TIDBITS

March 7, 2008   

Credit Card Debt Growing

From Bloomberg:  “Consumer credit increased by $6.9 billion for the month to $2.52 trillion, the Fed said today in Washington. In December, credit gained $3.7 billion, less than a previously reported increase of $4.5 billion. The report doesn't cover borrowing

secured by real estate, such as home-equity loans.  Consumers once dependent on home-equity financing are turning to other forms of short-term borrowing after the collapse in subprime mortgages made it tougher to qualify for loans, economists said. Personal income in January rose at a slower pace than inflation, and credit card usage in January

rose for a second straight month…After adjusting for inflation, consumer spending stalled for a second month in January, increasing concern that the economy is headed for a recession. Consumer spending accounts for two-thirds of the economy.  Total borrowing increased at a 3.3 percent annual rate in January after rising at a 1.8 percent pace during December. By category, revolving debt such as credit cards rose $5.5 billion

during January and non-revolving debt, including auto loans, increased $1.4 billion for the month…Late payments and charge-off rates on credit cards will probably increase for the next year, according to a Feb. 11 statement by Moody's Investors Service in New York.”

From Credit Suisse:  “Negative real yield in front-end TIPS now extends into the five-year sector, suggesting the market expects real growth to be weak for an extended period of time.”

End-of-Day Market Update

From Suntrust:  “Dallas Fed's Fisher said today "Markets are manic-depressive mechanisms". This aptly describes recent behavior in most markets.  The sense of calm that settled following the FED's TAF announcement was short lived. Stocks rallied, but then swooned on more bad credit news. Thornburg Mortgage said there is doubt about its ability to survive. The company faces another $610 mln margin calls which it is unable to meet. According to Merrill, Washington Mutual may have another $11 bln losses through '09. Financials were hit hard on the news, pulling equity markets right back down.”

From UBS:  “Treasuries rallied in the minutes immediately after the negative payroll numbers, then proceeded to sell off sharply until 11am, after which Treasuries staged a comeback to finish in the black as stock fell. 5-year notes outperformed the rest of the curve…Treasury volume was a strong 120% of the 30-day average…Front end [swap]spreads narrowed by 6bps…Agencies…underperformed Libor by 1bp across the board. Mortgages opened 3 ticks wider to Treasuries, then went to 28 tighter (yes, tighter), before widening out to "only" 13 tighter near the 3pm "close."”

From Bloomberg:  “U.S. stocks fell for a second day after the biggest drop in jobs since 2003 sent energy and mining stocks lower, overshadowing an advance in banks spurred by a Federal Reserve plan to make more cash available to lenders.  Chevron Corp., Alcoa Inc. and Boeing Co. led declines that sent the Dow Jones Industrial Average below 12,000 for the first time in two months and the Standard & Poor's 500 Index to its

lowest level since September 2006. Wells Fargo & Co. and CIT Group Inc. gained, helping spur a 2.5 percent advance in financial stocks during the final 90 minutes of trading.  The S&P 500 retreated 10.97 points, or 0.8 percent, to 1,293.37. The Dow average lost 146.7, or 1.2 percent, to 11,893.69. The Nasdaq Composite Index decreased 8.01, or 0.4 percent, to 2,212.49. About five shares fell for every three that rose on the New York Stock Exchange.  The S&P 500 extended its weekly decline to 2.8 percent …The benchmark for U.S. equities is down 12 percent this year …The Dow fell 3

percent for the week and the Nasdaq lost 2.6 percent.”

Three month T-Bill yield rose 8 bp to 1.44% 

Two year T-Note yield rose 2 bp to 1.52% 

Ten year T-Note yield fell 4 bp to 3.54% 

Dow fell 147 to 11,894

S&P 500 fell 11 to 1293  

Dollar index rose 0.03 to 73.03

Yen at 102.7 per dollar 

Euro at 1.536 

Gold fell $5.50 to $973.5

Oil rose $0.03 to $105.50 

*All levels as of 4:35 PM