Morning Call – 6/28/2010

Stone Street Advisors

ChiBondKing – laszlochi@gmail.com

Morning Focus
The big event this weekend was the result of the G20 summit, which I’m sure you’re familiar with by now. Joe Weisenthal
summed up what happened at the G20 quite nicely, you can find a link to his article in the interesting morning reading. Besides
making rosy optimistic promises about halving deficits in the next few years, the G20 was surprisingly lackluster on the “China
Issue” around the Yuan revaluation. Most notably were the rather “tame” statements saying “we expect the Yuan to rise over
time”, etc. This calls into question the action by the China central bank earlier this month in floating the Yuan, which, in my
opinion was nothing more than throwing a ‘teaser’ at the G20 participants: It appears to have worked. Light news over the
weekend, but for the week ahead we have a lot: 600B ECB financing operation, US jobs number. Asia indices mostly down with
the exception of HK shares: Australia -0.65pct to 4384.50, Nikkei -0.45pct to 9693.94, Hong Kong +0.17 to 20726.68, Shanghai -
0.69pct to 2535.28. US futures posting modest gains this morning, overnight US bond markets relatively quiet.

Notable Overnight Headlines

Asia
China G20
o HU SAYS CHINA ALSO TRYING TO MAKE ECONOMIC POLICIES MORE FLEXIBLE, ‘must be cautious about timing,
intensity of existing stimulus policies’ (Reuters)
o G20 drops China-sensitive plaudits on yuan reform
India PM: rush to exit stimulus has recession risk
Taiwan May Leading Index Rises To 110.5 From 110.1 In April
BIS-Taiwan dollar not affected by yuan reform (Reuters)
Chinese c.bank sets yuan mid-point at 6.7890 (Reuters)
South Korea c.bank sells 1-yr MSBs at 3.15 pct (Reuters)
Singapore Govt prices 2 year bond (Reuters)
Russia M2 on June 1 2.3 pct m/m, 30.7 pct y/y (Reuters)

Europe
Deutsche CEO says "regulatory arbitrage" a worry (Reuters)
Overnight deposits at ECB rise (Reuters)
Euro zone M3 falls, private loans rise (Reuters)
Greece to issue T-bills mid-July - deputy FinMin (Reuters)
Italy's 7 billion euro debt sale modestly received (Reuters)
Bank deposits increase in Greece, other peripherals (Reuters)
ECB Funding
o Nearly 600bln in ECB transactions this week
o Market participants worried; Eurozone banks hoarding cash and increasing o/n operations with various ECB
facilities

US Pre Open
Economic News

Obama: Countries Shouldn't Rely On Exports To US For Growth, Countries Can't Run To Stimulus Exits All At Same Time
(DJ)
All eyes on US Jobs number this Friday for signs of recovery or double dip

Equities

RDS: Shell CEO says to continue deep-water drilling (Reuters)

See Important Disclosures on page 4

 BP: Weekend chatter indicating higher open as co says no plans to replace CEO Hayward
BP: UPDATE: Russian Official says BP Hayward is set to resign (Reuters, 7:30AM ET)

Interesting Morning Reading

The Third Depression – Paul Krugman, NYT:

http://www.nytimes.com/2010/06/28/opinion/28krugman.html?src=twt&twt=NytimesKrugman
G20 Officially Reveals Its Total Pointlessness – Joe Weisenthal, TBI: http://www.businessinsider.com/g20-officially-
reveals-its-total-pointlessness-2010-6
SEC Loss Shows Difficulty of Insider-Trading Cases – WSJ:
http://online.wsj.com/article/SB10001424052748704846004575333144054961702.html?mod=googlenews_wsj

Notable Bond Market/Economic Events

Bond Auctions (1PM ET)
o 13, 26 week bills
Upcoming Bond Auctions (This Week)
o 6/29: 1Y bill, 4wk bill
Economic Releases For Today
o 8:30AM
 Core PCE, cons. 0.1pct
 Personal Spending, cons. 0.1pct
 Personal Income, cons. 0.5pct
o 7:30PM
 Japan Household Spending
 Japan Unemployment Rate, cons. 5pct

See Important Disclosures on page 4

Market Summary – 7AM

Futures Currencies Fixed Income

Symbol Last Chg Symbol Last Chg Symbol Last Symbol Last
DOW 10130 26 EURUSD 1.2345 -0.0032 2s5s 124.00 US2Y .65
SP500 1078.75 4 GBPUSD 1.5063 0.0003 2s10s 244.00 US5Y 1.89
NSDQ 1847 7.75 EURJPY 110.25 -0.2 2s30s 341.00 US7Y 2.56
ZB 125'18 +0'07 USDCAD 1.035 -0.0003 5s10s 120.00 US10Y 3.09
ZN 121'195 +0'040 USDJPY 89.31 0.07 5s30s 217.00 US30Y 4.06
ZF 117'307 +0'030 NZDUSD 0.7097 -0.0046 10s30s 97.00 UK5Y 2.11
ZT 109'107 +0'005 UK10Y 3.40
CLN0 78.35 -0.51 UK30Y 4.25

Spreads Bps Spreads Bps

UK25 135.00 USUK2 11.00
UK210 264.00 USUK5 22.00
UK230 349.00 USUK7 23.00
UK510 129.00 USUK10 31.00
UK530 214.00 USUK20 61.81
UK1030 85.00 USUK30 19.00

See Important Disclosures on page 4

 Morning Call – 6/28/2010
Stone Street Advisors
ChiBondKing – laszlochi@gmail.com

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