April 2, 2010

Economics Group
Weekly Economic & Financial Commentary

U.S. Review Nonfarm Employment Change

Change in Employment, In Thousands
Economic Recovery Continues, but is it Enough? 600 600

! Economic indicators this week suggested continued 400 400

economic growth. Factory orders, the Institute for

200 200
Supply Management manufacturing index and
employment all suggest continued progress. 0 0

! Yet the pace of the recovery still presents several

-200 -200
fundamental challenges. First, construction spending is
disappointing and for a society that has put so much -400 -400
emphasis on housing, there is a disconnect between
aspirations and reality. Second, the pace of growth will -600 -600

not likely solve the budget shortfalls in many states or at Nonfarm Employment Change: Mar @ 162,000
-800 -800
the national level. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Global Review Japanese Tankan Survey & Real GDP

Index, Year-over-Year Percentage Change
Signs of Continued Global Recovery in Q1 60.0 6.0%

! The Tankan index of Japanese business sentiment, 40.0

4.0%

which is fairly correlated with GDP growth, rose further 2.0%

in the first quarter, and manufacturing PMIs across Asia 20.0
0.0%
were strong in March.
! Monthly GDP data suggest that the Canadian economy 0.0 -2.0%

continued to expand at a strong pace in the first quarter. -4.0%

-20.0
! Manufacturing PMIs in Europe also rose further in -6.0%
March. However, strength in “soft” data has yet to -40.0
-8.0%
translate into robust “hard” data in most European Tankan Index: Q1 @ -14.0 (Left Axis)
Year-over-Year Percent Change: Q4 @ -0.9% (Right Axis)
countries. -60.0 -10.0%
1996 1998 2000 2002 2004 2006 2008 2010

Inside
Wells Fargo U.S. Economic Forecast
Actual Forecast Actual Forecast U.S. Review 2
1Q 2Q
2009
3Q 4Q 1Q 2Q
2010
3Q 4Q
2006 2007 2008 2009 2010 2011
U.S. Outlook 3
Real Gross Domestic Produc t
1
- 6.4 - 0.7 2.2 5.9 3.4 2.0 2.0 2.3 2.7 2.1 0.4 - 2.4 2.9 2.5
Global Review 4
Personal Consumption 0.6 - 0.9 2.8 1.7 2.2 1.0 1.4 1.6 2.9 2.6 - 0.2 - 0.6 1.6 1.7 Global Outlook 5
Inflation Indic ators
2
Point of View 6
"Core" PCE Deflator 1.7 1.6 1.3 1.5 1.4 1.2 1.2 1.2 2.3 2.4 2.4 1.5 1.3 1.7
Consumer Pric e Index - 0.2 - 1.0 - 1.6 1.5 2.5 2.4 1.9 1.6 3.2 2.9 3.8 - 0.3 2.1 2.1 Topic of the Week 7
Industrial Produc tion
1
- 19.0 - 10.4 6.4 6.6 8.3 3.9 3.4 6.5 2.3 1.5 - 2.2 - 9.7 4.9 5.7 Market Data 8
2
Corporate Profits Before T axes - 19.0 - 12.6 - 6.6 24.0 22.0 16.0 10.0 8.5 10.5 - 4.1 - 11.8 - 5.1 13.8 8.0
3
T rade Weighted Dollar Index 83.2 77.7 74.3 74.7 75.4 76.8 78.5 80.1 81.5 73.3 79.4 74.7 80.1 83.6
Unemployment Rate 8.2 9.3 9.6 10.0 9.7 9.8 10.1 10.0 4.6 4.6 5.8 9.3 9.9 9.6
4
Housing Starts 0.53 0.54 0.59 0.56 0.59 0.64 0.67 0.70 1.81 1.34 0.90 0.55 0.65 0.76

