Market Commentary

Over the last 24 hours the details of the Greek bailout
April 07, 2010

Over the last 24 hours the details of the Greek bailout has emerged.  At the time of this writing the bailout appears to be unraveling for a myriad of reasons with the Euro getting crushed and Greek bond yields surging.  Greece’s Deputy Prime Minister stated their debt problems are likely to spread further in the Euro Zone as perhaps Portugal will be the next crisis, a crisis amplified by speculation in credit default swaps.

Wow, does this sound familiar!  However unlike 18-20 months the 10-year treasury is not surging in price.  In fact yields are at the highest level since August 2008.  Why?

Obviously there are a multitude of reasons with difficulty assigning a weighting for each variable.  I think treasury yields are surging as the market believes the EMZ’s issues are country specific and the Euro never obtained the clout some thought.  I further believe the markets are suggesting the American economy is recovering at a pace considerably faster than most had expected.  Third, fears’ surrounding the Administration’s spending plans.

As noted several times I believe the 10-year treasury will rise to around the 4.25% area, the yield that this benchmark stood in June 2008 before the problems at Wachovia Bank became more pronounced ushering the next leg down in the credit crisis.

Commenting briefly about the release of the Minutes of the March 16 FOMC meeting, in my view there was nothing surprising other than perhaps a more pronounced split between the hawks and the doves.  Since the FRB Chairman is a dove, the odds are greater for no change in monetary policy in the foreseeable future believed to be another 4-5 months.

There is little to write about yesterday market action.  It was relatively quiet in all markets as all are waiting for the commencement of earning season and data to validate the emerging view the recovery is indeed stronger than expected.

Last night the foreign markets were mixed. London was down 0.13%, Paris down 0.33% and Frankfurt down 0.17%.  Japan was up 0.9% and Hang Sang up 1.82%.

The Dow should open nominally lower on profit taking and sovereign debt fears. The 10-year is up 1/32 to yield 3.95%.