? Friday 15 June 2012

• All eyes are firmly fixed on this weekend’s re-run Greek election, as at least one of the parties expected to poll well, if not grab a majority of the votes, will do so on a platform promising to re-negotiate Athens’?bailout from the ‘troika’ – the European Union (EU), the European Central Bank (ECB) and the International Monetary Fund (IMF). And given that last week’s Spanish ‘bailout’ seemed to impose less stringent austerity measures on Madrid than the earlier Greek version, the risk of further intensification of the euro sovereign debt crisis is well and truly live.
• ?Which is why the local interbank cash futures market views Glenn Stevens’?now famous glass as half full alright – of? poison – so continues to price in another 100 basis points of cuts by the end of this year. Notice how we carefully word it as ‘pricing in’, rather than ‘expecting’, because just as I insure my house even though I do not expect it to burn down but want help to re-build if it does, to some extent the cash futures markets prices to insure against the risk of an ugly outcome. And a messy election result from Greece would be quite ugly for sure.
• And everybody seems to be expecting the Spanish Inquisition – as I prepare to press the send button on this email, yields on 10-year government bonds are at a new historical high since the inception of the euro at almost 6.9% pa after Moody’s downgraded Iberia’s largest nation’s debt.
• While so much attention is tuned to Greece, it gives us an opportunity to look more closely than we might otherwise have done at the quarterly employment by industry data published by the ABS on Thursday.

See attached file:?WeeklySnapshot14June2012