Quarter- End Interest Rates

Federal Funds T arget Rate 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.50 5.25 4.25 0.25 0.25 0.50 3.25
Conventional Mortgage Rate 5.00 5.42 5.06 4.88 5.40 5.70 5.80 5.80 6.14 6.10 5.33 4.88 5.80 6.10
10 Y ear Note 2.71 3.53 3.31 3.85 3.70 3.80 4.00 4.10 4.71 4.04 2.25 3.85 4.10 4.50
Forecast as of: March 10, 2010
1
C ompound Annual Growth Rate Quarter-over-Quarter
2
Year-over-Year Percentage C hange
Economics Group U.S. Review Wells Fargo Securities, LLC
U.S. Review
Economic Recovery Continues, but is it Enough?
ISM Manufacturing Composite Index
Diffusion Index
Three important economic indicators this week suggested 65 65
continued economic growth. Factory orders, the Institute for
Supply Management Index and employment all suggested
60 60
continued progress on the economic front. Factory orders
increased 0.6 percent in February and the gain reported for
55 55
January was revised higher. Factory orders have gained in 10 of
the past 11 months and are now more than a third of the way back
50 50
to where they were at their peak in July 2008. Specifically, new
orders for non-defense capital goods ex-aircraft are up nine
45 45
percent (annualized) over the last three months, consistent with
our expectations for 8 percent or more gains in real equipment &
40 40
software spending for this year.
Meanwhile, the Institute for Supply Management manufacturing 35 35
index rose to 59.6 and is consistent with a continued recovery ISM Manufacturing Composite Index: Mar @ 59.6
12-Month Moving Average: Mar @ 51.8
rather than a double-dip recession. Orders, employment and
30 30
production all suggest a positive growth outlook. Finally, 87 89 91 93 95 97 99 01 03 05 07 09
employment rose in March and private sector employment has
risen for the past three months. The breadth of the employment Mean Duration Unemployment
Average Weeks Unemployed
gains was also positive in March. There were gains in 32 32
manufacturing and services with improvement in such cyclical
30 30
areas as retail trade, leisure & hospitality and temporary help.
28 28
One downside for jobs is that the mean duration of
unemployment remains very high and suggests persistent 26 26

structural unemployment. With that come concerns about 24 24

consumer and housing credit. 22 22
Yet, the pace of the recovery still represents several fundamental 20 20
challenges. Moderate economic growth alone does not solve
18 18
several secular imbalances in the economy. First, construction
16 16
spending is disappointing and for a society that has put so much
emphasis on housing, there is a disconnect between aspirations 14 14

and reality. Our expectation is that housing purchases will not 12 12

rebound at a pace that will make many speculative housing starts 10 10
Mar @ 31.2 Weeks
economically viable. Second, the pace of growth will not solve the
8 8
budget shortfalls in many states or at the national level. Political 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
promises have outpaced the ability of the economy to deliver. For
several years entitlement spending has outpaced the tax base that Federal Budget Surplus or Deficit
12-Month Moving Average, Billions of Dollars
supports it. Finally, the longer-term budget deficits and our $40 $40
dependence on foreign capital to support them creates a delicate
balance of supply and demand that is currently being tested by $20 $20

questions raised about the U.S. commitment to long-term deficit

$0 $0
control.
Cyclical Recovery Still Leaves Structural Imbalances -$20 -$20

Both public and private decision-makers are left with the reality -$40 -$40
that a cyclical economic recovery still leaves us with longer-run
structural imbalances—many of which have been growing since -$60 -$60
the 1960s. Economic growth appears insufficient to generate the
-$80 -$80
income needed to meet all the entitlement promises. The latest
Congressional Budget Office report on Social Security emphasizes -$100 -$100
this point. For the private sector, the ability to generate jobs and
earnings are being challenged in an economy with slower top-line -$120 -$120
sales and greater consumer caution. We may be out of the woods Surplus or Deficit: Feb @ -$123.1 Billion
but it is still a long journey to Mordor. -$140 -$140
90 92 94 96 98 00 02 04 06 08 10

2
Economics Group U.S. Outlook Wells Fargo Securities, LLC
ISM Non-Manufacturing • Monday
The ISM Non-Manufacturing Index remained in expansionary
ISM Non-Manufacturing Index
territory for the second consecutive month in February increasing Business Activity Index
by 2.5 points to 53.0. With the exception of employment, all 70 70

components of the composite index (business activity, new orders

65 65
and supplier deliveries) contributed to the increase. The recent
strength in service sector business activity is consistent with our 60 60
view that an economic recovery is underway. The forward looking
new orders index has been in expansionary territory for seven 55 55

consecutive months and suggests continued strength in the service

50 50
sector in the near future. The employment index rose 4.0 points to
48.6, the highest level since April 2008. The employment index 45 45
will likely push into expansionary territory in March, which is
consistent with underlying strength in private sector jobs. 40 40

