness” 


In other news China just saw the slowest pace of growth in 10 quarters, but we've been aware of the problems there for some time. The manufacturing and services sectors are in contraction, exports are down because of problems with their largest trading partner, the EU and they are seeing a housing bubble burst.


This will be a busy week for earnings and CitiGroup started it off on a sour note. They missed both top and bottom line coming in at $17.2 billion and $0.38 EPS on expectations of $18.5 billion and $0.52 per share. You may remember JPM missed last week, so financials will be in the spotlight. Remember Friday I showed you Financials finally coming out of sector rotation.