Friday, October 24, 2014

04/02/2010 Just the Facts *

For the short week, the S&P500 gained 1.0% (up 5.7% y-t-d), and the Dow rose 0.7% (up 4.8%). The broader market continues to perform well. The S&P 400 Mid-Caps rose 1.2% (up 9.7%), and the small cap Russell 2000 increased 0.7% (up 9.4%). The Banks added 0.3%, increasing 2010 gains to 22.8%. The Broker/Dealers increased 0.8% (up 2.1%). The Morgan Stanley Cyclicals gained 0.8% (up 9.6%), and the Transports jumped 1.2% (up 7.1%). The Morgan Stanley Consumer index gained 1.2% (up 6.3%), while the Utilities declined 1.8% (down 3.4%). The Nasdaq100 was unchanged (up 5.3%), while the Morgan Stanley High Tech index declined 0.3% (up 3.8%). The Semiconductors gained 1.1% (down 2.0%). The InteractiveWeek Internet index dipped 0.2% (up 5.7%). The Biotechs slipped 0.2%, with 2010 gains of 31.8%. Gold was down $7 today, reducing the week’s gain to about $12. The HUI gold index, as of Thursday’s close, was up 6.2% (down 0.4%).

Treasury bonds weren't excited by today's employment data. One-month Treasury bill rates ended the week at 15 bps, and three-month bills closed at 16 bps. Two-year government yields added 6 bps to 1.02%. Five-year T-note yields jumped 8 bps to 2.60%. Ten-year yields gained 10 bps to 3.95%. Long bond yields rose 5 bps to 4.80%. Benchmark Fannie MBS yields surged 12 bps to 4.56%, the high since December. The spread between 10-year Treasury and benchmark MBS yields widened 2 bps to 61 bps. Agency 10-yr debt spreads widened 5 bps to 36 bps. The implied yield on December 2010 eurodollar futures added one basis point to 0.89%. The 10-year dollar swap spread reversed course, increasing 7.25 to close the week at a positive 1.5 bps. The 30-year swap spread increased 7.50 to negative 17.25. Corporate bond spreads were stable (corporates didn't trade today). An index of investment grade bond spreads was little changed at 87 bps, and an index of junk spreads was little changed at 503 bps.

It was another strong week of debt issuance. Investment grade issuers included PSEG Power $550 million, Caterpillar $500 million, CBS $500 million, and Health Care REIT $300 million.

Junk flows reported strong inflows of $972 million (EPFR) and issuance rose to the occasion. Junk issuers included International Lease Finance $2.75 million, Linn Energy $1.3bn, Provident Funding $400 million, Autonation $400 million, Squaretwo Financial $290 million, Ferrellgas $280 million, Maxim Crane Works $250 million, National Semiconductor $250 million, GWR $230 million, FGI Holding $225 million, Stratus Technologies $215 million, Radnet $200 million, Continental Resources $200 million, Pharmanet Development $185 million, Midwest Gaming $175 million, and NES Rentals $150 million.

Convert issues included Corporate Office Properties $200 million.

International dollar debt sales remain robust. Issuers included Bank of Nova Scotia $4.25bn, Barclays Bank $1.0bn, BNP Paribas $500 million, Woori Bank $500 million, Banco Santander $500 million, Buenos Aires $475 million, Grupos Papelero $300 million, and Banco ABC-Brazil $300 million.

U.K. 10-year gilt yields dropped 9 bps to 3.92%, and German bund yields fell 7 bps to 3.08%. Bond yields in Greece surged 33 bps to 6.52%. The German DAX equities index jumped 1.9% (up 4.7% y-t-d). Japanese 10-year "JGB" yields declined 2 bps to 1.35%. The Nikkei 225 surged 2.6% (up 7.0%). Emerging markets were strong. For the week, Brazil's Bovespa equities index jumped 3.4% (up 3.7%), and the Mexico's Bolsa added 0.4% (up 3.6%). Russia’s RTS equities index surged 6.0% (up 11.6%). India’s Sensex equities index gained 0.8% (up 1.3%). China’s Shanghai Exchange rallied 3.2% (down 3.6%). Brazil’s benchmark dollar bond yields dipped one basis point to 4.95%, and Mexico's benchmark bond yields declined 3 bps to 4.85%.

