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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (79239)	9/7/2011 11:21:55 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217547

Subject: European Morning... in Pictures (Quick Question) This is not research and is not intended as such. This has been prepared by individuals on the sales desks of the Securities Division. This material does not represent a formal or official view of Goldman Sachs as the views expressed herein are solely those of the author(s), which may differ from those of Global Investment Research. Thoughts from Sales & Trading. For Professional Investors Only. For Discussion Purposes Only. Past performance figures are not a reliable indicator of future results. All graphs Source: Bloomberg. Not for forward distribution w/o consent of author. These are not trade ideas and should not be read as such. Quick question… Is this SNB move risk on… or risk off? Should the US catch-up with the dramatic sell-off in Europe yesterday… or buy everything now that yet another CB is providing extraordinary support? That is pretty much the only thing people have been asking this morning. In most of the pictures below… you will see the market covered in panic… then retraced… and now waits… The thematic monitor went all GREEN. Now very mixed. Important to note the 5d change in column 3… still deeply RED. The announcement that EUR/CHF was pegged at 1.20… did not go straight to 1.20. We paused at 1.18 long enough to ask.. why would it stop here (WHITE CIRCLE) before screaming to 1.22… where we paused long enough to ask… who would buy it up here? (RED CIRCLE) EUR/USD jumped straight through 1.4250… then retraced. Now waits to work out what the SNB will do with the EURs? The big winners… anyone with a house in Hungary and mortgage in CHF… The market immediately assumed Hungary can now aggressively cut rates. The other obvious winner on the day… the SMI (Swiss Equities) The market is confused about how to trade spreads. Lower with risk on? Or wider as SNB is bid for bonds? Eonia/Euribor retraced from the highs… though not much. Similar question with gold. Risk on and lower? Or last true safe haven and higher? We wait… Some think the European curve should steepen if the EURs are recycled into sub 5yr paper. But… 2yr EUR swaps initially moved higher w/ equities and risk. Bunds sold off with risk… rallied with uncertainty… and now wait… But looking back 30d… they are well off the lows (price) GBP QE expectations briefly took 5y5y through the lows… but attempting to recapture this morning. The European Volatility index retraced some of ydays move… but over 3 day session still elevated. Greek bonds under pressure. Here is last 30d price action. IRISH paper held well over the some time frame… though starting to see profit taking. 10yr Italian yields are well inside the pre-ECB highs… and lower this morning. Italy (HIGHER LINE) is now wider than Spain (LOWER LINE) across the full curve. Italian politics take front row now.. Also note how much inside Ireland (YELLOW) now is to Portugal (PINK) Here are the G4 curves. Swiss in PINK. US is ORANGE. Europe is BLUE. GBP is YELLOW. A lot of discussion around the UK/EU 10yr intersection. The Euribor strip that “shouldn’t go negative… is now less negative.. but still -15bps. Difficult to tell exactly “what’s priced in” due to pressure on Eonia. Those following interest rate differentials… will note that - although higher today - the clear trend between EUR and US 2y rates is lower. EU-US 2yr Swaps Last but not least… we look at the US 2s10s curve. My favourite chart of all time. Some believe we flattened ahead of operation TWIST. Others think we are doing a “Japan.” If you believe the former… perhaps it went far enough… If you believe the latter… still a ways to go.. JPY 2s10s (2002-2011) So is it risk on or risk off? I have no idea… but the thematic monitor is starting to vote… Good luck. Welcome back. Sorry so long… but there are a lot more questions… than answers. jsm Goldman Sachs