Monday, March 29, 2010

· President Obama has landed in Kabul to meet with Afghan President Hamid Karzai, White
House press secretary Robert Gibbs announced Sunday via Twitter
· Greece is expected to come to market this week w/a 7yr ~EU5B bond sale in what will
prove to be a critical test of the recently signed EU-IMF rescue package. Greece is looking to
sell the debt at 310bp over swaps. Bloomberg/FT
· There have been two explosions on Moscow metro systems March 29. The first explosion
hit the second carriage of a metro train stopped at Lubyanka station and the second at Park
Kultury station. Ten people were initially reported injured in the first blast with an unknown
number injured in the second blast. With two blasts approximately 40 minutes apart in Moscow
subway stations it is most likely it was coordinated terrorist attacks in Russia’s capital. - Stratfor
· Banks & Washington - CNBC is reporting that Morgan Stanley has won the underwriting
assignment to sell the Treasury’s stake in Citigroup (the sale will be conducted via a “dribble out
process”, whereby the Treasury’s sales won’t account for any more than 10% of the ADV in a
single day). An announcement could come in conjunction w/Citi’s earnings in a few weeks. The
WSJ is reporting that going forward the FDIC will be providing less asset loss protection to
acquirers of failed banks (which could ultimately make the deals less attractive). Finally,
Politico is reporting that the White House is going to ramp up its pressure on Congress to pass
the financial regulatory reform bill; the WH wants something passed by at least Sept (the second
year anniversary of Lehman) although some think a bill could be sent to the president’s desk by
Memorial Day
· A Bank tax idea is gaining global momentum with US and European regulators moving
forward w/a plan to impose levies on their country’s banks to create a pool of money that will
cover the costs of future bailouts. WSJ
· AAPL - Various sites are reporting that Apple appears to have sold out of its first batch of
iPads w/the company now promising delivery of orders by Apr 12 (weeks after the device will
officially go on sale on Apr 3).
· Junk bonds vs. equities – the sp500 is at the cheapest level vs. junk bonds in 2 years,
signaling the equities rally can continue. The lowest-rated debt pays 3.22 percentage points
more than the earnings yield on the S&P 500 – Bloomberg
· NYT article (front page) skeptical on equities (signaling still-high levels of skepticism re
rally) – “Stocks Soar, but Many Analysts Ask Why” – “Some analysts see ample reason for
caution in equities, with many economists, including those at the Federal Reserve, forecasting
tepid growth…”
· Health Care impact on corporate America – AT&T came out during trading and said it
would take a ~$1B charge to earnings as a result of the recently passed HC bill; other companies
have issued similar announcements as well (inc. CAT, MMM, and others). The stock prices of
the firm’s issuing these updates don’t seem to have reacted much to the news. GE told
Bloomberg that it doesn’t see a material impact from the HC bill and prob. won’t have to take a
charge. · Health Care impact on corporate America – Rep Waxman called on the heads of T,
VZ, CAT, and DE to provide evidence to support the charges to earnings the companies have
said they will be forced to take thanks to the recently passed legislation. The men are being
called before a hearing on Apr 21. Bloomberg
· Economics outlook - We believe that the global economy is making an important
transition to self-sustaining growth as the first quarter comes to an end. As part of this shift, GDP
growth is reaccelerating following a modest downshift at the turn of the year. Kasman
· A “good” sell-off? Recent trends, namely a rising stock market, a stronger dollar, and
weaker Treasuries, suggests that Treasuries are selling-off for the “right reasons” (i.e. rising
growth expectations and a desire for more risky assets). If the Treasury weakness was occuring
coincindent w/a weaker dollar/rising gold and a sluggish stock market, then budget deficits and
inflation could be more of the culprit.

US Generic Government 30 Year Yields

Recall that a ‘selloff’ in treasuries means an increase in yields.