Today's Headlines

Bloomberg:

• Greek Bill Sale Meets Reduced Demand One Day After Debt Downgrade by S&P. Greece paid almost 5 percent to borrow for six months as European policy makers’ talk of an additional aid package to avoid a debt restructuring drove its bonds higher. Greece sold 26-week bills today to yield 4.88 percent, 168 basis points more than Germany paid last month to borrow for 10 years. The rate was higher than the 4.8 percent at the previous auction on April 12. A Greek debt restructuring is “not an option,” European Central Bank Governing Council member Yves Mersch told journalists at a conference in Florence today. “It’s inevitable that Greece will have to borrow more money from the EU and IMF,” said Nick Stamenkovic, a fixed- income strategist at RIA Capital Markets Ltd. in Edinburgh. “The first outcome will be that they will get the necessary external funding and that will provide some temporary support.” Greek newspaper Kathimerini reported that Greece may also be offered a new aid package of at least 80 billion euros to replace the existing one that would cover its financing needs for the next two years. Greece may get an extension of loan repayments, European Central Bank Governing council member Ewald Nowotny said today in an interview with Austrian state broadcaster ORF. Greek bonds gained as reports of additional aid eased concern the country would be forced to restructure its 330 billion euros of outstanding debt. The Greek two-year yield dropped 53 basis points to 25.08 percent, the biggest decline in a week. The 10-year bond yield fell 27 basis points to 15.44 percent. The cost of insuring Greek debt against default fell from a record 1,371 yesterday, dropping 53 basis points to 1,318. The difference in yield between Greece’s benchmark 10-year bond and comparable German debt fell 31 basis points to 12.3 percentage points as of 3:30 p.m. in Athens. German Chancellor Angela Merkel attempted to cool speculation that a new bailout for Greece will come as early as June. “First we need to hear what the status is. Only then can I decide what, if anything, needs to be done,” Merkel told reporters in Berlin today. “We don’t do Greece any favors by speculating” about more aid, she added. “The way to deal with insolvency is not to lend more to the insolvent party, that’s Ponzi finance,” Citigroup Inc. Chief Economist Willem Buiter said in an interview with Ken Prewitt on Bloomberg radio from Edinburgh. “What you have to do is to face up to the reality of restructuring” which means taking “the necessary steps to restructure the sovereigns and the banks that are exposed to the sovereigns.”
• Greek Funds Industry Head Warns Debt Restructuring Would Devastate Economy. Greece’s money managers are warning of damage to an already crippled economy should European leaders move to restructure the country’s debt. Greek 10-year bond yields and the cost of insuring the country’s debt against default rose to all-time highs at the end of April amid speculation about a debt write-off or an extension of repayment timelines. Standard & Poor’s cut Greece’s long-term sovereign credit rating by two levels yesterday to B, five notches below investment grade. The rating may be lowered further, S&P said. “Right now a restructuring shouldn’t and can’t happen,” Aris Xenofos, president of the Hellenic Fund & Asset Management Association representing 36 firms, said in an interview before the downgrade. “It would be devastating for the Greek economy, and detrimental for the rest of the European Union and the euro.”
• Cost of U.S. Imported Goods Rises More Than Estimated on Food, Fuel Prices. Prices of goods imported into the U.S. rose more than forecast in April as a slumping dollar and growing economies overseas pushed up the cost of fuel and food. The 2.2 percent increase in the import-price index followed a revised 2.6 percent gain in March, according to figures from the Labor Department today in Washington. Other reports showed distributors boosted inventories and small businesses lost confidence. Compared with a year earlier, import prices increased 11 percent, exceeding the 10 percent increase projected by economists surveyed and the biggest 12-month gain in a year. Confidence among small companies fell to a seven-month low in April, damped by a deteriorating outlook for the economy, a report from the National Federation of Independent Business showed. The Washington-based group’s optimism index decreased to 91.2, the lowest since September, from 91.9 the prior month. Seven of the measure’s 10 components dropped. Small businesses planning to increase prices held at a net 24 percent of owners for a second month, according to the report. The report on prices from overseas showed the cost of imported petroleum increased 7.2 percent from the prior month and was up 37 percent from a year earlier. Excluding all fuels, import prices climbed 4.3 percent from April 2010, matching the prior month’s 12-month increase as the biggest since October 2008. Imported food was 1.8 percent costlier last month and was up 20 percent from a year earlier, the biggest 12-month increase since records began in 1977.
• Lacker Says Fed Should Plan Withdrawal of Stimulus After QE2 Program Ends. Federal Reserve Bank of Richmond President Jeffrey Lacker said the central bank should turn its attention to withdrawing stimulus after completing its $600 billion bond purchase program at the end of next month. “Barring significant unexpected developments, this should be the high-water mark for monetary stimulus in this cycle, with the focus going forward on the timing and pace of stimulus withdrawal,” Lacker said today in remarks prepared for a speech in Arlington, Virginia. “While timing and pace will depend upon how the economy behaves, I believe it will be important to remember the lesson of the last recovery -- namely, that inflation is capable of rising even if the level of economic activity has not returned to its pre-recession trend,” Lacker said to a gathering of northern Virginia business and community leaders. “It may be necessary to initiate policy tightening well before the unemployment rate has fallen to a rate we would expect to see over the long run,” Lacker said.
• China Ore Imports, Down in April, Unlikely to Rise, Arctic Says. China’s iron ore imports, down 11 percent in April from the month before, are unlikely to rise from current levels in May and June as the world’s biggest steelmaker curbs output, Arctic Securities ASA said. China imported 52.9 million metric tons of iron ore in April, down from 59.5 million tons in March, according to data from the country’s General Administration of Customs. Buyers were deterred by higher prices, Hu Kai, an analyst with researcher Umetal.com, said. Import prices at Tianjin port rose 5.3 percent in April, according to Steel Business Briefing Commodities Research. “We expect iron ore imports in May and June to remain at lower levels due to closure of steel mills as some regions struggle with electricity shortages,” Erik Nikolai Stavseth, an Oslo-based analyst with Arctic, said in an e-mailed note today.

