Archived IMT (2010.04.08)

ALTHOUGH GREEK 10-year bond yields have soared to a record 472 bps above their German counterpart (SEE CHART http://chart.ly/cfyrsp ), the rise in Portuguese and Spanish spreads has been limited to 2-month highs, half the level of the record highs reached in late January. EUR is increasingly victimized by Athens periodic manoeuvrings to raise 13 bln by end of next month, yet markets remain wary of recent funding developments. The chart http://chart.ly/cfyrsp illustrates the palpable divergence between the EURUSD exchange rate and the S&P500. What was a positive correlation between two legitimate representations of risk appetite, has now turned into a -0.48 daily correlation, the biggest negative correlation since May 2008. Year-to-date, EUR is the worst performing currency out of a group of 35 currencies, falling 7% against USD and as much as 10% against the Aussie. The road to $1.30 remains intact.