Freddie Mac 30-year fixed mortgage rates jumped 9 bps to a 12-wk high 5.08% (up 30bps y-o-y). Fifteen-year fixed rates rose 5 bps to 4.39% (down 13bps y-o-y). One-year ARMs sank 15 bps to 4.05% (down 70bps y-o-y). Bankrate's survey of jumbo mortgage borrowing costs had 30-yr fixed jumbo rates up one basis point to 5.83% (down 63bps y-o-y).

Federal Reserve Credit declined $7.4bn last week to $2.290 TN. Fed Credit was up $241bn, or 12.7%, from a year ago. Elsewhere, Fed Foreign Holdings of Treasury, Agency Debt this past week (ended 3/31) increased $7.2bn to a record $3.020 TN. "Custody holdings" have increased $64.5bn y-t-d, with a one-year rise of $410bn, or 15.7%.

M2 (narrow) "money" supply declined $10.0bn to $8.480 TN (week of 3/22). Narrow "money" has declined $32.3bn y-t-d. Over the past year, M2 grew 0.9%. For the week, Currency added $0.8bn, and Demand & Checkable Deposits increased $7.1bn. Savings Deposits declined $0.5bn, and Small Denominated Deposits fell $4.2bn. Retail Money Funds dropped $8.7bn.

Total Money Market Fund assets (from Invest Co Inst) dropped another $30bn to $2.983 TN, the first time below $3.0 TN since October 2007. In the first 13 weeks of the year, money fund assets have dropped $311bn, with a one-year decline of $852bn, or 22.2%.

Total Commercial Paper outstanding declined $5.2bn last week to $1.109 TN. CP has declined $60.8bn, or 20.8% annualized year-to-date, and was down $367bn over the past year (24.9%).

International reserve assets (excluding gold) - as tallied by Bloomberg’s Alex Tanzi – were up $1.179 TN y-o-y, or 17.7%, to a record $7.840 TN.

Global Credit Market Watch:

March 31 – Bloomberg (Pierre Paulden and Caroline Salas): “Corporate bonds are rallying for the fourth straight quarter, the longest streak since 2004… The securities returned 2.6% this quarter through yesterday, following a 16.3% gain in 2009…”

March 29 – Bloomberg (Bryan Keogh and John Detrixhe): “Junk bond sales reached a record this month… Companies worldwide issued $38.3 billion of junk bonds in March, passing the previous high of $36 billion in November 2006… Yields fell 0.95 percentage point to within 5.96 percentage points of government debt, the narrowest gap since January 2008… This is ‘an almost ‘Goldilocks’ environment for leveraged credit markets,’ JPMorgan Chase & Co. analysts led by Peter Acciavatti… said… Sales soared as investors plowed a record $33.6 billion into speculative-grade funds this quarter, according to… research firm EPFR Global.”

March 31 – Bloomberg (Richard Bravo): “The leveraged-loan market climbed to a 21-month high this week as rising prices spurred companies including Cedar Fair LP and IMS Health Inc. to obtain buyout loans during the quarter, making it the busiest period for such funding since July-through-September 2008. Since Jan. 1, companies have raised more than $5 billion in the high-yield, high-risk leveraged-loan market to finance buyouts…”

April 1 – Bloomberg (Patricia Kuo): “Demand for collateralized loan obligations is reviving, according to Citigroup Inc…. CLOs, shunned for their role in causing $1.76 trillion of bank write downs, buy leveraged loans and then use the payments as collateral for bonds. Citigroup last month priced a $525 million deal in the first new issue in a year. Leveraged, or junk-rated, loans typically fund buyouts. ‘More deals are expected in the course of the year,’ analysts led by… Ratul Roy wrote... Leveraged loans prices rose to 91.7% of face value this week, the highest since June 25, 2008… The gauge fell to a low of 59% in Dec. 17, 2008.”

