Week in Review, March 12

Foreign stock markets fell midweek on rumors of a possible disorderly Greek default (proved false) and some softening in Asian growth. The Euro Stoxx 50 was off -1.9%. The U.S. markets were flat with the S&P 500 closing at 1371, about where it began the week. Treasury bonds sold off slightly with the 10 year up 5 bp to yield 2.03%.

Despite reaching an agreement with 86% of its private creditors, the Greek government enacted "collective action clauses" which forced losses on all bondholders. Doing so maximized the level of debt relief, but was also finally ruled a "credit event" by the ISDA. Now that Greece has officially defaulted on its debt, holders of credit default swaps will be paid.

The February unemployment rate held at 8.3% and 227,000 new jobs were added to payrolls. The previous two months were revised upward by 61,000. Average hourly earnings rose +0.1% and +1.9% YoY. It was a solid report.

The Bank of England kept its main interest rate unchanged at a record low 0.5%, amid concerns that the economic turmoil in Europe and high oil prices would hurt the British economy. Meanwhile the ECB also stood pat, keeping their rate unchanged at 1%.

Mitt Romney extended his delegate lead on Super Tuesday as he claimed a narrow victory in Ohio and racked up wins in Idaho, Virginia, Vermont, Massachusetts and Alaska. It wasn't a knockout blow and the Republican contest likely will not end soon. Romney has 55% of the delegates that have been awarded so far.

Meanwhile Vladimir Putin returned to a six year stint as President of Russia with 64% of the vote. Election fraud and intimidation added to his results.

This week attention will be on the Tuesday March 13 FOMC meeting although no change in policy is expected. The next meeting on April 25 will include updated forecast information.

Retail sales on Tuesday should be strong (expect +1.0%). The PPI on Thursday (+0.5%) and CPI (+0.4%) on Friday will highlight inflation and the impact of rising gas prices. Industrial production (+0.4%) and consumer confidence (unchanged) rounds out the week on Friday.

Treasury auctions of 3, 10, and 30 year bonds will be a Monday through Wednesday event.

Best of luck to all the mushers on the Iditarod trail!

Jeff Pantages

Chief Investment Officer