Inflation/European toxic debt

In a meeting with USA Today, online today, WMT’s US CEO said “US consumers face ‘serious’ inflation in the months ahead for clothing, food and other products.” “We’re seeing cost increases starting to come through at a pretty rapid rate.” Euro zone CPI in March rose 2.6% y/o/y, above expectations of 2.4% and the most since Oct ’08. Taiwan followed most of Asia and expectedly raised interest rates by an 1/8 of a pt to 1.75% to fight inflation. Germany reported a much better than expected jobs figure and their unemployment rate fell to 7.1%, the lowest since the 1991 reunification. Toxic is the only way to explain the debt of Portugal, Greece and Ireland. Portugal in particular is seeing yields spike again. Their 2 yr note is up another 37 bps and higher by 200 bps in just the past 2 weeks. Portugal announced their 2010 budget deficit was worse than initially expected. The possibility of debt restructurings in 2013 has caused investors to flee.

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