Today's Headlines

Bloomberg:

• Banks in Europe Face $3.8 Trillion in Assets Sales. European banks could be forced to sell as much as $3.8 trillion in assets through 2013 and curb lending if governments fall short of their pledges to stem the sovereign debt crisis or face a shock their firewall can’t contain, the International Monetary Fund said. In a study of 58 banks including BNP Paribas SA (BNP) and Deutsche Bank AG (DBK), the IMF forecast that under such circumstances, gross domestic product in the 17-country euro region would be 1.4 percent lower than now expected after two years. Even under its baseline scenario, the IMF sees banks’ combined balance sheets possibly shrinking by as much as $2.6 trillion.
• Italian Bonds Slide on Monti Deficit as Bunds Outperform. German bunds outperformed most of their euro-region peers as fresh concern about Europe’s debt crisis boosted demand for the safest assets while the nation’s borrowing costs dropped to a record at a sale of two-year notes. Italian bonds reversed gains after Prime Minister Mario Monti pushed back his balanced-budget goal and predicted a deeper contraction of the economy. Spanish government bonds pared an advance after the Bank of Spain said the country’s bad loans ratio climbed. The nation will auction two- and 10-year securities tomorrow.
• European Stocks Decline; Repsol, Santander Retreat. European stocks declined as Bank of England policy maker Adam Posen ended his support for more stimulus, falling house prices signaled slowing growth in China and bad loans surged in Spain. “The debt crisis is far from over still and I think Spain will be worse before it gets better,” Henrik Drusebjerg, a senior equity strategist at Nordea Bank AB in Copenhagen, said in a Bloomberg Television interview with Maryam Nemazee. “European leaders need to address the key issues to move Europe out of this crisis and that is how to create growth under this environment and that has been almost unaddressed so far during this crisis.”
• Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to BNP Paribas SA. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings climbed 12.5 basis points to 669.5 at 2:42 p.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose five basis points to 142 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 6.5 basis points to 250.5 and the subordinated index climbed 11 to 409.
• Bank Credit Worst to Companies Since Crisis Peak. The debt of banks is trading at the biggest discount to the broader corporate bond market since the depths of the funding squeeze in November as Europe’s sovereign crisis again threatens to rattle global financial markets. From Spain’s Banco Santander SA (SAN) to Morgan Stanley in New York, the cost of credit-default swaps on a basket of the largest banks in Europe and the U.S. is 266 basis points, compared with 137 for the Markit iTraxx Europe Index of 125 companies with investment-grade ratings. The 129 basis-point spread is the most since it reached 133 on Nov. 30.
• Worst Yet to Come as Crisis Rescue Cash Ebbs, Deutsche Bank(DB) Says. The worst may be yet to come in the global financial crisis as the central bank spending that kept defaults low runs out, according to Deutsche Bank AG. (DBK) Credit-default swap prices imply that four or more European nations may suffer so-called credit events such as having to restructure their debt, strategists led by Jim Reid and Nick Burns said in a note. The Markit iTraxx SovX Western Europe Index of contracts on 15 governments including Spain and Italy jumped 26 percent in the past month as the region’s crisis flared up. “If these implied defaults come vaguely close to being realised then the next five years of corporate and financial defaults could easily be worse than the last five relatively calm years,” the analysts in London said. “Much may eventually depend on how much money-printing can be tolerated as we are very close to being maxed out fiscally.”
• Oil Falls as U.S. Supply Rises Twice as Much as Forecast. Crude fell for the first time in three days on a U.S. Energy Department report showing a larger- than-expected supply gain. Prices dropped as much as 1.8 percent after the government said oil inventories rose 3.86 million barrels last week, more than double the increase forecast in a Bloomberg survey of analysts. Refineries operated at a rate below 85 percent for a second week.
• Intel(INTC), (IBM) See Sales Stall as Europe Crisis Crimps Orders.
• SXC(SXCI) to Buy Catalyst(CHSI) in $4.4 Billion Pharmacy Services Deal. SXC Health Solutions Corp. agreed to buy Catalyst Health Solutions Inc. in a cash and stock transaction valued at $4.4 billion to stay competitive as larger pharmacy benefits managers join forces. Catalyst investors will receive $28 in cash and 0.6606 shares of SXC stock for each Catalyst share under the terms of the agreement, the companies said today in a statement. That implies a purchase price of $81.02 per Catalyst share, 28 percent above yesterday's closing stock prices.
• Default Concern Mounts in Brazil as State Banks Cut Rates. President Dilma Rousseff is pushing state-run banks Banco do Brasil and Caixa Economica Federal to lower interest rates and boost lending to less-creditworthy borrowers, fueling concern that delinquencies will rise. The consumer default rate in Latin America's biggest economy held at 7.6 percent in February, the highest since December 2009, the central bank said in a report last month. The overall default rate in Brazil was unchanged at 5.8 percent, compared with 2.47 percent in Mexico.
• Webb Sees Virginia Question for Obama After Health-Law Fight. Democratic Senator Jim Webb of Virginia said it's a "big question mark" whether President Barack Obama will be able to carry his state again in this year's election because Obama's handling of the health-care overhaul harmed his credibility.

