Sunday, 10 June 2012

Spanish PM Hails EU Bank Aid, Says to Boost Confidence

Spain's prime minister Sunday hailed a 100 billion euro ($125 billion) credit line from the European Union for Spain's banks, saying it will help to shore up confidence in the ailing local economy and wider euro zone.
Mariano Rajoy also stressed that Madrid hadn't caved into pressure from the EU to fix its banks, but instead said he was the one calling for the aid.
The aid agreement came after days of talks between Spanish and European officials that culminated in a conference call among finance ministers Saturday afternoon, in which the framework for the support was agreed.
"The European project, the future of the euro and our banking system all won new credibility yesterday," Mr. Rajoy told reporters at a televised press conference in Madrid "This is a clear message that the euro project is irreversible."
"Europe has been up to the challenge," he said.
Mr. Rajoy said Spain wasn't under pressure to ask for EU help to fix its banks.
"I was the one putting pressure," he said. "I'd like to know why this deal wasn't reached earlier."
European governments were anxious for Spain to agree to a support package for banks that have suffered from a real-estate crash ahead of crucial Greek elections June 17, the outcome of which could send a new wave of turmoil through the region's financial markets.
The talks dragged on as Spain tried to minimize conditions on the loans, and limit the role of the International Monetary Fund, officials said, fearing it would send the wrong message to foreign investors on which the country depends to plug a government budget deficit that may reach over 5% of gross domestic product this year, down from 8.9% of GDP in 2011.
Madrid also sought strenuously to avoid the aid being depicted as a bailout like those provided to Greece, Ireland and Portugal.
Mr. Rajoy told reporters that the EU support plan for Spain was different to previous European rescues, and that loan conditions will be just linked to the country's banking sector overhaul.
A formal loan request by Spain is expected before June 21, when euro-zone finance ministers meet in Luxembourg and after a detailed report is issued by two government-appointed advisors on the banks' capital needs.
Rajoy is set later Sunday to travel to Poland, where he plans to meet that country's prime minister and watch Spain's opening match in the Euro soccer championship.

Speculators Pare Positive CAD Bets by Half

Speculative traders have cut their net long position CAD by 50%, bringing it to just $1.5B, according to CFTC data for the week ending June 5. They added aggressively to their already record short position in AUD, bringing it to $5.0B, notes Scotiabank. Sentiment toward CAD and toward AUD are both moving in the same bearish direction, but CAD longs are having a hard time capitulating, likely due to the relatively hawkish stance struck by the Bank of Canada, Scotia says.

Canadian Bonds End Higher, Outpace U.S. Treasurys In Choppy Trading

Canadian bonds ended higher Friday, paring some of their earlier gains but outperforming U.S. Treasurys in restless, headline-driven trading.
Yields for Canada's two-year bond were at 1.041% Friday, from 1.053% late Thursday. The 10-year bond was yielding 1.809%, from 1.826%, according to electronic trading platform CanDeal.
Yields for the 30-year bond were at 2.367%, from 2.383%.
Bond yields move inversely to bond prices.
"They were trading a little better, but they've given back a little bit," said one Montreal bond trader.
Canadian bonds were able to hold in more effectively than their U.S. counterparts as investors gained confidence in more risk-sensitive assets on expectations that euro zone officials might be able to forge a bailout for Spanish banks over the weekend.
"We lagged on the way up and are obviously outperforming on the way down," the trader said.
There was a an outburst of Canadian economic data after a recent dry spell, with Statistics Canada reporting job growth of 7,700 in April, slightly higher than the consensus forecast of 5,000.
The trade balance for April was deficit of C$367 million, weaker than the expected surplus of C$180 million and the first deficit in six months.
But the data were not far enough from expectations to roil the market significantly.
"In terms of economic data, there was nothing really shocking in one way or another," said David Tulk, chief Canada macro strategist at TD Securities.
Some of the activity on Friday was also attributable to position squaring ahead of the weekend, Mr. Tulk said.
"I feel like we're still in a holding pattern waiting for clarity in Europe ahead of the Greek election on [June 17]," he said.
The market will remain on tenterhooks and will continue to take direction from developments in Europe, the Montreal bond trader said.
"It's a headline-driven market, and that's all. If there's a credible plan that comes out of Europe, then the market will certainly be vulnerable," he said.