April 1 – Wall Street Journal (Aaron Lucchetti): “Wall Street continued to recover from the financial crisis in the first quarter as junk-bond issuance was brisk and a late rally in stocks helped rev up banks’ underwriting machines. Banks sold more than $1.93 trillion of stock and bond offerings to investors during the quarter, up from $1.61 trillion in the prior three months and from $1.79 trillion in the 2009 first period.”

March 29 – Bloomberg (John Fraher and Simon Kennedy): “Greek Prime Minister George Papandreou… now has to prove he can keep his nation’s finances afloat. His government still has to raise as much as 15.5 billion euros ($21bn) by the end of May, almost as much debt as it sold in the first quarter, says Petros Christodoulou, head of the country’s debt agency.”

March 29 – Bloomberg (Chris Bourke): “European banks may face a 156 billion-euro ($209bn) shortfall in funds needed to refinance commercial real-estate debt in the next two years, DTZ Holdings Plc estimates. About 480 billion euros of property loans will mature by the end of 2011… Banks won’t be able to refinance all of the debt, particularly when loans exceed the value of the properties backing them. More than half of the shortfall will occur in the U.K. and Spain, DTZ said.”

April 1 – Bloomberg (Oliver Biggadike and Cordell Eddings): “Spreads between 10-year interest-rate swaps and Treasury yields will turn positive by June as U.S. borrowing slows, ending a period of ‘unusually high’ government and corporate issuance, according to Goldman Sachs Group Inc… Corporate sales of investment-grade bonds almost doubled to $94 billion last month through March 30 from $53.4 billion the previous month…”

Global Government Finance Bubble Watch:

April 2 – Bloomberg: “China’s central bank said new asset bubbles are emerging in some parts of the world and some sectors and these bubbles may burst unless ‘supported by economic fundamentals.’ The rapid increase in asset prices has been pushed up mainly by excessively loose monetary policies pursued by governments around the world, the People’s Bank of China said…”

March 31 – Bloomberg (Lilian Karunungan, David Yong and Veronica Espinosa): “Emerging-market companies and governments are borrowing at a record pace to take advantage of all-time low yields… Developing-nation issuers sold $157 billion of bonds in the first quarter, the busiest start to a year since Bloomberg began compiling the data in 1999, as the yield on JPMorgan Chase & Co.’s benchmark EMBI Global Diversified Index fell as low as 6.22% on March 17.”

March 31 – Wall Street Journal (Mark Gongloff): “Investors flooded risky companies with money in March even as the government prepares to shut down a key engine driving one of the greatest corporate-bond rallies in history. A total $31.5 billion in new high-yield debt… hit the market through Tuesday, exceeding the previous monthly record in November 2006. Partly propelling the activity: The Federal Reserve’s massive mortgage-buying program, which comes to an end… By buying $1.25 trillion of mortgage securities, the Fed absorbed a flood of assets that otherwise would have needed buyers. That kept money in the hands of investors, who went searching for something else to buy. The Fed's underpinning encouraged investors to seek riskier, higher-yielding securities. A natural choice: corporate bonds.”

March 30 – Financial Times (Lina Saigol): “Mergers and acquisitions boomed in Asia in the first quarter in sharp contrast to a slump in deal volume in Europe and the US, underlining a global shift in activity in the wake of the credit crisis. The value of global M&A overall rose 6% to $442bn in the first quarter of 2010… There were $89.4bn worth of deals in the Asia-Pacific region, excluding Japan, during the first three months of the year – an increase of almost 93% from the same period a year earlier… In spite of a series of big healthcare deals, US activity dropped 25.6% to $148bn in the quarter.”

March 31 – Wall Street Journal (Michael Casey): “Never say never. Treasury Secretary Timothy Geithner broke that cardinal rule last week when he said a ratings downgrade ‘will never happen to this country.’ Yet his remark, made during an ABC TV interview, reflects fears that at times swirl through the market, fears that the U.S. government could indeed lose its coveted AAA rating. Because of heightened concern about unsustainable long-term obligations in Medicare, Medicaid and Social Security, the ratings agencies Moody’s, Standard Poor’s and Fitch all recently opined about the possibility of a downgrade one day.”

