The Spanish PM has written to EU’s Barroso and Van Rompuy asking for more support for Spanish debt as funding problems bite and strangle the economy.  He wants  EU to act to bring down government bond yields and says the  ECB  is the only institution capable of  restoring stability in the economy.

Think he should be writing to  Angela Merkel as well …

LONDON (MNI) – Mortgage rates climbed higher across a range of
products in May, although some five year fixed rates fell, according to
a Bank of England survey.

The moves higher were not dramatic in light of reported increases
in funding rates for banks, but they do continue the recent trend of
borrowing costs rising despite the Bank of England leaving its Bank Rate
on hold and despite the Monetary Policy Committee debating further
stimulus.

The BOE’s Quoted Rates survey found the average monthly rate on a 2
year 90% loan-to-value fixed rate mortgage rose to 6.04% from 5.79% in
April. It held steady at 3.66% for a 2 year fixed mortgage with 90%
loan-to-value.

For a three year 75% fixed loan-to-value mortgage it rose to 4.1%
in May from 4.03% in April.

One mortgage product which bucked the trend was the five year fixed
75% loan-to-value, which fell 2 basis points to 4.27% in May.

BOE Deputy Governor Paul Tucker said in a speech Tuesday that bank
funding costs had risen because of fears that the euro area could
unravel, and these higher costs were being passed on to borrowers.

“However unlikely that scenario, the market regards it as a
tangible possibility. An event with low probability but gigantic impact
affects bank funding costs. That is gradually being passed on into
lending rates for firms and households,” he said.

-London Bureau; Tel: +442078627491; email: drobinson@marketnews.com

[TOPICS: M$$BE$]

Reuters reporting.

UPDATE:  Central weather bureau says earthquake of magnitude 4.9

They’re behind the recent shunt up to 1.5577 but there are a bunch of offers sitting ahead of 1.5600 to chew through ahead of the june 7 high of 1.5601 and where buy stops are positioned on a break.

GBP/USD’s sitting around 1.5568

ITALY DATA: Final May HICP confirmed flat m/m,+3.5% y/y vs Apr +3.7% y/y
– The m/m result follows gains of 0.9% in April and 2.5% in March, when
index hit highest monthly rise since the January 2001 series start.
–Main domestic index (NIC) also confirmed at flat m/m, +3.2% y/y
–Core NIC inflation slowed to +2.2% y/y, down from +2.3% y/y in April
–Net of energy the y/y rate +2.1%, down from +2.2% y/y in April

Around recent 1.2539 session high. We’re back down at 1.2525 in increasingly choppy trade.

As mentioned earlier, sovereign names seem to be out in force this morning on both sides of market.

• EU must take serious steps to increase public investments, move towards eurobonds
• If EU focuses on growth, spreads will narrow, danger of contagion will decrease (simples)
• Tensions in financial markets ‘very serious’

Smaller bank outflows at 10-30 mln euros, according to senior Greek bankers.

Reuter’s reporting.

Hardly surprising.  If I had any money in Greece I’d have removed it by now.

Reports of some selling out of HK earlier are being easily mopped up in a  tight 79.50/70 range, but some cross demand particularly in AUD/JPY has been noted in the last 24 hours, with real money amongst the buyers

As Sean mentioned in Asia there’s some AUD/JPY tech resistance around the 79.60 area and 80.00  buy stops sit just above.

On the USD/JPY  there’s plenty of offers  from 79.70 up to 80.25 with large stops just above ahead of major resistance up at 80.75

USD/JPY’s sitting around 79.55 and AUD/JPY around 79.38

In recent trade.

It’s that Dutch bank again.  Said to be selling on behalf of SNB.

We sit at 1.2522 amid a flood of sovereign interest on both sides of the market.

PM speaking on Deutschlandradio

• Italy completely on path to reaching its budget goals
• Italy very tranquil with way it is presenting itself to markets

We’re up at 1.2515 from 1.2495 when I arrived, having been as high as 1.2525 so far.

