Friday, May 8, 2009

Quick Notes for the Day - May 8

Look for Joe's latest post tomorrow.

Quick Notes

BofA, Morgan Stanley Selling Debt - Both Bank of America and Morgan Stanley were in the bond market Friday to sell debt backed by their own credit, meeting a condition to return money borrowed from the government. Bank of America is selling $3 billion in 5-year debt, according to analysts. The deal is expected to price about 5.38 percentage points above Treasurys, or at about 7.50%. Morgan Stanley is selling $2 billion in 5-year notes to yield about 6.08% and $2 billion in 10-year debt to yield 7.27%. Banks wanting to return funds taken under the TARP but must show that they can issue five-year unsecured debt that is not backed by the FDIC. This is an important step that both institutions are taking because there was absolutely no way either could have done this deal a two months ago.

Payrolls Drop But Slowing, Unemployment at 8.9% - Nonfarm payrolls fell by 539,000 and the unemployment rate rose to 8.9%. The report was largely as expected, reflecting an easing in the pace of massive job destruction from the previous five months. April's loss of 539,000 jobs was the smallest decline since October's 380,000.

Obama - Training for Unemployed - President Obama proposed Friday changes in unemployment benefit rules to allow unemployed workers to seek job training without losing their weekly check. He also proposed easing rules so unemployed people can get tuition aid. "Education is the single best bet we can make - not just for our individual success; but for the success of our nation as a whole," Obama said. He spoke after the Labor Department reported an increase in the unemployment rate to 8.9% in April.

McDonald's April Comparable Sales Up 6.9% - McDonald's said Friday that its April comparable sales rose 6.9%, including a 6.1% increase in the U.S., an 8.4% gain in Europe and a 6.5% rise in Asia, Middle East and Africa. Systemwide sales, including those operated by franchisees, for McDonald's worldwide restaurants declined 1% for the month, but increased 8.9% excluding the impact of currency translations. In the U.S., sales were helped by new McCafe coffees and chicken Snack Wraps. ***Note - The company defines comparable sales as sales at all restaurants in operation at least 13 months including those temporarily closed, excluding the impact of currency translations.

Fannie Wants Another $19 Billion - Mortgage financer Fannie Mae asked for an additional $19 billion from the Treasury Department on Wednesday, the firm revealed on Friday. The request was made by the Federal Housing Finance Agency, which has been Fannie's conservator since the government took over the troubled firm in September. Fannie said the request was a result of its first-quarter loss, which led to a net worth deficit of $18.9 billion as of March 31. Fannie declared a quarterly loss of $23.2 billion. As part of Wednesday's request, Treasury's funding commitment to Fannie doubled to $200 billion. "Due to current trends in the housing and financial markets, we expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from the Treasury," said Fannie in a statement.

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