The Early Story Of The Day Is Italian And Spanish Credit

Bonds and CDS for both countries are incredibly strong this morning. They are outliers versus almost anything else out there. Stocks are up a bit after a couple of rounds of overnight weakness. The strength in Spain and Italy is a bit surprising but so is the fact that the market isn’t completely in love with the move. It seems that the LTRO2 effect is in play and markets understand that.

A Greek CDS ruling is expected. My guess is no Credit Event yet, but clarity on what will constitute a Credit Event. If the ruling is a Credit Event – then sell because it would severely limit what other countries can do to manipulate bind holders into actions of their choosing.