Today's Headlines

Bloomberg:

• Greek Bonds Drop ;a 7th Day; Bund Spread Widens on Budget Woes. Greek two-year notes slid for a seventh day and the 10-year yield premium to German bunds jumped to the most since the euro’s debut after the nation’s finance minister failed to dispel concern that the government is doing enough to avoid a default. The decline drove the yield on the two-year note up as much as 130 basis points, bringing the increase since the streak began to 367 basis points. The 10-year yield climbed 41 basis points, or 442 basis points more than bunds, the benchmark for borrowing in Europe, based on Bloomberg generic prices. Greek stocks fell and credit-default swaps on the nation’s debt rose to a record. “Greece continues to look like a slow-motion train crash,” Steve Barrow, head of Group of 10 currency strategy at Standard Bank Plc in London, wrote in a report. “The crash has not occurred yet but it is coming. Efforts to avoid a crash seem doomed to failure, whether it’s emergency loans or some other initiative. Bond spreads are likely to widen much further.” Papaconstantinou said yesterday the nation’s 2009 deficit will be at least 12.9 percent of gross domestic product, up from the previous estimate of 12.7 percent. The EU’s limit is 3 percent. The cost of insuring against a default on Greek government bonds rose above that for Iceland for the first time. Credit- default swaps linked to Greek sovereign debt climbed 53 basis points to a record 468.5 today, according to CMA DataVision prices.
  
• Mortgage Rates on 30-Year U.S. Loans Jump to 5.21%. U.S. mortgage rates jumped to the highest level in almost eight months, increasing borrowing costs for buyers and signaling a threat to the housing market’s recovery as government efforts to spur demand end. Rates for 30-year fixed loans rose to 5.21 percent for the week ended today from 5.08 percent, mortgage finance company Freddie Mac said in a statement. That’s the highest rate since the week ended Aug. 13. The Mortgage Bankers Association’s index of mortgage applications fell 11 percent in the week ended April 2. The portion of refinancings dropped 17 percent. Applications to purchase a home increased 0.2 percent.
  
• Hedge Fund Rules Are Fair to U.S., EU's Barnier Tells Geithner. Hedge-fund rules proposed by the European Union aren’t protectionist, the bloc’s financial services chief told U.S. Treasury Secretary Timothy F. Geithner. Michel Barnier, the EU’s financial services commissioner, said the law wouldn’t shut out U.S. funds and managers from the 27-nation region, according to a copy of a letter to Geithner obtained by Bloomberg News.
• China on 'Treadmill to Hell' Amid Bubble, Chanos Says. China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos. The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV. China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.” Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.
• Jobless Claims in U.S. Increased Heading Into Easter. More Americans unexpectedly filed claims for jobless benefits last week, a jump that may in part reflect difficulty in seasonally adjusting the data ahead of the Easter holiday. Initial jobless applications increased by 18,000 to 460,000 in the week ended April 3, Labor Department figures showed today in Washington. The week leading up to Easter and the two weeks that follow are traditionally a volatile time for claims, a Labor Department analyst said, making it difficult to discern the underlying trend in applications.
• ECB Keeps Rates at 1% on Greek Crisis 'Wait and See'. The European Central Bank left interest rates at a record low as the Greek fiscal crisis complicates its withdrawal of emergency stimulus measures. The Frankfurt-based ECB kept its benchmark interest rate at 1 percent, as predicted by all 62 economists in a Bloomberg News survey. A separate poll shows the rate may stay there until the first quarter of next year.
• Wall Street Bonuses Should Be Taxed More, NYC Comptroller Says. New York City and state officials should consider higher taxes on Wall Street bonuses in the face of deficits and shrinking revenue, Comptroller John Liu said. Governor David Paterson and Mayor Michael Bloomberg were wrong to rule out tax increases on bonuses to employees of banks and financial companies that received federal bailout funds, Liu said at a Manhattan breakfast sponsored by Crain’s New York Business. “We’re not at a point in time where it’s prudent to exclude any options,” Liu said, citing Paterson’s prediction of a $9 billion deficit for the state and Bloomberg’s $4 billion projected city budget gap.
• Gap(GPS), Saks(SKS) Lead Largest Monthly Sales Gain in a Decade. Gap Inc., Saks Inc. and TJX Cos. posted March sales gains that exceeded analysts’ estimates as retailers benefited from an early Easter and the economic recovery to report the biggest increase in a decade.Easter fell eight days earlier this year on April 4, which drew more purchases into the reporting period. That produced more favorable comparisons with last March, when the economy was in the depths of the recession and the Standard & Poor’s 500 Index fell to a 12-year low, said David Schick, a retail analyst for Stifel Nicolaus & Co. in Baltimore. “It certainly doesn’t finish making the case that we are in recovery, because of the easy comparison,” Schick said in a telephone interview. “What we need to see is healthy numbers against comparisons that aren’t as easy.” March sales at 31 chain stores rose 9 percent, the biggest one-month gain since March 1999, the New York-based International Council of Shopping Centers said today. The early Easter accounted for 4 to 5 percentage points of the gain, said the trade group. April sales may be unchanged or fall as much as 3 percent, the council said.

