Yen Leads Amid Heightened Risk Aversion

Greece and EU summit; Spanish PPI and 10 year yield rose; German auction; sovereign issuance. Market awaits new home sales. Details on Premium Insights below.

Risk off sentiment grips markets since the Asia open. USD is higher across the board except JPY that rose sharply. European equities are losing between 0.9% and 2% and the relative strength winner is JPY.

Greek PM Samaras as well as the finance minister Rapanos will miss the EU summit on Thursday and Friday as both are in the hospital (PM underwent an eye surgery while the finance minister's illness has not been disclosed). The foreign minister along with outgoing finance minister will attend the summit instead and are expected to ask for an adjustment of terms surrounding the bailout. Trading is likely to remain range bound ahead of the critically important summit and a failure to present clear and decisive steps to deal with the ongoing crisis would likely result in a swift EUR decline. German government spokesman already suggested that no decisions on Greece will be made at the summit.

The only data released throughout the London session was Spanish PPI that rose 3.2% in May from previous 3.0% y/y. Spanish 10 year yield moved higher from about 6.35% to current 6.53% after Spain formally requested bank recapitalization aid.

Germany sold 12 month bills totaling EUR 2.04 bln vs. 3 bln target. The average yield fell to record low 0.0191% from previous 0.0264% but cover improved.

Eurozone sovereign bond issuance from Germany, France, Spain and Italy is expected to reach EUR 22 bln this week, up from last week's EUR 16.78 bln, MNI reports. According to their own calculations, Eurozone's sovereign issuance this year has reached over EUR 441 bln, which is about 55.1% of the total 2012 funding needs.

The US data is limited today to new home sales that are seen marginally higher in May at 347K from previous 343K. Existing home sales that can be used to estimate the trend were slightly below expectations last Thursday so we might get somewhat weaker print today.

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