35 ISM Non-Manufacturing Business Activity Index: Feb @ 54.8 35

12-Month Moving Average: Feb @ 49.8

Previous: 53.0 Wells Fargo: 53.5
30 30
Consensus: 54.0 98 99 00 01 02 03 04 05 06 07 08 09 10

Pending Home Sales • Monday

Pending home sales have fallen two out of three months with
Pending Home Sales Index
Year-over-Year Percent Change declines likely due to the weather and a payback from the jump in
35% 35% sales that occurred before the initial expiration of the first-time
30% 30% homebuyer tax credit (initially scheduled to end November 30th).
25% 25% While the extension and modification of the tax credit has yet to
20% 20% spur sales, we expect to see a boost in the months leading up to the
15% 15% second expiration (extended to April 30th for contracts to be
10% 10% signed). All four regions of the country saw declines in January
5% 5% with the West seeing the largest decline. We expect the index to
0% 0% continue to wane in February. The decline in mortgage
-5% -5% applications in February supports the notion that pending sales will
-10% -10%
likely remain weak.
-15% -15%

-20% -20%

-25% -25%
Year-over-Year Change: Jan @ 12.3%
Previous: -7.6%
-30% -30%
2002 2003 2004 2005 2006 2007 2008 2009 2010 Consensus: -1.0%
Initial Jobless Claims • Thursday
Initial jobless claims for the week ending March 27th fell by 6,000
Initial Claims for Unemployment
to 439,000, the second consecutive weekly decline. On a trend Seasonally Adjusted, In Thousands
basis, the four-week moving average edged lower to 447,250. 700 700
Year-over-Year Percent Change: Mar-27 @ -32.6%
Consistent with our view that labor market conditions are 650 Initial Claims: Mar-27 @ 439.0 Thousand 650
stabilizing, we expect claims to continue to decline in coming weeks 4-Week Moving Average: Mar-27 @ 447.3 Thousand
52-Week Moving Average: Mar-27 @ 534.8 Thousand
(especially with improving weather conditions in most parts of the 600 600

country). While claims are moving in the right direction, the level is 550 550
still too high to be consistent with sustained underlying strength in
payroll growth. We expect temporary census hiring will likely help 500 500

boost payrolls through May. Thereafter, we should see a

450 450
retracement in temporary and government employment from June
through September. By the fourth quarter, the effects of the census 400 400

should be behind us and payroll gains should reflect underlying

350 350
strength in the private sector.
300 300

Previous: 439K
250 250
Consensus: 433K 86 88 90 92 94 96 98 00 02 04 06 08 10

3
Economics Group Global Review Wells Fargo Securities, LLC
Global Review
Signs That Global Growth Strengthened Further in Q1
Chinese Manufacturing PMI
Seasonally Adjusted
Data released this week suggest that the global economic 60 60
recovery, which has been in place over the past few quarters,
strengthened further in the first quarter of this year. In Japan, the
Tankan index of business sentiment, which is fairly correlated 55 55
with real GDP growth, rose to its highest level since the near
collapse of the global financial system in the autumn of 2008 (see
graph on first page). Sentiment among large manufacturers, who 50 50

tend to be exporters, was the strongest among different sectors.

However, the increase in sentiment was broad-based among both
45 45
manufacturers and non-manufacturers, suggesting that domestic
demand also strengthened in the first quarter.
Speaking of Japanese exports, survey evidence indicates that 40 40
growth in some of Japan’s major trading partners in Asia
remained strong in the first quarter. The manufacturing PMI in Chinese Manufacturing PMI: Mar @ 55.1
China rebounded in March after a brief dip during the previous 35 35
month, suggesting that growth in Chinese industrial production 2005 2006 2007 2008 2009 2010

remained strong (top chart). In India and Taiwan, manufacturing

PMIs remained well within expansion territory in March. Canadian Real GDP
Bars = Compound Annual Rate Line = Yr/Yr % Change
A marked upturn got underway in Canada in the second half of 6.0% 6.0%