Wall Street Journal:

• Mutual Funds Often Unclear on Their Use of Derivatives. The use of derivatives by mutual funds has caught the eye of regulators, concerned that these complex instruments pose risks that aren't fully understood. It's safe to say that many investors, and even their advisers, can't easily determine the extent to which the funds they choose are using derivatives, including futures, options, swaps and other instruments. While more often associated with hedge funds and the more exotic types of exchange-traded funds, such as those that use leverage, derivatives are in fact employed to some extent by many different types of mutual funds.

Business Week:

• Chongqing Airport, Railways Mean Hard Landing for China's Wen. “Look at the scale of this,” said Li Chongyi, an engineer, as he watched a 4-kilometer line of trucks and earth movers busy quadrupling the size of Chongqing’s Jiangbei International Airport. “This will take years.” Jiangbei, which begins work on a third terminal when the second is done next year, is one of 15 trillion yuan ($2.2 trillion) in projects begun in 2009, almost twice the economy of India. The projects and their loans are stymieing efforts by Premier Wen Jiabao to curtail investment as inflation rose to 2.7 percent in February, a 16-month high. Failure to rein in local government spending could push inflation to 15 percent by 2012, said Victor Shih, a political economist at Northwestern University who spent months tallying government borrowing. “Increasingly the choice facing the government is between inflation or bad loans,” said Shih, author of the book “Finance and Factions in China,” who teaches political science at the university in Evanston, Illinois. “The only mechanism for controlling inflation in China is credit restriction, but if they use that, this show is over -- a gigantic wave of bad loans will appear on banks’ balance sheets.” Attempts to curb borrowing by raising interest rates would boost debt-servicing costs for local governments. At the same time, tightening credit may stall projects, triggering “a build-up of bad loans,” the Basel, Switzerland-based Bank for International Settlements said in a quarterly report in December. Nomura Holdings Inc., Japan’s biggest brokerage, estimates local government projects started last year totaled up to 10 trillion yuan -- 2.5 times the official 4 trillion yuan stimulus plan. Should the boom end in a property-market collapse, even those stocks tied to the local government projects will be affected along with most other industries, said Shanghai-based independent economist Andy Xie, formerly Morgan Stanley’s chief Asia economist. “Corporate profits are very much driven by the property sector,” said Xie. “The largest sectors will be hit hard, especially banks and insurance companies.” “Policy makers may need to start thinking about how to handle the aftermath of the bust,” said Nomura’s Sun.

CNBC:

• Tech Industry Recovery Under Way: Forrester.
• 'Distressed' Home Sales Levels Near 2009 Peak. Sales of foreclosed or other "distressed" homes are flirting with the peaks of the housing crisis in early 2009 when heavy inventory was pressuring home prices lower, according to First American CoreLogic. Distressed sales accounted for 29 percent of all sales in January, the highest since April 2009 and just shy of the 32 percent seen in January 2009, the mortgage data company said Thursday.

