Still swings in mood next week

- FI Strategizer: "A clear trend for USTs is unlikely to emerge given the light calendar and a cautious investor stance ahead of the September 21 FOMC meeting. In the EMU, the Greek T-bill auction and news on Irish banks should be the main drivers putting pressure on periphery spreads."
- EU Portfolio Strategy: "Just as the double-dip discussion lost steam, another round of credibility erosion moved center stage, although a clear Bund yield rally did not emerge. We return to a modest long duration stance to benefit from renewed uncertainty."
- MM: "Excess liquidity has stabilized in the EMU as shown by the recent 1W and 1M auctions. Portuguese and Greek data show that borrowing at the ECB has not eased in August after the stress test results."
- Trade Idea (I): "The Portuguese curve has cheapened vs. swap at the 15Y and offers an interesting switch with Ireland. Our Z-score system also suggests switching from the BTP Apr15 into the SPGB Apr15."
- Trade Idea (II): "The 10/30Y spread in the UK trades close to all-time highs and has recently started to tighten. We expect the recent trend to gain momentum, also thanks to a slowing in inflation."
- Supply Corner: "There is no liquidity next week, while gross supply should be EUR 25/30bn, with almost an auction per day. 68% will come from core countries, the remaining will come from Italy and Spain. Keep an eye on Tuesday's Greek T-Bill auction (EUR 0.9bn of 26W T-bills)."
- FX Strategizer: "Safe-haven currencies (i.e., JPY, CHF & USD) should remain favored as long as global uncertainty persists. Next week's data are unlikely to cause direction-setting impulses, but large swings should prevail in the medium term too, preventing the formation of clear trends."
- EUR: "We do not expect heavy EUR-USD losses over the next couple of weeks, but we don’t rule out a retest of 1.25-1.20 in the coming months, if EMU worries escalate. A recovery up to 1.30-1.35 may occur only in late 2011, when the ECB starts its tightening process."
- JPY: "The JPY should stay strong and BoJ intervention, if any, may at best contain its rise. A weaker JPY may occur only from 2Q11 onwards, if risk appetite resumes, but USD-JPY is unlikely to rally above 90-95."
- CHF: "The SNB meeting on Thursday will be a crucial test, but we won’t be surprised if EUR-CHF slides to 1.27-1.25 before December. This will limit the room for a pullback in 2H11 that won’t exceed 1.30-1.35."
- GBP: "Cable should be dragged down towards 1.52-1.50 if risk aversion persists and we don’t see great upside potential towards 1.60 before the end of 2011. EUR-GBP should stay locked within the 0.80-0.85 band."
- Pacific Rim: "The three dollars shrugged off risk aversion, but we would handle their strength with care. A more sustained rally may resume in 2H11, when interest rate spreads may offer stronger support in the wake of a less uncertain global scenario and a weaker JPY."
- Nordics: "EUR-SEK and EUR-NOK will fall towards 9.15-9.10 and 7.65-7.60, respectively, but attacks and retreats will remain the theme. Book squaring may weigh on the SEK ahead of the September 19 elections."

Unicredit Curves & Crosses 20100910

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