Whether the weather
Overnight data from Japan and Australia suggested that the broad improvement in the global economic backdrop continues to improve, lead largely still by the Asian markets. Despite this Asian equities were lower in the session on the back of rumours that China were soon to announce a further rate hike.
The big story of the day however was the 10 year Greek financing round where yesterdays additional 2010 austerity measures, having been roundly approved and welcomed by the EU and general market sentiment, lead to a considerably more positive tone and the guideline pricing for the issue, at 310bps above mid swaps will likely come below 3% as the bond drew bids of in excess of EUR14.5B. EU Rehn stated that the measures taken by Greece to address its financial troubles are enough for 2010 but further measures will be needed for 2011 and 2012. For now however, once the 10 year benchmark is priced, Greece will have completed 28% of its funding programme for 2010 (EUR53B) putting it ahead of all other Euro area states.
Both the Bank of England and the European Central Bank announced unchanged rates today as broadly expected, with the BoE also holding the QE target unchanged at £200B and as is the norm when policy is left unchanged the BoE offered no statement.
The ECB however made some further technical adjustments to the extra ordinary liquidity measures, returning next month to ordinary competitive tenders for the 3 month loans it gives banks in a sign that it is more comfortable with the state of the financial system and the gradual withdrawal of such liquidity measures. Trichet stated that 2010 GDP growth will continue to be moderate and uneven, and that markets should look past quarterly volatility. Slightly further out the ECB slightly increased the 2011 GDP forecast range.
In the other very interesting dynamic for the day, Yen Libor traded below USD libor for the first time since August 2009, signalling perhaps the end of the USD funded carry trade and despite the repatriation flows in USDJPY putting downward pressure on the cross into the financial year end, I think this will be a very significant turning point for the JPY going forward into Q2 2010 and beyond.
Tomorrow brings us the all important US employment report and after much speculation as to the impact of the extreme weather conditions on the number we will get some clarity on the situation but will ultimately have to wait for next months data to assess how the weather impacted the data and whether the trend is faltering, continuing or accelerating.