Market Data: Week Ending March 11, 2011

Market Index	12/31  Close	3/11    Close	Week Change	Simple YTD %
Dow Industrials Avg	11,577.50	12,044.40	-1.61%	4.03%
S&P 500	1,257.64	1,304.28	-1.88%	3.71%
Fed Funds Rate	0.10%	0.15%	-0.01%	50.00%
10 yr T-note Yld	3.29%	3.40%	-0.09%	3.34%
5 yr T-note Yld	2.01%	2.06%	-0.12%	2.49%
5 yr TIPS - 'Real' Yld	-0.06%	-0.57%	-0.09%	-850.00%
Implied 5 yr Inflation %	2.07%	2.63%	-0.03%	27.05%
2 yr T-note Yld	0.59%	0.64%	-0.04%	8.47%
2-10 Yr Slope	2.70%	2.76%	-0.05%	2.22%
90 day T-bill Yld	0.12%	0.07%	-0.04%	-41.67%
Gold ($/oz)	$1,421.40	$1,428.60	$0.00	0.51%
WTI Oil ($/brl)	$91.38	$101.16	-$3.26	10.70%
VIX "Worry Index"	17.75	20.08	1.02	13.13%
Credit Spreads	12/31  Close	3/11    Close	Week Change	Simple YTD %
Inv Grade Credit Idx	4.78%	4.54%	-0.10%	-5.02%
Low Grade Credit Idx	8.32%	7.79%	-0.03%	-6.37%
Markit CDX Inv Grd Idx	85	87	6.10%	2.35%
Markit CDX Mid Grd Idx	131	121	3.42%	-7.63%

Ten Year Note auction 3/2011

Todays auction was completed in strong action. Econoday reports "All readings on today's 10-year Treasury auction are strong. Coverage of 3.32 compares with a long-term average of 2.50 while the stop-out rate of 3.499 percent is nearly three basis points below the one o'clock bid. Buyside participation was strong, indicated by a smaller-than-average dealer takedown of 41 percent."

At the same time, Pimco's Total Return Fund is reported  by Reuters to have sold all its U.S. government-related securities, including U.S. Treasuries and agency debt. The article goes on that Bill Gross is saying there is going to be a loss of bids for treasuries, raising yields, if the Fed ends QE2 at the end of June. The posturing here is clear. Bill Gross is voting for more QE2.

Market Data: Week Ending March 3, 2011

Market Index	12/31  Close	3/4      Close	Week Change	Simple YTD %
Dow Industrials Avg	11,577.50	12,241.00	0.91%	5.73%
S&P 500	1,257.64	1,329.30	0.71%	5.70%
Fed Funds Rate	0.10%	0.16%	0.01%	60.00%
10 yr T-note Yld	3.29%	3.49%	0.08%	6.08%
5 yr T-note Yld	2.01%	2.18%	0.02%	8.46%
5 yr TIPS - 'Real' Yld	-0.06%	-0.48%	-0.04%	-700.00%
Implied 5 yr Inflation %	2.07%	2.66%	0.06%	28.50%
2 yr T-note Yld	0.59%	0.68%	-0.03%	15.25%
2-10 Yr Slope	2.70%	2.81%	0.11%	4.07%
90 day T-bill Yld	0.12%	0.11%	-0.01%	-8.33%
Gold ($/oz)	$1,421.40	$1,428.60	$19.30	0.51%
WTI Oil ($/brl)	$91.38	$104.42	$6.54	14.27%
VIX "Worry Index"	17.75	19.06	-0.16	7.38%
Credit Spreads	12/31  Close	3/4      Close	Week Change	Simple YTD %
Inv Grade Credit Idx	4.78%	4.64%	-0.02%	-2.93%
Low Grade Credit Idx	8.32%	7.82%	-0.01%	-6.01%
Markit CDX Inv Grd Idx	85	82	-3.53%	-3.53%
Markit CDX Mid Grd Idx	131	117	-3.31%	-10.69%

Quantitative Easing Explained

Listen to the FOMC

This week members of the Federal Reserve Open Market Committee (FOMC) were speaking around the country to different groups. The Board of Governors of the Federal Reserve System is responsible for the discount rate and reserve requirements, and the FOMC is responsible for open market operations. Here is a summary of those who spoke this week and a brief clip from their talk as they begin showing their cards on the question of monetary policy adjustments or changes. Most of these players are not showing their cards now. There is a meeting of the FOMC on March 15 and the next one is April 26-27. My guess today is that there will not be any change to the current easy money behavior (money printing policy) until employment growth is sustained taking it well past June 2011.

From Fed Chairman Bernanke:
"FOMC participants see inflation remaining low; most project that overall inflation will be about 1-1/4 to 1-3/4 percent this year and in the range of 1 to 2 percent next year and in 2013. Private-sector forecasters generally also anticipate subdued inflation over the next few years.³ Measures of medium- and long-term inflation compensation derived from inflation-indexed Treasury bonds appear broadly consistent with these forecasts. Surveys of households suggest that the public's longer-term inflation expectations also remain stable."
"A wide range of market indicators supports the view that the Federal Reserve's recent actions have been effective. For example, since August, when we announced our policy of reinvesting principal payments on agency debt and agency MBS and indicated that we were considering more securities purchases, equity prices have risen significantly, volatility in the equity market has fallen, corporate bond spreads have narrowed, and inflation compensation as measured in the market for inflation-indexed securities has risen to historically more normal levels. Yields on 5- to 10-year nominal Treasury securities initially declined markedly as markets priced in prospective Fed purchases; these yields subsequently rose, however, as investors became more optimistic about economic growth and as traders scaled back their expectations of future securities purchases.