2009, and real GDP data for January indicate that the economy is
on pace to register another strong quarter of growth in the first 4.0% 4.0%

quarter (middle chart). In January, real GDP rose 0.6 percent

relative to the previous month, which follows the 0.5 percent 2.0% 2.0%

increase that was chalked up in December. Even if the economy

stagnated in February and March, which we do not expect, real 0.0% 0.0%

GDP in the first quarter will have risen at an annualized rate of

about 5 percent. Although exports clearly have played an -2.0% -2.0%

important role in the Canadian recovery, indicators of domestic

demand have been strong as well recently. For example, retail -4.0% -4.0%

sales in January were up 0.7 percent relative to the previous

month, and employment in February stood 0.4 percent above its -6.0% -6.0%
Compound Annual Growth: Q4 @ 5.0%
year-ago level. (By way of comparison, U.S. employment in Year-over-Year Percent Change: Q4 @ -1.2%
February was down 2.5 percent on a year-over-year basis.) -8.0% -8.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Among the major regions of the global economy, recovery thus far
has been strongest in Asia and weakest in Europe. However, the
European Manufacturing
manufacturing PMIs for the euro-zone and the United Kingdom Purchasing Manager Indices
strengthened further in March (bottom chart). The PMI in the 65 65

former jumped to a 40-month high and the index in the latter

rose to its highest level since 1994. Service sector PMIs for March 60 60

will not print until next week, but European and British indices
are expected to remain well within expansion territory where they 55 55

have resided since last summer.

50 50
Unfortunately, the apparent strength in the PMIs has not
translated into strong economic growth, at least not yet. Real
45 45
GDP in the United Kingdom rose only 0.4 percent (not
annualized) in the fourth quarter, and it was essentially flat in the
40 40
euro-zone. Although British consumer spending has rebounded
somewhat, continental European consumers have no pulse at
35 35
present. And we fear that the fiscal consolidation that is Euro-zone PMI: Mar @ 56.6

underway in some of the euro-zone’s former high-flying U.K. PMI: Mar @ 57.2
30 30
economies (e.g., Greece, Ireland and Spain) will keep growth in 2000 2002 2004 2006 2008 2010
the overall euro area weak for some time.

4
Economics Group Global Outlook Wells Fargo Securities, LLC
German Industrial Production • Thursday
The year-over-year rate of decline in German industrial production
German Industrial Production Index
(IP) has slowed significantly over recent months due, at least in Year-over-Year Percent Change
part, to base effects. German IP has risen 8 percent from its low last 10.0% 10.0%

April, but remains 17 percent below its peak in early 2008.

5.0% 5.0%
However, recent increases in survey data (e.g., the Ifo index and the
PMI) suggest that German IP rose further in February. Germany
0.0% 0.0%
also releases data on February factory orders and French IP data
will print next week as well.
-5.0% -5.0%
The European Central Bank holds its monthly policy meeting next
week, and there is very little chance of a change in rates at the -10.0% -10.0%
meeting. Rather, investors will look to the press conference for
clues about ECB policy going forward. Due to the sluggish nature of -15.0% -15.0%
the euro-zone recovery to date (see page 4), we believe that the ECB
will keep rates on hold throughout the rest of the year. -20.0% -20.0%
IPI: Jan @ 2.1%
3-Month Moving Average: Jan @ -3.7%
Previous: 0.6% (month-on-month change)
-25.0% -25.0%
Consensus: 0.7% 1997 1999 2001 2003 2005 2007 2009

British Industrial Production• Thursday

As in Germany, the year-over-year rate of decline in British IP has
U.K. Industrial Production Index
Year-over-Year Percent Change flattened out in recent months. Unlike Germany, however, there
5.0% 5.0% has been very little bounce in British industry thus far. British IP is
up only 2 percent from its low, and it remains 14 percent below its
peak in early 2008. As discussed on page 4, the manufacturing PMI
0.0% 0.0% has risen sharply in recent months, so “hard” data should, sooner
or later, start to firm as well. Indeed, the consensus forecast looks
for a modest rise in IP in February. In addition, a widely followed
index of monthly GDP is also slated for release next week.
-5.0% -5.0%
Like the ECB, there is very little chance that the Bank of England
will change rates at its own policy meeting next week. In our view,
the upturn in Britain is not quite as tepid as the euro-zone recovery,
-10.0% -10.0%
and we look for a BoE rate hike by the end of 2010.