Reports have the Reserve Bank of India as a notable seller around the highs.

Buy stops tipped through 1.2535.

Also talk of a “large” 1.2500 vanilla option expiry at today’s New York cut.

UPDATE:    As yesterday, middle eastern sovereigns notable buyers of the pairing this morning.  Seems as though this interest is rather ongoing.

LONDON ((MNI) – The Bank Of England said Wednesday it was offering
an unlimited supply of U.S. dollars in a 7-day operations.

The settlement date on the 7-day op was June 14 maturing June 21
2012. The Bank said the repo would be at a fixed-rate, with the rate to
be set at 0.67%.

–London Bureau; Tel: +442076341655; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,M$$BE$]

FRANKFURT (MNI) – Finnish Prime Minister Jyrki Katainen said
Wednesday that any European bailout funds received by Spain should
only go to banks that are truly solvent, and that the program should be
monitored by the International Monetary Fund.

In an interview with the German business daily Handelsblatt,
Katainen said there would have to be conditions attached to the Spanish
aid program.

“Not all banks should receive money from Spain’s government …
only the healthy ones,” Katainen said. “We are not writing any blank
checks: The banks must prove their eligibility. And the International
Monetary Fund should monitor the developments.”

Katainen also said any common European fiscal and tax policy was
“far in the future” and said he had concerns about taking such major
steps during a time of crisis.

Katainen at a conference in Berlin Tuesday said sustainable growth
in the Eurozone “can only be based on competitive economies,” while
“adding yet more debt is not a sustainable way of stimulating the
economy.”

The Finnish prime minister argued that “austerity and growth are no
contradiction.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com

[TOPICS: M$X$$$,M$S$$$,MGX$$$]

• Crisis linked to local government deficit
• Crisis linked to significant euro-zone problems
• Spain going through economic deleverage
• Spain aid to be paid by financial system
• We must be glad that EU partners are helping
• Spain going through challenging situation
• Spain has no governance problems
• Spain failed to overhaul banking system in 2009
• Spain to overhaul banking system now with EU aid
• Spain needed EU help because it doesn’t have 100 bln euros
• Spain needs to cut budget deficit
• Seeks to foster EU fiscal, banking integration

Dow Jones reporting.

From expectations of -0.2%, +1.9%, and down from  April’s +1.4%m/m and +2.1%y/y

Got to think we’re heading lower again after repeated rallies have stalled towards the 1.3000 level. Yesterday the cross closed just under  the  April 16 lows of 1.2572 and we nudged down to 1.2550 this morning in Asia.

A break lower now looks a distinct possibility with next technical support down around 1.2500/05 (March 20 lows) .   Also significant was a close last night below the 100 day MA around 1.2605

Overnight comments from RBA’s Stevens are also helping to shore up the AUD/USD this morning and a  likely test of parity again looks on the cards although there’s supposedly solid resistance sitting up at the level.

AUD/USD’s currently finding some demand from european prop accounts under 0.9950

• Closely watching fx market moves, to take appropriate action as needed

BOJ’S Shirakawa:

• Watching effect of strong yen on Japan’s economy
• Yen gain could be downside risk to Japan
• BOJ will asses economy, including impact of Europe debt woes and fx moves, at this week’s policy meeting

Both officials speaking in parliament and their comments having absolutely no effect on the USD/JPY exchange rate.

USD/JPY sits serenely at 79.60.

FRANCE DATA: April current account deficit narrowed to E4.2 bln from
E4.4 bln in March (revised from -E4.1 bln)
- Larger revenues surplus (+E2.7 bln vs +E2.2 bln) offset
- Bigger merchandise goods shortfall (-E6.1 bln vs -E6.0 bln) and
- Smaller services surplus (+E1.6 bln vs +E1.8 bln).
- Transfers deficit stable (-E2.4 bln)