Daily Trading Stance Thursday, May 28, 2009

Theme Comment
US Mortgage rates are climbing and are now higher than when the Fed announced that it would stimulate the
housing market by purchasing as many as $1.25T of agency mortgage bonds. Ben Bernanke has promised that
mortgage rates would go to 4%. We doubt it. GM is all but certain to go file chapter 11 after bondholders declined the
suggested debt-to-equity swap. The 2-to-10 year yield spread in treasuries continues to widen and yesterday made an
all-time record of 276 bps. This is reflecting inflation worries and rising risk-premiums due to fiscal irresponsibility.
Stocks sold off in the second half of the US session. Stay tuned for the Durable Goods Orders and Mortgage
Delinquencies today.

Economic Data Releases

Country Time (GMT) Name Expectation Prior Comment
US 12:30 Durable Goods Orders MoM (APR) 0.5% -0.8%
US 14:00 New Home Sales MoM (APR) 1.1% -0.6%
US 14:00 Mortgage Delinquencies (1Q) 7.88%

FX Daily stance Comment

EURUSD 0/- Convincing break of 1.38 targets 1.3735 lvl. Res 1.3870-80
EURJPY 0/- Risk of squeeze up to 134.80 but 134 likely caps for 132.50
USDJPY 0/- Risk of a squeeze up to 96.70-80. Would sell there, stop abv 97.25 for 94.0
GBPUSD 0/- Prefer to sell to 1.5960-80, or break of 1.5890, for 1.5830
AUDUSD 0/- Prefer to sell rallies to 0.7810-15, accelerating below 0.7750 for 0.7650

FX-Options Comment
EURUSD Vols have eased off as spot continues to come under pressure. Risk reversals have
also eased off which might imply spot will stay weak for the moment.
USDJPY Back end vols are paid up as spot moves higher. Risk reversals have eased off all along the
curve so likely to see spot well bid.
AUDUSD Spot remains stuck in ranges and the curve has now come off from levels seen last week.
Upside AUD calls still finds buyers in the 1m-3mth area so spot might grind higher.

Equities Daily stance Comment

DAX 0/+ Buy on dips towards 4948 and target 5000. Stop below 4920.
FTSE 0/+ Buy on dips towards 4353 and target 4400. Stop below 4333.
S&P500 0/+ Buy on dips towards 885 and target 900. Stop below 877.
Nasdaq100
Nikkei 0/+ Buy at the break of 9500 and target 9600. Stop below 9450.

Commodities Daily Stance Comment

Gold 0/+ Buy on dips towards 942 and target 953. Stop below 935.50.
Silver 0/+ Buy on dips towards 14.60 and target 15. Stop below 14.45.
Oil 0 Sell on rallies towards 63.40 and target 62. Stop above 64.

Earnings Releases
Country Time (GMT) Name EPS exp. EPS prior Comment
(G(GMT)(GM
T)
 Daily Trading Stance

US Breakeven 10 Year 140

Top 100 Global Stocks CDS Index
3

2,5
120

100
1,5

1
80

0,5

60
0

-0,5 40
17-jan 17-mar 17-maj 17-jul 17-sep 17-nov 17-jan 17-mar 17-maj 29-05-2008 29-07-2008 29-09-2008 29-11-2008 29-01-2009 29-03-2009

US Breakeven 10 Year Saxo CDS Index

USD breakeven 10 Year – an expression for measuring inflation Credit Default Swaps are expressions for the perceived
expectations. default risk in a company. Now at 96.
AAA and BAA Corporate Bonds vs. 30yr US Treasuries
EURUSD Opt. Vol.
35 7

6
30

5
25

4
20

3
15

2
10
1
5
0
0 okt-07 jan-08 apr-08 jul-08 okt-08 jan-09 apr-09
maj-07 jul-07 sep-07 nov-07 jan-08 mar-08 maj-08 jul-08 sep-08 nov-08 jan-09 mar-09 maj-09

EUR-USD OPT VOL 1W EUR-USD OPT VOL 1M EUR-USD OPT VOL 1Y Moody BAA - US Generic Govt 30 Year Yield Moody AAA - US Generic Govt 30 Year Yield

Volatility at different time horizons. Too low, now? Spreads are easing, but still showing tight corporate debt
markets.

CEE-German Govt. Bond Spreads CBOE SPX VOLATILITY INDEX

12 90

80
10
70

8 60

50
6
40

4 30

20
2
10

0 0
jul-08 aug-08 sep-08 okt-08 nov-08 dec-08 jan-09 mar-09 apr-09 maj-09 nov-08 dec-08 jan-09 feb-09 mar-09 apr-09 maj-09
GDMA Hungarian - German Czech Republic - German Poland - German CBOE SPX VOLATILITY INDX

Some optimism after the G20 meeting. Especially for Hungary. The VIX Index is edging lower. Now below 40.