Currency Watch:

April 2 – Bloomberg (Michael B. Marois and Paul Dobson): “The People’s Bank of China said the U.S. dollar will have only a limited rebound in 2010 because of the nation’s high fiscal deficit and low interest rates. The greenback may see a ‘technical rebound’ from last year’s declines, though the appreciation may not be ‘too big,’ the central bank said in its 2009 international financial markets report…”

April 1 – Bloomberg (Klaus Wille): “The Swiss franc rose to a record for the second straight day against the euro…”

The dollar index slipped 0.6% this week to 81.173 (up 4.3% y-t-d). For the week on the upside, the Brazilian real increased 3.1%, the South African rand 2.6%, the British pound 2.1%, the Norwegian krone 1.8%, the Australian dollar 1.7%, the Mexican peso 1.6%, the Canadian dollar 1.5%, the South Korean won 1.2%, the Swedish krona 1.2%, the Euro 0.7%, and the Danish krone 0.6%. For the week on the downside, the Japanese yen declined 2.2%.

Commodities Watch:

March 30 – Financial Times (Javier Blas and Peter Smith): “Global steel prices are set to leap by up to a third, pushing up the cost of everyday goods from cars to domestic appliances, after miners and steelmakers on Tuesday agreed a ground-breaking change in the iron ore price system. The deal by Vale of Brazil and Anglo-Australian BHP Billiton with Japanese and Chinese mills marks the end of the 40-year-old benchmark system of annual contracts and lengthy price negotiations. The industry instead agreed to move to quarterly contracts linked to the nascent iron ore spot market. ‘The benchmark system has ended. There is no comeback,’ said a senior mining executive directly involved in the talks. The world’s top ore miners stand to profit hugely in the short term from the new price system… The new price system will lift the cost of iron ore to Asian steelmakers to about $110-$120 a tonne during the April-June period, up between 80% and 100% from the $60 level at which the 2009-10 annual contracts were settled.”

March 30 – Financial Times (David Oakley and Javier Blas): “Banks and brokers are gearing up to exploit the new iron ore pricing system by developing a multibillion-dollar derivatives market similar to the ones that exist for commodities such as oil, aluminium and coal. As the 40-year-old pricing system based on annual contracts is replaced with short-term deals linked to the spot market, analysts forecast that the iron ore swaps market will grow to $200bn by 2020 from $300m today. ‘All the ingredients are here for the market to take off,” said Andy Strickland, associate director at inter-dealer broker Icap. “The market for iron ore swaps could grow exponentially by a factor of 20 or 50 times its current size. The extreme price volatility will trigger interest from the consumers.’”

March 30 – Bloomberg (Yasumasa Song and Masumi Suga): “Vale SA, the world’s largest iron ore producer, and BHP Billiton Ltd. ended a 40-year system of setting annual prices by signing short-term contracts with Asian mills, with the Brazilian company winning a 90% increase.”

March 29 - China Knowledge: “China’s crude oil import dependence in 2009 reached 51.29%, exceeding the warning line of 50% for the first time… China consumed 388 million tons of oil last year, 189 million tons produced domestically and 199 million tons imported from overseas. The country’s oil consumption expanded by 6.78% each year on average in the period from 2000 to 2009.”

March 29 – Bloomberg (Thomas Kutty Abraham): “Gold imports by India, the world’s biggest consumer, jumped this month as jewelers stockpiled the metal to meet wedding-season demand… Purchases until March 25 were between 28 tons and 30 tons, up from 4.8 tons a year earlier, said Suresh Hundia, president of the Bombay Bullion Association.”

March 29 – Bloomberg (Madelene Pearson and Heidi Couch): “India’s coking coal imports may rise fivefold in the next decade, making it the world’s largest buyer, on accelerating demand for steel used in factories, power plants and cars, according to Gujarat NRE Coking Coal Ltd.”

