Monday Map Reading.

Despite our cynical look at the Euro-statement in last night's post, we are more optimistic than we were a week ago and apparently more so than nearly everyone we speak to. Our original plan on how to play Greece rested upon the Greek vote becoming a referendum on Euro membership, which it rapidly became. As everyone is pointing out, this result is no immediate fix to a country which is still reliant on EU aid, but the result does mean that the likelihood of that aid being severed is a great deal less. So that is good news. TMM are well aware that the Syrizapaths are still lurking in background and despite their change of rhetoric during the election campaign as they realised it WAS becoming a Euro debate and they had no hope at all if they stood on a general anti euro platform, they are still perfectly capable of dropping large clunky spanners in the machine of coalition government. But TMM think that Greece will still be in the Euro at the end of the summer and that time has indeed been bought so positional unwind associated with the Greek play can continue. Meanwhile the monocular of the markets can move back to other woes - Spain and friends.

With Spanish 10yr back above 7%, market reaction appears to be following a self re-enforcing map of last Monday when supposedly good news price rallies unwound within hours. Which is exactly what everyone is telling us to do today "Sell the rally". Well, at time of writing, the rally has been sold and last Monday's price map is being waived as evidence to maintain similar expectations. TMM though are looking to buy this dip instead. Of course it would have been nice to see the Europeans follow up this Greek result with support in Spain and Italian markets, whether by SMP, new announcements or ANYTHING to chase confidence higher, rather than leave it faltering. Even if Germany was seen to be handing out conciliatory offerings to the Greek people in gratitude for "doing the right thing". But nothing so far, in fact just the opposite - **GERMAN GOVT SPOKESMAN SAYS NOW IS NOT TIME FOR GIVING DISCOUNTS TO GREECE. But we should know better as one thing we have learned is that European policy is based on reaction rather than pro-action.  

Should we expect G20 to offer something more tangible?  No. G20 has rarely offered anything tangible so other than agreeing on the reinforcement of liquidity safety nets and behind closed doors threats to European representatives, TMM don't think it is possible for them to disappoint us more than we can already imagine. We really don't think we are alone in our lack of expectations so in fact the surprise bias from G20 should be to the upside.

So what do we trade? Well part of our background belief is that we are in a "bonds to equities" phase change which has been stymied by the current crisis. If the spring is released then the next big calamity is going to be in G7 bonds (read any of the current safe haven big bond markets - USTs, Gilts, Bunds) which may well be lead by the periphery safe havens (read the likes of Aussie and Swedish bonds). Even if this weeks FOMC gives QE III, (real or suggested)  - in this case we see equities taking the lion's share of the gains over bonds.

So let's start with beating up the Bund some more. The short term longs we put on in euro related risk last Tuesday we are willing to morph into medium term, and we are going to add some really unstable fuel to our portfolios - buying Spanish 10yr as the "Monday map" and renewed rumours of Spain having to cancel this week's auctions pushes yields over 7% again. However we will wait until the US has opened and played out their dose of rally selling.

Must dash - We are off to pay the remaining balance on our Greek summer holiday.