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All quiet on the Western Front

Well at least there s nothing really new to say. Equity Markets are still under the spell of the US Debt Ceiling and the European Debt Crisis which Politicians on both sides of the Atlantic Ocean unable to calm markets concerns about their ability to come up with a sustainable solution. While Officials as Trichet & Merkel still trying to fool markets by stating that there will be no Greece default the former ECG chief economist Issing stated the plain truth in an FAZ Interview saying "a massive haircut is inevitable". 
As predicted, EU “Stress” Test wasn t able to calm markets neither as Financials where leading the global down turn. For those of you who wld like to perform a more realistic stress test on their own expectations, pls find a outstanding simulation provided by reuters below:
http://graphics.thomsonreuters.com/11/07/BV_STRSTST0711_VF.html

As the global risk off trade continued swiss franc held steady as well as gold and other so called safe heaven assets as bunds & treasuries rose as well. Did you notice the divergence between the German / US CDS Levels & the Bund / Treasuries? Both are rising which seems to be a bit schizophrenic on a 1st view even if there s some logic behind. They are counting as safe havens on the short run (rising prices) while on the long run risk is rising (rising CDS). If the current trend of rising debts with no solutions how to handle it hold on, we ll reach a point sometimes in the future where we have to redefine what we call “risk free” assets.

Today s focus will last on the Spain & Greek bills sales for as much as 5,75 bln euros as well as Numbers from BoA & GS (pre-mkt) and Yahoo & Apple after mkts.
With equities having been sold off sharply and IV, Skew & TS on short term extremes, there s always a chance of a short-lived rebound you may want to position for by calendar spreads. Nevertheless we see every rebound as a new chance of initiating new overwriting positions.