by Calculated Risk on 5/09/2011 09:15:00 AM

From MarketWatch: Greek CDS spreads widen after downgrade

Standard & Poor's lowered its credit rating on Greece to B from BB-minus. The spread on five-year Greek credit default swaps, or CDS, widened further to 1,375 basis points from around 1,360 basis points earlier in the day ...

I've heard from an excellent source that there are EMU people working on the details of what a restructuring would look like - as a contingency plan - but nothing is imminent. Some sort of restructuring seems priced in with the yield on Greece ten year bonds is at 15.6% today and the two year yield at 25.2%.

by Calculated Risk on 5/08/2011 11:59:00 PM

From Nick Timiraos and Dawn Wotapa at the WSJ: Home Market Takes a Tumble

Home values fell 3% in the first quarter from the previous quarter and 1.1% in March from the previous month, pushed down by an abundance of foreclosed homes on the market, according to data to be released Monday by real-estate website Zillow.com. Prices have now fallen for 57 consecutive months, according to Zillow.
...
[Stan Humphries, Zillow's chief economist] now believes prices won't hit bottom before next year and expects they will fall by another 7% to 9%.
...
Prices are decelerating in large part because the many foreclosed properties that often sell at a discount force other sellers to lower their prices.

As I noted on Friday, Fannie and Freddie sold over 90,000 REOs in Q1; a new record. These foreclosure sales are pushing down house prices - and there are many more REOs coming (I'll try to summarize all the house price indexes, but most are showing prices at a post-bubble low).

Weekend:
• Schedule for Week of May 8th
• Summary for Week ending May 6th
• Total Fannie, Freddie, FHA REO inventory declined in Q1, Fannie and Freddie REO Sales at Record Levels

by Calculated Risk on 5/08/2011 06:33:00 PM

First on Ireland from the Daily Mail: We won't pay off our debt... Fine Gael Minister admits Ireland plans to restructure €250bn borrowings

Ireland will never repay the €250bn it has borrowed from the EU and IMF, senior government insiders have admitted – but we will not default until our ­EU partners agree we have no choice.

A senior minister last night told the Irish Mail on Sunday that the Cabinet expects our crippling debts to be ‘restructured’ within three years.
...
As Europe tried to ease the pressure with a 1% cut in our bail-out interest rate, ministers were admitting that the full amount could never be repaid.

‘It is not called defaulting – it’s code for a restructuring,’ said one senior minister.

And from the Irish Times: Rabbitte 'hopeful' of interest rate cut

Minister for Communications Pat Rabbitte Pat Rabbitte said today he “hopes” that Ireland will secure a lower interest rate on its bailout loans from the European Union.

EU finance ministers are to hold meetings on May 16th and 17th to discuss the bailout for Portugal. Ireland's bailout is also expected to be on the agenda.

Mr Rabbitte said today Ireland would continue to negotiate for reduced rates. "The decision has not yet been made," he said.

And on Greece from the WSJ: Greece Slips Farther Behind Budget-Cut Target

Greece has been slipping farther behind its targets for cutting its budget deficit and is expected to need nearly €30 billion ($43 billion) of extra financing for 2012, according to euro-zone officials.

The country's growing reliance on aid from other euro members is fueling a debate over whether Greece should hold talks with its private creditors about extending the maturity of its bonds, a step that Germany is quietly pushing but other euro nations are resisting.

Euro-zone finance ministers meeting in Brussels early next week are expected to debate Greece's debt burden, its need for additional aid, and its request for more time to meet its fiscal targets.

The meeting next week should be interesting ...

Weekend:
• Schedule for Week of May 8th
• Summary for Week ending May 6th
• Total Fannie, Freddie, FHA REO inventory declined in Q1, Fannie and Freddie REO Sales at Record Levels

Friday employment posts (with graphs):
• April Employment Report: 244,000 Jobs, 9.0% Unemployment Rate
• Employment Summary, Part Time Workers, and Unemployed over 26 Weeks
• Employment: A dirty little secret and more graphs
• Employment Graph Gallery

by Calculated Risk on 5/08/2011 12:12:00 PM

On Friday, I wrote in frustration:

[A]nyone who adds (or subtracts) the Not Seasonally Adjusted (NSA) birth/death model numbers from the headline SA payroll employment is clueless. Someone sent me this "analysis" today: "... you exclude the 62K from McDonalds hirings, and 175K from the Birth Death Adjustment, and end up with.... +7K jobs". That is complete nonsense. The key issue with the birth/death model is it misses turning points; otherwise it is an important part of the monthly estimate.

As I noted on Friday that "analysis" was complete nonsense. My suggestion is that most people should just ignore the model, but for those who want to understand it, below the fold is a slightly technical discussion with links to complete explanations.

To commentators: Please stop subtracting the BD numbers from the headline BLS numbers! You are misleading your readers.

Read more »

by Calculated Risk on 5/08/2011 08:14:00 AM

The key reports this week are April Retail Sales on Thursday, the Consumer Price Index (CPI) on Friday and the monthly Trade Balance report on Wednesday.

----- Monday, May 9th -----
10:00 AM ET: New York Fed Q1 Quarterly Household Debt and Credit Report

----- Tuesday, May 10th -----
7:30 AM: NFIB Small Business Optimism Index for April.

Click on graph for larger image in graph gallery.

This graph shows the small business optimism index since 1986. The index decreased to 91.9 in March from 94.5 in February.

This has been mostly trending up, although the level is still very low.

8:30 AM: Import and Export Prices for April. The consensus is a for a 1.8% increase in import prices.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for March.

----- Wednesday, May 11th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been very weak over the last couple months suggesting weak home sales through mid-year (not counting all cash purchases).

8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the monthly U.S. exports and imports in dollars through February 2011.

Exports are up sharply and are now above the pre-recession peak. The consensus is for the U.S. trade deficit to be around $47.0 billion, up from $45.8 billion in February.

9:00 AM ET: Ceridian-UCLA Pulse of Commerce Index™ This is the diesel fuel index for April (a measure of transportation).

10:00 AM: Job Openings and Labor Turnover Survey for March from the BLS. This report has been showing a general increase in job openings, but very little turnover in the labor market.

----- Thursday, May 12th -----
8:30 AM: The initial weekly unemployment claims report will be released. The number of claims increased sharply last week partially due to some one time factors. The consensus is for a decrease to 428,000 from 474,000 last week, however the storms in the south might impact the report this week.

8:30 AM: Retail Sales for April.

This graph shows retail sales since 1992. This is monthly retail sales including food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 16.0% from the bottom, and now 2.5% above the pre-recession peak.

The consensus is for retail sales to increase 0.6% in April (0.6% increase ex-auto).

8:30 AM: Producer Price Index for April. The consensus is for a 0.6% increase in producer prices (0.2% core).

10:00 AM: Manufacturing and Trade: Inventories and Sales for March. The consensus is for a 0.9% increase in inventories.

10:00 AM: Testimony of Fed Chairman Ben Bernanke before the U.S. Senate Committee on Banking, Housing, and Urban Affairs, "Dodd-Frank Implementation: Monitoring Systemic Risk and Promoting Financial Stability"

----- Friday, May 13th -----
8:30 AM: Consumer Price Index for April. The consensus is for a 0.4% increase in prices. The consensus for core CPI is an increase of 0.2%.

9:55 AM: Reuters/University of Mich Consumer Sentiment preliminary for May. The consensus is for a slight increase to 70.0 from 69.8 in April.

Best wishes to All!