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Wednesday, June 15, 2011

  • Greece - the key negative this morning was the lack of any progress on Greece at Tuesday’s meeting. According to the WSJ, a deal on Greece was “still some ways off w/major differences remaining between Berlin and the ECB” while German finance minister Schaeuble said that no progress was made. Luxembourg Finance Minister Luc Frieden said an agreement on a second bailout for Greece may be

delayed until July (although the EC said it expects a decision on the next disbursement for Greece at next week’s June 19 and 20 th meetings according to Bloomberg). Separately, most Greek major public services were shutdown on Wed as citizens took to the streets in protest of the government’s fresh

austerity and privatization measures. WSJ

Wednesday, June 15, 2011 Greece - the key negative this morning was the lack of anyWSJ Renewed stress as yields make another leg up (prices down). Fed on hold at next week’s meeting (Hilsenrath in WSJ) – no shift seen in Fed policy at the upcoming meeting. Officials are in no rush to tighten given recent sluggish economic readings but also aren’t looking at further policy accommodation given an uptick in inflation. QE3 seems very unlikely at the moment. The Fed isn’t w/o tools – it could use rhetoric to convince markets the current accommodative policy stance would remain in place for a certain period of time or until certain milestones are hit. The Fed could also lower the rate paid on bank reserves. Many Fed officials believe the current slowdown will prove transitory and point to a pickup in auto production schedules as evidence of a rebound. – WSJ " id="pdf-obj-0-21" src="pdf-obj-0-21.jpg">

Renewed stress as yields make another leg up (prices down).

  • Fed on hold at next week’s meeting (Hilsenrath in WSJ) – no shift seen in Fed policy at the upcoming meeting. Officials are in no rush to tighten given recent sluggish economic readings but also aren’t looking at further policy accommodation given an uptick in inflation. QE3 seems very unlikely at the moment. The Fed isn’t w/o tools – it could use rhetoric to convince markets the current accommodative policy stance would remain in place for a certain period of time or until certain milestones are hit. The Fed could also lower the rate paid on bank reserves. Many Fed officials believe the current slowdown will prove transitory and point to a pickup in auto production schedules as evidence of a rebound. WSJ