Monday, April 18, 2011 – my comments are in italics

S&P’s Ratings Services affirmed its ‘AAA’ long-term and ’A-1+’ short-term sovereign credit
ratings on the U.S. and revised its outlook on the long-term rating to negative from stable. – Bloomberg
– this is the first major rating agency to make an incremental negative move on US debt.
Greece and debt restructuring – the IMF has said it believes Greece’s debt load is unsustainable
and has told the eurozone and ECB that Athens should consider a restructuring by next year. – WSJ
Geithner told Meet the Press on Sunday that he was confident the debt ceiling would wind up
being increased; the Treasury Sec said that Congressional Republican leaders had signaled strongly to
the White House that they would vote in favor of raising the national debt ceiling – NYT
“Fed to signal end of monetary easing” – the FT previews the Apr 27 FOMC meeting and says the
Fed is due to signal that QE2 will end as scheduled at the end of June. While QE2 will end as planned, it
doesn’t seem like Fed officials are inclined to raise rates anytime soon. – FT
Budget – on Fri the House voted to pass the Paul Ryan budget proposal, which would slash
spending by ~$6T over the next 10 years and fundamentally alter Medicare and Medicaid. The effort
was largely symbolic and will likely die in the Senate but it does mark the kick-off to negotiations
between Dems and Republicans. – WSJ
OPEC comments – ministers voiced caution on the ability of the global economy to
accommodate >$110 crude. "At these high price levels, spending on oil imports could represent a
significant economic burden for many import dependent countries," OPEC called on consuming nations
to rein in speculators, saying they had added $15-20 per barrel. Separately, Saudi Arabia confirmed over
the weekend it had cut 800K BPD in Mar production due to weak demand. Ministers reiterated that the
current crude markets are well supplied and as a result there is no need to raise production. – Reuters –
I don’t completely buy that speculators have added $15-20 per barrel. There is a risk premium built into
current prices derived from the probability of an additional supply disruption (will unrest in Bahrain spill
into Saudi Arabia? Will these new protests in Nigeria escalate?, etc.) Furthermore, there has already
been a supply disruption of over 1 Million barrels per day (BPD) when Libya went off line.