Friday, June 10, 2011 - 15:12
WASHINGTON (MNI) - The following are top events and news reported Friday ET in the global financial system by Market News International:
* The U.S. government ran a budget deficit of about $57.6 billion in May, vs. a deficit of $139.6 billion in the same month a year ago, thanks mostly to new lower estimate for the cost of the Trouble Asset Relief Program, the U.S. Treasury reported Friday. The Treasury said it now expects TARP to cost $48 billion. Outlays totaled $233 billion and total receipts $175 billion. The interest on Treasury debt securities is $30.9 billion, which is 13.3% of the total current month Federal Outlays. For the first eight months of the fiscal year, the government incurred a budget deficit of $927 billion, $8 billion more than the deficit recorded during the same period last year. [14:00 ET]
* New York Federal Reserve Bank President William Dudley Friday said he anticipates that economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery. Still, the pace of recovery probably will be painfully slow for the many unemployed and underemployed workers, projecting "considerable labor market slack at the end of 2012." Dudley added that the recent disappointing data suggest that downside risks to the outlook have increased. He later said that it is important to watch a broad variety of inflation indications, noting some have "drifted upward" in the first half of 2011 but have come down in recent weeks. [11:11 and 09:00 ET]
* The New York Federal Reserve Friday announced that it plans to purchase approximately $62 billion in U.S. Treasuries in June. This represents $50 billion in purchases of the announced $600 billion purchase program, which will be completed by the end of June, and $12 billion in purchases associated with principal payments from agency debt and agency MBS expected to be received between mid-June and mid-July. [14:00 ET]
* With the economy struggling, the stock market plunging, and the debt limit deadline nearing, Vice President Joe Biden is expected to sharply accelerate the pace of budget talks he has been hosting since early in the spring. Biden held the sixth round of budget talks Thursday and lawmakers left the session saying the pace of the talks will accelerate sharply next week. Biden is expected to meet with lawmakers Tuesday, Wednesday and Thursday next week. The Biden talks are exploring a deficit reduction package that can be developed to coincide with this summer's vote on debt ceiling legislation. [13:35 ET]
* The Federal Reserve is seeking comment on a proposal to require top-tier U.S. bank holding companies with total consolidated assets of $50 billion or greater to submit annual capital plans for review. Institutions would be expected to have credible plans to have sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions. Boards of directors of the institutions would be required each year to review and approve capital plans before submitting them to the Fed. In some cases, such as when institutions' capital plans have been rejected by the Fed, firms would be required to receive approval from the Fed before making capital distributions. [11:00 ET]
* The European Central Bank needs to raise interest rates "in a gradual and timely" manner, ECB Executive Board member Juergen Stark said Friday. Speaking at the ECB Watchers conference in Frankfurt, Stark reminded that interest rates are "at extremely low levels," and also said a gradual and timely exit from nonstandard measures is warranted to ensure inflation expectations remain firmly anchored. [10:38 ET]
* Earlier, Stark said European Central Bank staff forecasts of 1.7% average inflation in 2012 assume rising interest rates, suggesting that the central bank was planning to raise its policy rate further. Asked whether the 2012 forecasts, which show inflation falling well below the ECB's price stability target of close to but below 2%, means there is less pressure to act on interest rates, Stark stressed that the forecasts were not those of the Governing Council. [Updated 09:42 ET]
* In an unusual move Friday, ECB Vice President Vitor Constancio issued a "clarification," which he said "replaces his earlier statement of today regarding possible private sector involvement in the Greek adjustment programme." In the clarification, Constancio stated: "President Trichet made clear that the ECB's Governing Council excludes all concepts that are not purely voluntary or have any element of compulsion, that entail any credit event or that entail any default or selective default." [Updated 11:29 ET]
* The European Central Bank does not oppose a voluntary private sector contribution to a new Greek bailout package, but a large-scale deal appears unlikely, ECB Executive Board member Juergen Stark said on Friday. While he personally favors private sector involvement for political, though not economic reasons, Stark warned that the recent public debate on the topic is diverting key resources from the main goal of implementing Greece's EU/IMF program, which he said can assure debt-sustainability. [10:16 ET]
* The UK's growth rate in the three months through May picked up, after the hit on output from the Royal Wedding Bank Holiday in April, according to the National Institute of Economic and Social Research data. NIESR said growth in the three months through May rose to 0.4% from just 0.1% in the three months through April. [10:00 ET]
* The latest municipal bond flows show retail investors are returning to the municipal bond market, and EPFR Global analyst Cameron Brandt expects them to stay. "Retail investors appear to be warming to U.S. debt in general," noted EPFR Global Director of Research Cameron Brandt. Asked what it meant for retail investors flows going forward, Brandt told Market News International that "with yields rising and the default rate nowhere near as bad as feared, retail investors -- usually the back-bone of this market -- are coming back." [13:07 ET]
* As the midnight Friday deadline approaches for submitting nominations to take over leadership of the International Monetary Fund, the short-list of candidates is likely to remain short, and unless emerging markets join forces in coming days, France Finance Minister Christine Lagarde seems likely to keep the post for Europe. Bank of Mexico Gov. Agustin Carstens is the only viable challenger to Lagarde, and his campaign has gathered steam in recent days as he travels the world in search of support, but broad backing from emerging markets has been absent. [12:58 ET]
** Market News International Washington Bureau: 202-371-2121 **
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