Wall Street Journal:

• Sovereign Wealth Funds Fight for Reputation. The world's largest government-controlled investment funds are gathering in Beijing this week to discuss ways to blunt criticism that their investments are driven by political agendas. The so-called sovereign-wealth funds are seeking to better coordinate their approach as they look to put their vast resources to work world-wide.
• U.S. Pushes China on Human Rights. The U.S. risked China’s wrath by pressing the world’s second-biggest economy on its human rights record, with Secretary of State Hillary Clinton calling it a “fool’s errand” to try and deter dissent and free speech. In an interview with The Atlantic magazine, the top U.S. diplomat accused China “of trying to stop history, which is a fool’s errand.” In some of her strongest language to date, Clinton called China’s human-rights record “deplorable,” according to excerpts of an April 7 interview published today. She cited reports of arrests and “disappearances” of artists, journalists and bloggers. To underline the message, Vice President Joe Biden indicated that criticism on this front would continue -- even at the risk of irritating Chinese authorities, who view it as an intrusion into domestic affairs.
• Latest Treasure Is Location Data. As Lawmakers Ready Hearings, Insurers, Car Makers, Even Shopping Malls Seek to Track Customers. Cellphones that collect people's locations are only the tip of the iceberg: Auto makers, insurance companies and even shopping malls are experimenting with new ways to use this kind of data. Location information is emerging as one of the hottest commodities in the tracking industry—the field of companies that are building businesses based on people's data. Some companies are using the data to build better maps or analyze traffic patterns. Others send users advertisements for services near where they are located. Some insurers hope to use the data to provide discounts to better drivers. On Tuesday in Washington, D.C., a Senate Judiciary subcommittee plans a hearing to consider whether a federal law is required to protect consumer privacy on mobile devices.
• Goldman(GS) Discloses CFTC Probe. Goldman Sachs Group Inc. said the Commodity Futures Trading Commission is investigating its Goldman Sachs Execution and Clearing division's role as clearing broker for an unnamed SEC-registered broker dealer. The agency has orally advised Goldman it intends to bring aiding and abetting, civil fraud and supervision-related charges against the Goldman operation related to its clearing services for this broker-dealer, it added in its quarterly regulatory filing. The CFTC, Goldman said, is basing these charges on allegations the Wall Street giant knew or should have known that the client's subaccounts at Goldman were accounts belonging to customers of the broker-dealer and not the broker-dealer's own accounts.
• Mississippi River Crests in Memphis. The Mississippi River crested Tuesday in Memphis just short of 48 feet after threatening to bring record-setting flooding to the area. National Weather Service meteorologist Bill Borghoff said the river reached 47.85 feet at 2 a.m. and is expected to stay close to that level for the next 24 to 36 hours.
• BlueGold Loses 20% on Oil Bets, But Stays Bullish. BlueGold Capital Management LP, one of the most successful hedge funds over the past few years, is now among the biggest losers amid the sudden downturn in commodity markets. BlueGold, a $2.4 billion London-based fund, has suffered losses of about 20%, or nearly $500 million, so far this month, according to someone close to the matter. The downturn is the firm's worst ever.
  

Business Insider:

• A Quick Look at How Big Hedge Funds Are Trading This Market. (graphs) We went through the latest Hedge Fund Monitor from Bank of America, to find notable moves by large hedge funds across various assets.
• Irish Bombshell: Government Raids PRIVATE Pensions to Pay for Spending.
• Pakistani PM Disses US and Says China Is Its New "All Weather Friend".
• Ken Griffin Explains How The Government Just Enabled Another Huge Bailout of All The Same Firms. Griffin explained in more detail, why he thinks Dodd-Frank is so dangerous.
• More Bad News For Food Prices, As US Crop Situation Deteriorates.
  

New York Times:

• Syria Proclaims It Now Has Upper Hand Over Uprising. The Syrian government has gained the upper hand over a seven-week uprising against the rule of President Bashar al-Assad, a senior official declared Monday, in the clearest sign yet that the leadership believes its crackdown will crush protests that have begun to falter in the face of hundreds of deaths and mass arrests.
• Merkel Resists Pressure on New Aid for Greece. Ignoring mounting criticism from Greece and Ireland over the terms of their bailouts, Chancellor Angela Merkel refused Tuesday to commit Germany to any changes and insisted that “bold reforms” were the only way to make their economies stronger. Mrs. Merkel, as leader of Europe’s strongest economy and the biggest contributor to the rescue package, gave no indication that Germany would be willing to grant more aid — and certainly not at next week’s meeting of E.U. finance ministers. She said she would wait until officials from the E.U., the European Central Bank and the International Monetary Fund complete their assessment of Greece’s progress, particularly about how it was implementing its “bold reforms.” That report is due in June.

ChinaLawBlog:

• US Listed Chinese Company Troubles. Hidden In Plain Sight.

The Detroit News:

• Former GM Execs Sue For Retirement Benefits. More than 100 former General Motors executives are suing the automaker in federal court to recoup pension benefits slashed during the company's historic bankruptcy. The retirees, including former vice presidents and high-ranking managers, are trying to recoup benefits plus interest and want a federal judge to order GM to accurately pay future benefits.

Reuters:

• Slovak Prime Minister Iveta Radicova said restructuring of Greek debt will be inevitable at some point to overcome the country's fiscal crisis. Private financial institutions will need to share losses stemming for such restructuring, she said in an interview.