MarketWatch:

• After Shorting Subprime, Eisman Says Short AIG(AIG). Equity holders could lose $23 billion, FrontPoin's Eisman estimates.

NY Times:

• Apple(AAPL) Unveils Ad Platform and Phone Software.

Business Insider:

• Think This Market is Boring? Here Are 14 Crises That Could Blast The Complacency Out Of The Market.

zerohedge:

• S&P Threatens Greece With Downgrade If Bond Spreads Are Not Quickly Reduced.

Wisconsin Journal Sentinel:

• Tax Shock is Just Start for Obamacare.

Lloyd's List:

• Dry Bulk Newbuilding Deliveries Hit Record High. DELIVERIES of newbuilding dry bulk carriers hit a record high of 190 vessels in the first three months of the year, equivalent to two ships entering service every day.

CBS News:

• Qaeda Group Threatens to Attack World Cup. The North African terror group al Qaeda in the Islamic Maghreb has threatened to attack this summer's World Cup games in South Africa. "How amazing could the match United States vs. Britain be when broadcasted live on air at a stadium packed with spectators when the sound of an explosion rumbles through the stands, the whole stadium is turned upside down and the number of dead bodies are in their dozens and hundreds, Allah willing," reads a statement the group published in a recent issue of the Jihadi online magazine Mushtaqun Lel Jannah (Longing to Paradise)."Al Qaeda, who managed to deliver 50 grams of explosives to the Detroit plane, after infiltrating dozens of U.S. security barriers, al Qaeda, who enabled brother martyr Abul Kheir (Abdullah Asiri) to get into the palace of Mohammed bin Nayef, al Qaeda, who humiliated the world's greatest intelligence apparatus through the operation of Mujahid Abu Dujana al-Khorassani (Humam al-Balawi), who shattered the pride of the CIA and the Jordanian intelligence combined," the statement says. "Al Qaeda will have a presence in the games, Allah willing." In addition to the U.S. and U.K. teams, the teams representing France, Germany and Italy are also on the group's list of targets. "All those countries are part of the Zionist-Crusader campaign against Islam," the statement says. The group says they will use some undetectable explosive that will be able to circumvent security checkpoints at the games. The statement appears to directly challenge FIFA's president Joseph Blatter. "All the security checks and X-ray machines that America will be sending after reading this article would not be capable of detecting how those explosives made it into the stadium and that for a simple reason that we will be announcing in due course," the statement says. "So are your preparations for this event up to scratch, Mr. Platter? (sic)"

cnet:

• iPad Sold Out at Best Buy(BBY) Nationwide. Best Buy has sold out of the iPad at all 673 of its U.S. stores with Apple shops. In contrast, Apple stores are maintaining stock. "We expect to have iPad inventory replenished at these locations by Sunday," said company spokeswoman Paula Baldwin.

Rasmussen Reports:

• Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 28% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-two percent (42%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -14 (see trends).
• 55% Oppose Limits On U.S. Nuclear Response To Attacks. Fifty-five percent (55%) of U.S. voters oppose President Obama’s new policy prohibiting the use of nuclear weapons in response to chemical or biological attacks on the United States. A new Rasmussen Reports national telephone survey finds that just 25% of voters agree with the president’s decision to rule out a nuclear response if a non-nuclear country attacks America with chemical or biological weapons. Only 31% favor a reduction in the number of nuclear weapons in the U.S. arsenal. Fifty-three percent (53%) oppose any such reduction.