Wall Street Journal:

• Italy's 2013 Budget Miss Is No Sign of Laxity. Italy’s decision Wednesday to announce it won’t balance its budget as pledged next year is destined to complicate the debate about whether the euro area is too focused on austerity. A closer look indicates that Italy is not following Spain in loosening its fiscal targets so as not to over-penalize economic growth. Italy is in fact tightening its fiscal policy, a subtle point noted by Deputy Economy Minister Vittorio Grilli.
  

Business Insider:

• The 10 Hedge Funds That Give A Ton Of Money To Politicians.
• Regulators Decide At The Last Minute They're Not Going To Regulate 85% of Derivatives Traders.
• LA Times Publishes Awful Afghan Photos Over Strong Objection From The Army.
• This is the Chart That's Causing Spain to Get Crushed Today.
• Goldman(GS): Apple(AAPL) is a Screaming Buy.
  

Zero Hedge:

• A Quick Reminder Ahead of Tomorrow's Spain Debt Auction.
• Is This The Canary of Australia's Collapsing Housing Coalmine?
• Contagion Returns: France CDS Over 200 For First Time Since January. (graph)
  

Washington Post:

• SEC Approves New Rules for Dealers of Credit Default Swaps; Regulators Face Challenge. More than three years after the financial system teetered on the brink of collapse, federal efforts to impose tighter regulation are facing a major challenge. Business groups that denounce various rules as wasteful and misguided have found a powerful legal tactic to oppose regulators and potentially blunt their work. Their argument: Rulemakers have done too little to analyze the costs and benefits of the rules, thereby creating an unwarranted drag on the economy and giving courts grounds to intervene.

Securities Technology Monitor:

• France Biggest Default Risk, Not Spain. If you thought Spain was the country that most investors were now worried about defaulting on their credit obligations, think again. France tops the list. And Hungary is rising fast. The French republic ranked as the top sovereign entity with the most outstanding credit default swaps, net after offsetting contracts are accounted for, in the week ending April 13.

Reuters:

• Exclusive: Weidmann Says Not ECB Job to Tackle Spain's Problems. Spain should take a rise in its bond yields as a spur to tackle the root causes of its debt woes, not look to the European Central Bank to help by buying its bonds, European Central Bank policymaker Jens Weidmann told Reuters. Weidmann, who has led a push by some policymakers from core euro zone countries for the bank to begin planning an exit from its crisis mode, said no ECB policymakers favored using the bank's bond-buying plan to target specific interest rates on sovereign bonds, and ECB board member Benoit Coeure was simply stating a fact by saying last week that the program still existed. In a wide-ranging interview, Weidmann, who turns 44 on Friday, also said he saw no reason to discuss a third LTRO, the funding instrument with which the ECB has pumped over 1 trillion euros into financial markets since late last year. Weidmann, who is head of Germany's Bundesbank, which gives him a powerful voice on the ECB's 23-man Governing Council, spoke to Reuters against a backdrop of growing tensions in Spain, where benchmark sovereign bond yields are near the closely watched 6 percent level."We shouldn't always proclaim the end of the world if a country's long-term interest rates temporarily go above 6 percent," he said.
• Exclusive: Chesapeake(CHK) CEO Took Out $1.1 Billion in Unreported Loans. Aubrey McClendon, the CEO of Chesapeake Energy Corp, has borrowed as much as $1.1 billion over the last three years against his stake in thousands of company wells - a move that analysts, academics and attorneys who reviewed loan documents say raises the potential for conflicts of interest. The loans, which haven't been previously detailed to shareholders, are used to fund McClendon's operating costs for an unusual corporate perk that offers him a chance to invest in a 2.5 percent interest in every well the company drills. McClendon in turn is using the 2.5 percent stakes as collateral on those same loans, documents filed in five states show.
• Copper Steadies Near $8,000; Europe Caution Weighs.
  

Frankfurter Allgemeine Zeitung:

• Germany's leading economic institutes said the European Central Bank's response to the region's debt crisis jeopardizes its independence, citing a yet unpublished report. "The independence and credibility of the ECB is at stake," the institutes will say in their biannual report to be published tomorrow. "There's a danger that monetary policy won't be able to free itself from the predicament it has entered," the institutes said.
  

Il Corriere della Sera:

• Prime Minister Mario Monti is not planning to adopt new austerity measures this year to meet its deficit-reduction goal, citing his comments in a meeting with the representatives of the three main political parties last night.