Wednesday, February 10, 2010 – my comments are in italics

• Greece - Germany is considering a plan in conjunction w/its EU partners to offer Greece and other
troubled Eurozone countries loan guarantees (per WSJ). Bloomberg added that Germany is considering
loan guarantees as well as additional aid measures; As of 5:25amET, a deal had not yet been reached per
Reuters citing a "French source." Euro zone finance ministers will hold a teleconference on Wednesday
to discuss the Greek budget crisis, a European Commission spokesman said. – this has sparked a rally in
greek sovereign debt.

Yield on 5 Year Sovereign for Hellenic Republic Government Bond

Recall that when a bond rallies, the yield declines. This is a graph of the yield, so a rally in the bond
means this yield moves lower.

• BoE cut to its economic growth forecast and gave commentary that inflation will undershoot its
target, suggesting policy makers may need to keep up its emergency stimulus (per Bloomberg); BOE's
King says its "far too soon to say no more bond buys are needed"; separately, UK IP came in prtty strong.
– let’s hope the US economy isn’t in the same boat.
• Major event for today – the Fed will release testimony from Bernanke discussing Fed exit strategies
today at 10amET; Discount rate hike may come sooner than most expect. In contrast, large-scale
draining of reserves could come later than most expect. When the Fed does hike, the interest on the
excess reserve (IOER) rate will be the rate on which to focus. Feroli
• “Truckers index drives US GDP fears” - The Pulse of Commerce Index (measures the health of the
US economy by analyzing real-time diesel consumption of trucks) posts a sharp decline in Jan; The
decline in the PCI suggests US economic activity slowed in January after the index fell at an annualized
rate of 36.8 per cent (FT)

This is a brand new index that is supposed to mirror Industrial Production (the look-back data
has been reconstructed). The benefit is that it will be released prior to industrial production, so
we can get a timelier picture into the state of the economy. The index is constructed from
electronic card payment data that captures the location and volume of diesel fuel being
purchased by over the road trucking operations.
Be careful about getting too negative based on just this one month of data. Here is what the guy
who created the index said, “Though the January 2010 number is disappointing, the index is 3.6
percent above its January 2009 level and is similar to year-over-year pre-recession values. The
three-month moving average is 2.3 percent above the previous year's value, which is the first
time that there has been a year-over-year increase since April 2008, 21 very difficult months
ago."