When Is +1.55% A Disappointment?

In spite of today’s sharp rally, the market failed to hold early gains, and is likely to disappoint Europe overnight.  The DAX is up 4.55% and is up 5.3% in dollar terms.  The Euro Stoxx 50 is up almost 4% in USD terms YTD.

On top of that Spanish 5-year bond yields are 25 bps higher than year-end, including a 15 bp move today.  Italy has actually performed well and the 5 year is 30 tighter on the year, though it moved out 5 bps today.  Long Italy / Short Spain seems to be the trade of the day in CDS land.  It was at 80 bps mid, though I didn’t see dealers making aggressively tight markets on it.

Speaking of wide bid/offers, MAIN continued to trade with a 1.5 bp wide bid/offer spread as the standard I saw.  It finished the day 4 tighter (169) but that was off the tights of 167 and was when stocks were still near their highs of the day.

XLF hung in pretty well, though again finished well off its highs.  BAC faded near the end, but that was likely due directly to the MBIA headline.  The Countrywide unit lost a summary judgement about what MBIA would have to prove in court (only need to show misrepresentations rather than having to prove they caused the losses).  Not sure how big this is for BAC, but MBIA shares popped about 7% on the headlines.  Given the track record of BAC’s management, it shouldn’t be surprising if they screwed up and MS must be thankful that they settled their fight late last year.