Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1394.3	-5.9	-0.42%
Eurostoxx Index	2468.1	-28.6	-1.15%
Oil (WTI)	105.23	-0.2	-0.17%
LIBOR	0.4682	-0.002	-0.32%
US Dollar Index (DXY)	79.244	0.118	0.15%
10 Year Govt Bond Yield	2.16%	-0.04%
RPX Composite Real Estate Index	169.77	0.0

Markets are weaker as S&P warns that Greece may have to restructure its debt again and a disappointing report from H&M. Best Buy reported better-than-expected earnings this morning and will close 50 stores.

The third revision to 4Q GDP was released this morning, unchanged from the 2nd revision at 3%. Initial Jobless claims were slightly higher than expected at 359,000. Bloomberg Consumer Comfort and Kansas City Fed come out later this morning.

Bill Gross of PIMCO told Bloomberg that the Fed will probably concentrate on supporting MBS once Operation Twist ends in June. He referred to a "sterilized twist" where the Fed would buy current coupon MBS and simultaneously repo out the Treasuries. This would cause MBS spreads to tighten. So even if the sell off in Treasuries continues, mortgage rate may not rise as rapidly.

Bloomberg had a good interview with FHFA Acting Director Ed DeMarco regarding principal forgiveness on underwater homeowners. It certainly does not appear that a mass taxpayer-funded principal forgiveness, (or cramdown for investors) is in the cards. FHFA prefers to mod interest and term first in order to make an affordable payment. If they cut the principal and the house increases in value, the borrower gets all of the benefit. If they don't cut the principal, then taxpayers share in that upside. Ed has been a pinata to the Left who want mass cramdowns.

American borrowers fear the Repo Man over everyone else, at least according to a TransUnion survey cited in the Washington Post. It used to be that the mortgage payment was the first priority, but with foreclosure pipelines so elongated, the car loan now takes priority.

Dealbook has been the go-to place for all things MF Global. Yesterday, regulators held a hearing with several top executives of MF, who took the Fifth. The CFO has apparently offered a proffer statement, which means he is negotiating to talk.