Politico:

• President Obama, Dmitry Medvedev Sign Strategic Arms Reduction Treaty. Making a down payment on his goal of a nuclear-arms-free world, President Barack Obama signed a new treaty with his Russian counterpart Thursday to reduce nuclear arsenals on both sides by about one-third. In a gilded hall here at a castle in Prague’s presidential complex, Obama and Russian President Dmitry Medvedev put their signatures on a new Strategic Arms Reduction Talks treaty that calls on each country to reduce its number of warheads and long-range missiles. Obama also predicted the U.S. Senate would ratify the treaty, despite some Republicans' objections that it goes too far in reducing American military might. China and Russia are the last nations at the negotiating table that have not agreed to move forward with tougher sanctions against Iran. Obama will meet one on one with the Chinese leader during the nuclear summit. He goes into that discussion with a stronger case if he can move the Russians closer to sanctions in his meeting Thursday with Medvedev. The White House downplayed the potential for a breakthrough with Russia in Prague. Briefing reporters on Air Force One, White House press secretary Robert Gibbs said not to expect any significant developments on Iran.
• Robert Rubin Returns. Former Treasury Secretary Robert Rubin — who watched his reputation as an economic titan shatter after he left the Clinton White House — is decidedly out of favor in the nation’s capital. Except for one place — the Obama administration. Behind the scenes, Rubin still wields enormous influence in Barack Obama’s Washington, chatting regularly with a legion of former employees who dominate the ranks of the young administration’s policy team. He speaks regularly to Treasury Secretary Timothy Geithner, who once worked for Rubin at Treasury. According to Geithner’s public calendar, the treasury secretary spoke or met with Rubin at least four times in the first six months of Geithner’s tenure. Three of those chats, including an hourlong session in Rubin’s New York office, came before President Obama released his Wall Street regulatory reform proposal in June 2009. Rubin’s is a discreet kind of influence, though, because the veteran Wall Street hand is still dealing with the fallout from his post-White House career. He took a job at Citigroup, where the bank’s collapse was averted only by the injection of $45 billion in taxpayer bailout cash.
• CBO Chief Says Debt 'Unsustainable'. The nation’s fiscal path is “unsustainable,” and the problem “cannot be solved through minor tinkering,” the head of the Congressional Budget Office said Thursday morning. Doug Elmendorf, best known for arbitrating the costs of various health care proposals, added his voice to a growing chorus of economic experts who predict dire consequences if political leaders don’t scale back spending, increase taxes or both — and soon. Elmendorf noted a recent CBO report that pegged an increase in the public debt from $7.5 trillion at the end of 2009 to $20.3 trillion at the end of 2020 if President Barack Obama’s fiscal 2011 budget were to be implemented as written. As a percentage of gross domestic product, the debt would rise from 53 percent to 90 percent, CBO forecasted.
  

Reuters:

• Exclusive: U.S. Group Targets Honeywell(HON) Over Iran. A pressure group, United Against Nuclear Iran (UANI), is urging industrial conglomerate Honeywell International Inc to stop selling security technology to Iran, the group said on Thursday. Honeywell security products can be used for surveillance of oil pipelines and nuclear reactors, UANI said in a letter faxed to Honeywell it provided exclusively to Reuters. The sale of security technology, via a British subsidiary, violates company guidelines for business conduct, UANI said, adding it may sue or pressure the New York Stock Exchange to delist Honeywell if the company continues operations in Iran.
• Tech Budgets To Rise in 2010-Morgan Stanley Survey. More companies are planning to increase their technology spending in 2010, especially in hardware, a Morgan Stanley survey showed on Thursday, suggesting stronger sales for companies such as Hewlett-Packard Co(HPQ) and International Business Machines Corp (IBM). The survey of 150 chief information officers (CIOs) showed tech budgets up 3.2 percent in 2010, after a 1.8 percent decline in 2009, signaling "increasing confidence in a return to IT spending growth this year across all the major tech segments." It was also a 1.5 point increase from the same survey in January, showing CIOs gaining confidence about business conditions in recent months. Hardware spending leads the improvement with a planned 4.1 percent increase, followed by a 3.7 percent increase in software spending, it showed.

Yonhap:

• North Korea said it will freeze a series of South Korea-owned facilities at its eastern mountain resort and expel South Korean personnel from them.