March 30 – Bloomberg (Anna Stablum): “Aluminum scrap supply is undergoing its ‘most intense tightness’ in recent history, increasing prices and spurring consumers to use more newly smelted ingots, research group Harbor Intelligence said.”

The CRB index jumped 3.4% (down 2.5% y-t-d). The Goldman Sachs Commodities Index (GSCI) surged 4.8% (up 2.5% y-t-d). Spot Gold, which traded today, increased 1.1% to $1,120 (up 2.0% y-t-d). Silver surged 5.8% to $17.89 (up 6.2% y-t-d). May Crude jumped $4.87 to $84.87 (up 6.9% y-t-d). May Gasoline rose 5.1% (up 13.2% y-t-d), and May Natural Gas rallied 4.0% (down 27% y-t-d). May Copper advanced 5.3% (up 7% y-t-d). May Wheat declined 2.2% (down 16% y-t-d), and May Corn fell 3.4% (down 17% y-t-d).

China Bubble Watch:

March 29 – Wall Street Journal Asia (Andrew Batson): “Overseas acquisitions such as Zhejiang Geely Holding Group Co.’s $1.8 billion purchase of the Volvo car brand from Ford Motor Co. are helping Chinese companies acquire new technology and global market share. One thing they are not doing, though, is meaningfully affecting China’s buildup of foreign-currency reserves…the inflows of foreign money into China are still so rapid, that headline-grabbing mergers are doing little to alter the economic equation. China added $453 billion to its official foreign-exchange reserves in 2009 -- more than the $418 billion it did in 2008…”

March 29 – Bloomberg: “PetroChina Co. plans to spend at least $60 billion in the next decade on overseas acquisitions, challenging Exxon Mobil Corp. and BP Plc in the race to control oil and gas fields. ‘Ten years ago, PetroChina was a state-owned oil company, but now we have a goal of becoming an international, integrated energy company,’ Jiang Jiemin, chairman of the world’s largest company by market value, said…”

March 29 – Bloomberg: “China Construction Bank Corp., the nation’s second-largest lender, more than doubled profit in the fourth quarter as bad loans declined and lending surged… Net income climbed to 20.7 billion yuan ($3.03 billion)…”

April 1 – Bloomberg (Le-Min Lim): “An imperial pearl necklace is the star item in a Hong Kong auction that may raise HK$1.3 billion ($167 million). Chinese investors are buying art because of worries that prices of property and stocks have risen too much.”

Japan Watch:

April 2 – Bloomberg (Masahiro Hidaka and Mayumi Otsuma): “Bank of Japan policy makers will consider raising their economic assessment next week after mounting evidence that the export-led recovery exceeds their expectations, three people familiar with the matter said.”

India Watch:

March 29 – Bloomberg (Anil Varma): “Foreign investment in Indian debt, which has more than doubled the past year to a record, will climb further as accelerating inflation boosts interest rates, said Sundaram BNP Paribas Asset Management Co.”

Asia Bubble Watch:

March 29 – Bloomberg (Kyunghee Park and Wendy Leung): “South Korea’s biggest port, overwhelmed with empty containers a year ago, is now dealing with shipping lines that have more cargo than they can carry. Surging shipments of furniture, electronics and clothes to the U.S. and Europe, coupled with capacity cuts by shipping lines, has caused as much as 15% of containers to be delayed in Busan this year…”

April 1 – Bloomberg (Sungwoo Park and Bomi Lim): “South Korea’s exports rose faster than economists expected in March… Overseas shipments advanced 35.1% from a year earlier to $37.68 billion…”

March 30 – Bloomberg (Kevin Cho): “South Korean manufacturers’ confidence for April rose to the highest level in more than seven years as the nation’s economic recovery strengthens.”

