Spanish, French Yields Rise, Rumours of Margin Hike

UK retail sales higher than expected; Swiss ZEW declined; Spain and France auctions pay higher yields; Spain-Germ 10- yr hits 4.99%, Italian 10 year yield firmly above 7%, Chatter of Margin hike in Spanish requirements, Market turns to building permits, housing starts, jobless claims and Philly Fed index. Intermarket Insights due ahead of NY opening bell.

USD stronger against most majors in the ongoing session. Major European stock markets are losing about 1.5%.

UK Retail sales rose 0.6% in October from previous 0.5%, significantly better than expected -0.2%. Annually, retail sales grew 0.9% from 0.3%. This is a second solid print in a row as consumers took advantage of early Christmas discounts. The improvement is not likely to last long though as the unemployment rate remains high and consumer confidence is declining. GBPUSD jumped on the release towards 1.58 but lost most of its gains.

Swiss ZEW economic expectations index fell to -64.3 in November from -54.4 which remains close to two years low seen in September at -75.7.

Spain sold EUR 3.5 bln in 10 year bonds with average yield 6.975%, up from previous 5.43%. Bid to cover was lower at 1.54 compared to previous 1.76. Spain 10-yr yield hit a new high of 6.78%, pushing the spread over Germany to 5%. This is the highest borrowing cost since 1997 and dangerously close to the 7% rate which is by many considered to be unsustainable for longer term funding. A rumor that Clearnet will increase margin requirements for Spanish bonds is pushing yields higher.

France also had to pay higher cost as it sold EUR 6.94 bln in various durations today. The largest auction was for July 2016 BTAN that reached EUR 3.33 bln with average yield 2.82%, higher than previous 2.31%.

Investors have been paying more attention to the fixed income market as 10 year yields have rising not only for the periphery states but also for many Eurozone core countries. Italian 10 year yields around 7.09% and Spanish 6.69% despite ECB buying.

The NY session starts at 8:30 am ET with building permits that are seen higher in October at 0.6M from previous 0.59M and housing starts that are anticipated lower at 0.61M from 0.66M. Jobless claims are seen at 396K from 390K.

Canadian International securities transactions should rise to CAD 9.24 bln in September from CAD 7.92 bln.

Philly Fed index is due at 10:00 am and is anticipated unchanged in November at 8.7.