Yesterday Spain paid 3.24% to sell the same 6 month bills. While the immediate concern is Spain, Italy is carrying $1.95 trillion Euros in debt, this makes Italy the world's 4th largest debtor. Tomorrow will be the real test for Italy as they try to sell 5 and 10 year debt, which falls outside of the 3 year LTRO loans at 1%.
At last look, Spanish 10-year bond yields stand at 6.86%
German State CPI's overnight (Consumer Price Index) came in a little higher than expected.
Monti of Italy is ready for a fight with Germany as the FT reports (Nothing new as he's been at it with her for several weeks now).
Mario Monti has set the stage for a tough fight with Germany at the EU summit this week, insisting that he will continue to push Italy’s proposal to use eurozone bailout funds in an attempt to stabilise financial markets.
Italy’s technocratic prime minister’s frustration with Germany surfaced in a combative speech to parliament, saying he would not go to Brussels to “rubber-stamp” pre-written documents and was ready to extend the two-day summit until Sunday night if needed to reach agreements before markets reopen on Monday.
Italian officials said they were extremely concerned how markets might react Monday if the Brussels talks fail to break new ground. The summit was heading towards “complete uncertainty”, Mr Monti said.
Merkel is not just facing pressure from Italy and the Southern EU countries, you may recall yesterday in Egan Jones downgrade of Germany, part of the reasoning was Merkel's unwillingness to cooperate. In this article from the FT, she is apparently facing pressure from all sides including domestically.
One thing seems certain, this EU meeting will be unlike past EU meetings as cooperation and the spirit of unity (or at least perceived unity) totally crumbles. I would expect this summit to produce nothing in the way of constructive measures, but probably some very entertaining mud-slinging
In the US:
MBA Purchase Applications were released at 7 a.m.
Released On 6/27/2012 7:00:00 AM For wk6/22, 2012
| Prior | Actual | |
| Composite Index - W/W Change | -0.8 % | -7.1 % |
| Purchase Index - W/W Change | -9.0 % | -1.0 % |
| Refinance Index - W/W Change | 1.0 % | -8.0 % |
As you can see, this was a huge decline of -7.1% vs the prior at -0.8%
At 8:30 a.m. Durable Goods came in
Released On 6/27/2012 8:30:00 AM For May, 2012
| Prior | Consensus | Consensus Range | Actual | |
| New Orders - M/M change | 0.2 % | 0.4 % | -1.0 % to 1.0 % | 1.1 % |
| New Orders - Yr/Yr Change | 6.9 % | 4.6 % | ||
| Ex-transportation - M/M | -0.6 % | 0.8 % | -0.5 % to 1.5 % | 0.4 % |
| Ex-transportation - Yr/Yr | 6.3 % | 3.8 % |
As mentioned in passing, the recent downgrade of major US and EU banks has forced collateral calls
"A series of ratings downgrades from Moody’s last week has created an unwelcome but manageable liquidity squeeze on three major banks, by forcing them to post billions of dollars in additional collateral against derivatives exposures."
"Citigroup’s two-notch long-term rating downgrade from A3 to Baa2 could have led to US$500m in additional liquidity and funding demands due to derivative triggers and exchange margin requirements, according to the bank’s 10Q regulatory filing at the end of the first quarter.
Morgan Stanley – which Moody’s downgraded from A2 to Baa1 – said a two-notch downgrade from both Moody’s and Standard and Poor’s could spur an additional US$6.8bn of collateral requirements in its latest 10Q. The bank did not break down its potential collateral calls under a scenario where only Moody’s downgraded the bank below the Single A threshold."
As for overnight action, in a single word, "Directionless"
The 5 min EUR/USD chart since yesterday's 4 p.m. close.
Market and USO updates coming...
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