March 31 – Bloomberg (Suttinee Yuvejwattana): “Thailand’s industrial production rose for a sixth straight month in February, confirming the nation’s economic recovery and putting pressure on the central bank to raise interest rates. Manufacturing output climbed 30.3% from a year earlier…”

March 30 – Bloomberg (Jason Folkmanis): “Vietnam’s economic growth accelerated to 5.83% in the first quarter from a year ago… Growth was almost twice as fast as the 3.14% expansion in the first quarter of 2009… Gross domestic product expanded 5.3% last year…”

Latin America Bubble Watch:

April 1 – Bloomberg (Gabrielle Coppola and Veronica Espinosa): “Banco Santander Brasil SA’s $500 million bond sale yesterday capped a record quarter of dollar bond offerings by Brazilian banks looking to tap into the lowest yields in two years to finance loan growth. Banks sold $6.3 billion of bonds in the first three months of 2010, surpassing annual totals in each year since at least 1999…”

April 1 – Bloomberg (Joshua Goodman): “Brazil’s industrial output rose 18.4% in February from the year-ago month, the national statistics agency said.”

March 29 – Bloomberg (Katia Cortes and Adriana Brasileiro): “The second phase of Brazil’s Growth Acceleration Program is aiming for public and private investment of 959 billion reais ($529bn) between 2011 and 2014, the government said. President Luiz Inacio Lula da Silva earmarked 465.5 billion reais of the total investment for energy projects… and 57.1 billion reais for sewage and water treatment works…”

March 31 – Bloomberg (Andre Soliani): “Brazil’s central bank said the cost of bringing accelerating inflation back to its target may be ‘significant.’ Consumer prices will increase 5.2% in 2010 and 4.9% in 2011, compared with 4.3% in 2009… ‘The necessary cost to bring inflation back to the target trajectory may be significant… The recovery of commodity prices and the steep recovery of the domestic activity level have become important risk factors for prices.’”

March 31 – Bloomberg (Laura Price): “Tam SA, Brazil’s biggest airline, forecast air-travel growth of 14% to 18% in its home market this year as the recovery in Latin America’s biggest economy spurs a rebound.”

Unbalanced Global Economy Watch:

April 1 – Bloomberg (Scott Hamilton): “An index of U.K. manufacturing rose to the highest level for 15 ½ years in March… A gauge based on a survey of companies increased to 57.2 from 56.5 in February…”

April 1 – Bloomberg (Klaus Wille): “Swiss manufacturing expanded at the fastest pace in more than three years in March… The SVME purchasing managers’ index climbed to 65.5 from 57.4 in February…”

March 31 – Bloomberg (Gelu Sulugiuc): “Denmark’s unemployment rate unexpectedly fell in February… The rate… was 4.1%, compared with 4.2% in January…”

March 31 – Bloomberg (Steve Bryant): “Turkey’s economy returned to growth in the three months through December… Gross domestic product increased 6% from a year earlier…”

U.S. Bubble Economy Watch:

April 2 – Bloomberg (Steve Matthews): “The biggest increase in employment in three years makes it “pretty clear” the deepest U.S. recession since the 1930s has ended, said the head of the group charged with making the call. Payrolls rose by 162,000 workers last month, the third gain in the past five months and the most since March 2007… ‘I personally put lots of emphasis on employment,” Robert Hall, who heads the National Bureau of Economic Research’s Business Cycle Dating Committee… ‘I would say ‘pretty clear’ is a good description” for whether the economic contraction has ended, he said.”

Fiscal Watch:

April 1 – New York Times (Sewell Chan): “State and local governments will eventually save $12.3 billion from bonds issued in the first year of the Build America Bonds program, a Treasury Department analysis has found, compared with what they would have spent by issuing traditional tax-exempt bonds to finance projects, a Treasury Department analysis has found.”

Central Bank Watch:

March 31 – Bloomberg: “China’s central bank said the nation’s economic rebound has been ‘further cemented’ and managing liquidity in the aftermath of a record credit expansion is ‘arduous.’ China faces ‘extremely complex economic and financial situations’ at home and abroad, the People’s Bank of China said in a statement in Beijing today after a quarterly gathering of its monetary policy committee. China’s economy continues to rebound, the bank said while pointing to ‘prominent problems’ including an ‘urgent’ need to ‘transform the growth model’ and reduce reliance on exports.”

