Wednesday, June 15, 2011 Greece - the key negative this morning was the lack of any progress

on Greece at Tuesdays meeting. According to the WSJ, a deal on Greece was still some ways off w/major differences remaining between Berlin and the ECB while German finance minister Schaeuble said that no progress was made. Luxembourg Finance Minister Luc Frieden said an agreement on a second bailout for Greece may be delayed until July (although the EC said it expects a decision on the next disbursement for Greece at next weeks June 19 and 20th meetings according to Bloomberg). Separately, most Greek major public services were shutdown on Wed as citizens took to the streets in protest of the governments fresh austerity and privatization measures. WSJ

Renewed stress as yields make another leg up (prices down). Fed on hold at next weeks meeting (Hilsenrath in WSJ) no shift seen in Fed policy at the upcoming meeting. Officials are in no rush to tighten given recent sluggish economic readings but also arent looking at further policy accommodation given an uptick in inflation. QE3 seems very unlikely at the moment. The Fed isnt w/o tools it could use rhetoric to convince markets the current accommodative policy stance would remain in place for a certain period of time or until certain milestones are hit. The Fed could also lower the rate paid on bank reserves. Many Fed officials believe the current slowdown will prove transitory and point to a pickup in auto production schedules as evidence of a rebound. WSJ