Thursday, February 11, 2010 – my comments are in italics

Initial Jobless Claims Survey 465k Actual 440 Prior 480 Revised 483

Initial Jobless Claims – Fall more than Expected

• Small banks – warning issued by TARP panel – a Congressional inquiry has found that nearly 3K small
US banks could be forced to sig. cut back on lending b/c of CRE-related losses. WSJ
• Fed/Bernanke comments (recap of the release that hit 10amET on Wed) - In the text of the speech
Bernanke was going to give to Congress Wed, the Fed Chairman discussed in great detail the current
thinking on exit strategies. Probably the most noteworthy section of Bernanke's speech concerned the
discount rate. The gap between the discount rate and the top of the fed funds target has been narrowed
from 100 basis points to 25bps in a few steps during the crisis. In today's text, the Chairman noted that
"before long, we expect to consider a modest increase in the spread between the discount rate and the
target federal funds rate." Asset sales were unlikely to occur before the first rate hike, and certainly not
in "the near term," but asset sales are likely to occur at some point, when the recovery is "sufficiently
advanced." Bernanke's remarks today were not intended to convey any shift in the stance of monetary
policy, or signal any change in how the Fed is viewing the macroeconomy. M Feroli
• Greece – headlines crossing @ 6:45amET - EU’s Barroso says “a Greek accord reached”; not clear on
the details just yet or the timing of an official announcement. Earlier this morning, Reuters reported
that Euro area finance ministers agreed their countries would take "determined and coordinated action"
to help Greece, drawing on IMF expertise but not the Fund's money, an EU government source said on
Thursday. However, a senior EU source played down the prospects of a rescue package emerging on
Thursday, saying the details would be left to EU finance ministers, who meet as the Eurogroup on
Monday (Reuters/CNBC)

Yield on 5 Year Sovereign for Hellenic Republic Government Bond

The news was anticipated yesterday, thus the larger rally in bonds (and resulting decline in yields) took
place yesterday. But the rally continues today.

• Obama said that a presidential commission on the budget needs to consider all options for reducing
the deficit, including tax increases and cuts in spending on entitlement programs such as Social Security
and Medicare. Bloomberg – I’m sure that will go over well.
• U.S. unemployment peaked in October and will retreat through 2011 as the economy strengthens,
according to economists surveyed by Bloomberg News. Bloomberg
• California’s revenue rose by 6 percent in January from the year-earlier period, topping forecasts;
sign of improved budget outlook for the state. Bloomberg
• China inflation - China’s January headline CPI eased in January, to rise 1.5%oya (JPMorgan: 1.9%;
consensus: 2.1%), compared to 1.9% in December. Further details suggest that the moderation in
headline is mostly due to decline in food prices. Qian Wang
• Yuan peg could be maintained until June - China will probably keep the yuan pegged against the
dollar until June to show its control over the currency after U.S. President Barack Obama intensified calls
for appreciation – Bloomberg – a similar thing happens at my house daily when my five year old yells at
my three year old, “Don’t tell me what to do!”