March 29 – Bloomberg (Michael Dwyer): “Australia’s central bank Governor Glenn Stevens said house prices are ‘getting quite high’ and signaled that interest rates may need to be increased further to contain inflation. …Stevens told Channel Seven it was important for borrowing costs to be returned to ‘normal’ levels. ‘It’s not wise to leave interest rates right down at rock bottom any longer than you need,” Stevens said. “It would be not doing people any favors to have a prolonged period of very low rates and then hammer them unexpectedly.’”

Real Estate Watch:

March 30 – Bloomberg (Jody Shenn): “Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump. A Markit ABX index of credit-default swaps tied to 20 subprime-loan bonds rated AAA when created in the first half of 2006 climbed 3.2% last week…”

April 1 – Bloomberg (Jonathan Keehner): “Starwood Capital Group LLC, the investment firm founded by Barry Sternlicht, finished raising capital for two funds totaling about $2.8 billion that will invest in real estate.”

Muni Watch:

March 30 – New York Times (Mary Williams Walsh): “California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay. And states are responding in sometimes desperate ways, raising concerns that they, too, could face a debt crisis… If investors become reluctant to buy the states’ debt, the result could be a credit squeeze, not entirely different from the financial strains in Europe, where markets were reluctant to refinance billions in Greek debt. ‘If we ran into a situation where one state got into trouble, they’d be bailed out six ways from Tuesday,’ said Kenneth S. Rogoff, an economics professor at Harvard and a former research director of the International Monetary Fund. ‘But if we have a situation where there’s slow growth, and a bunch of cities and states are on the edge, like in Europe, we will have trouble.’”

March 30 – Bloomberg (Dunstan McNichol): “The two-year slide in tax collections that opened a $196 billion gap in U.S. state budgets has stopped… The 15 largest states by population forecast a 3.9% gain in tax revenue in fiscal 2011, budget documents show. The 50 states on average may increase collections by about 3.5%, the first time in two years the figure is expected to grow, said Mark Zandi, chief economist at Moody’s, California took in 3.9% more since December than projected in January…”

California Watch:

April 1 – Bloomberg (Michael B. Marois and Paul Dobson): “The bond market is showing California is no Greece. Debt issued by California, the world’s eighth-largest economy, is outperforming Greece’s bonds as funds… are betting the lowest-rated U.S. state’s credit risk has been exaggerated. The cost to protect against California not paying its obligations is the lowest relative to Greece in at least 15 months…”

New York Watch:

April 1 – Bloomberg (Michael Quint): “New York Governor David Paterson is asking state workers’ unions to give up a 4% pay increase agreed to under the previous administration to help close a budget gap of $9.2 billion, he said…”

March 30 – Bloomberg (David M. Levitt): “Downtown Manhattan… is about to lose its spot as the best-performing U.S. market. Vacancies may exceed 14% of the area’s 87 million square feet by late 2011, empty space that’s equivalent to four Empire State Buildings and the highest rate since 1997, according to… Cushman & Wakefield Inc. That doesn’t include the 4.4 million square feet of offices in two towers now under construction at the World Trade Center site… ‘The amount of space that’s potentially going to come to the market will increase availabilities and put pressure on pricing,’ said Kenneth McCarthy, Cushman’s head of New York- area research…”

Crude Liquidity Watch:

March 29 – Bloomberg (Fiona MacDonald): “Kuwait posted a preliminary budget surplus of 8.3 billion dinars ($28.7bn) in the 11 months through February, the Finance Ministry said. Revenue was 16 billion dinars, or 98% more than forecast for the fiscal year through March…”

Speculation Watch:

March 30 – Bloomberg (Jacqueline Simmons): “UBS AG generated about $2.3 billion of revenue at its fixed-income division in the first quarter as Switzerland’s biggest bank rebuilt the unit following record losses… UBS may have revenue of almost $1 billion from credit alone… UBS hired about 350 people at its fixed-income unit, which includes emerging markets and foreign exchange, in the past 12 months.”