Please sir, may I have some more? Spain may be saying that soon

It’s becoming increasingly harder for your scribe to pinpoint what time and/or day it is, as they all tend to blend into one at the moment, especially in light of a 3am finish this morning on the back that wild Asian open last night.

Turning to the Asian open and the events that preceded it, it’s the obvious “Please sir, can I have some more?” from Spain on Saturday that led to the overall “risk” spike into last night. The details in brief (although I’m sure all are well known for now);

• Spain (formally the sovereign) borrows 100bn EUR at 3% to recapitalise it’s banks (thus temporarily halting what will no doubt eventually be formal bank runs)
•  A “formal request” is yet to be made and will be forthcoming in the next few days (beware the devil is always in the detail)
•  China’s trade balance data on Saturday prints better than expected, but still points to number fudging

And/or various other bits and pieces, but the main drivers are as listed above.

So the result in price action doesn’t really come as a major shock, ultimately the market quickly forms a view that this band-aid solution for Spain should do the trick in the very short term and let’s face it, this market mainly is only looking at the short- term for now. I suspect that once formal details regarding this additional aid are released and digested the effect won’t be quite so positive. Certainly the main question on the back of all of this is what does this do for the net balance sheet position of Spain and at what average price are they now going to be borrowing in the market. In my mind neither answer to those questions resonates with any significant positivity.

Moving on, a very quiet day in Europe (and the US for that matter) with a distinct absence of data releases and only a couple of FED speakers doing the circuit late this afternoon (mostly reiterating stuff we heard from them last week).

FX traders (and others) will be keeping a close eye on spreads and yields in the periphery today, as they will be the key lead to how the market swallows the joy from the weekend until we get more clarity in the coming days.

My core EURUSD shorts were closed on Friday and while I retain some USD longs in other pairs for now, the size has been considerably scaled down looking for price action and headlines to dictate the most immediate course of further action.

On a side note, I will mention that when all those around you are losing their heads, the profitable trade belongs to the man keeping his head firmly anchored. Translation, the macro view has not changed and if anything has in fact perhaps even further deteriorated so now more than ever is the time to maintain the courage of your convictions and limber up, as agility is now the name of the game.

Helmets on and good luck.