The dramatic improvement of winning markets and credit rates in Euro for five weeks raise questions about its duration, especially as the underlying foundation to the crisis in the euro area are still in place.
Many professionals are that economic growth remains low, even zero or negative in the eurozone, and that risks such as governance, yet non-existent for the euro, the French elections and the potential frictions in the Franco-German couple remain.
But they believe along with the upturn would last – and this became evident endlessly repetitive – the European Central Bank and its refinancing operation long-term (LTRO) three years after which it lent in December nearly 500 billion to European banks, which have escaped and a liquidity crisis.
LTRO a second, scheduled for 29 February should further inflate the first balloon of oxygen.
Under the title "Too good to be true," strategists rate Societe Generale stressed that "illusions are not yet on the brink of extinction, a good amount good news is already in progress ".
Vincent Chaigneau, head of rates strategy at SG, estimates that the market behaves as if the Greek problem was solved, as if the banks would buy sovereign debt, as if the U.S. economy had gone out of business and even as if China was to be the turbo world.
But it does not exclude the risk appetite remains largely intact over the next two weeks.
This return to the active risquésa permits, among other things, to rate countries 'peripheral' in the euro area to relax dramatically (-170 basis points to 5.6% Italian for 10 years from its high of November, -135 bp for the 10-year Spanish).
"Debt device should begin to run out of fuel," said Vincent Chaigneau, who feels that if there is agreement on the Greek case, it will be difficult to implement: "The devil is in the dice ; details. "
He advocates an easing of positions on the 'peripheral', as Hans Lorenzen, credit strategist at Citigroup, for whom this "rally will likely continue, and probably reach a level that does not fundamentals. "
The ECLIPSE EUPHORIA Do NOT NEED SECURITY
"Thus, we estimate that over this rally progresses, more investors will take the opportunity to take a stand on quality," says Hans Lorenzen.
This relaxation of the assets risquésa the distinction of not having removed the need for security and has therefore not resulted in massive outflow of low-risk assets such as loans German government (Bund). The 10-year Bund yield has evolved over the first six weeks of the year between 1.79% and just over 2%.
Hans Lorenzen advises on the market for corporate bonds (corporate credit), to phase out of cyclical sectors and sensitive sectors 'peripheral' to defensive sectors and less exposed to risk device.
Particularly sensitive to the crisis of sovereign debt in euro, the market for bank debt, almost closed in the second half of 2011, walked away on top speed, with premiums (spreads) that have contracted considerably and a primary market that is out of his coma to find a form insolent to the point of welcoming new financial institutions in Italy and Spain.
Citigroup said that the bank maintains growth forecasts 2012 and 2013 significantly below the consensus.
"This will translate over time by a sharp rise in corporate default rates. Risks Greece, Portugal, the risk of failed auctions or even the French elections may harbor a negative scenario, "he says
. "A victory of Francois Hollande would create great uncertainty in the markets about the commitment of France to the (new) pact in the European budgetary its current form, "he wrote in a note
. However, he said, as quantitative easing (QE) in the United States, the positive effect on asset prices could last well beyond the second LTRO
.. Assuming that ……. this second operation leads banks to borrow as much as in the first, the total would be around € 1.0 billion, enough to provide much the liquidity needs of banks in 2012, of around 800 billion euros
.