IPI: Jan @ -1.6%

3-Month Moving Average: Jan @ -3.7%
Previous: -0.4% (month-on-month change)
-15.0% -15.0%
1997 1999 2001 2003 2005 2007 2009 Consensus: 0.5%
Canadian Employment Report • Friday
Despite the occasional month of contraction, Canadian payrolls
Canadian Employment
have been growing on trend since midsummer 2009. The gain in Month-over-Month Change in Employment, In Thousands
payrolls reported for February was driven by an increase in 125 125

manufacturing jobs. Consensus expectations for March payrolls 100 100

look for an even larger increase. Still, the employment component 75 75
of the forward-looking Ivey purchasing managers’ index recently
50 50
slipped to its lowest level since February 2009, suggesting the pace
of the recovery in the labor market might slow somewhat in coming 25 25

months. 0 0

Speaking of the Ivey index, we get our next look at that survey on -25 -25

Wednesday of next week. The overall index has been above 50 for -50 -50
eight of the last nine months. However the employment series has
-75 -75
been below 50, signaling contraction, for the last several months.
-100 -100
An improvement here could lift expectations for future jobs reports.
Change in Employment: Feb @ 20.9K
-125 -125
6-Month Moving Average: Feb @ 20.9K
Previous: 20.9 K -150 -150
2000 2002 2004 2006 2008 2010
Consensus: 25.0 K

5
Economics Group Point of View Wells Fargo Securities, LLC
Interest Rate Watch Consumer Credit Insights
Canary in the Coal Mine Central Bank Policy Rates Mortgage Rates Still Low…for Now
7.5% 7.5%
As expressed by Alan Greenspan, rising US Federal Reserve: Apr - 2 @ 0.25%
ECB: Apr - 2 @ 1.00%
The Fed's mortgage-backed securities
Treasury interest rates are the canary in the 6.0%
Bank of Japan: Apr - 2 @ 0.10%
Bank of England: Apr - 2 @ 0.50%
6.0%
(MBS) and agency debt purchase programs
coal mine suggesting danger in the outlook have helped to keep mortgage rates low for
for interest rates. In our December annual 4.5% 4.5%
the past year. Even though 10-year
outlook for 2010 we posited a pattern of Treasury yields have rebounded by about
rising interest rates on the benchmark 5- 3.0% 3.0%
180 basis points from the December 2008
and 10-year Treasury notes. In rebalancing lows, 30-year conventional fixed mortgage
the U.S. economy, we anticipated that both 1.5% 1.5%
rates have actually declined slightly. The
fiscal and monetary policy would have a average spread between 30-year fixed
significant influence on the pattern of 0.0% 0.0% mortgage rates and 10-year Treasury yields
interest rates this year. In recent weeks the 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
over the last 15 years has been about 160
pattern of fiscal policy has turned negative. Yield Curve basis points, about 40 basis points higher
First, recent estimates of the future fiscal 5.00%
U.S. Treasuries, Active Issues
5.00% than the current spread, which is still near
integrity of Social Security have suggested 4.50% 4.50% the lowest in decades. The Fed's mortgage
that the system’s revenues would fall short 4.00% 4.00% purchase program however, came to an end
of spending this year—much sooner than 3.50% 3.50% this week on schedule and we have already
many anticipated. Second, the budget 3.00% 3.00% seen some response in the MBS markets
estimates for the healthcare plan do not 2.50% 2.50% where securities declined in value and
appear credible to the markets. Future 2.00% 2.00% yields rose on Thursday. Buyers are likely
Medicare cuts are unlikely. While 1.50% 1.50% on the sidelines waiting to see how the
mandates have been raised and 1.00%
April 2, 2010
1.00% Fed's exit affects markets in the coming
entitlements broadened, there is likely no 0.50% March 26, 2010 0.50% days. In addition, with signs that the
March 2, 2010
reasonable method to pay for these. 0.00% 0.00% housing market is continuing to struggle
3M 2Y 5Y 10
Y
30
Y

Meanwhile for monetary policy, questions and unemployment remaining high,

have arisen about the ease and extent of the
Forward Rates investors are still concerned about
90-Day EuroDollar Futures

Fed’s exit strategy. Both the composition

2.25% 2.25% mortgage defaults. This will continue to
and the size of the Fed’s balance sheet 2.00% 2.00% exert upward pressure on rates. Higher
represent significant issues to the 1.75% 1.75%
mortgage rates will add another headwind,
marketplace. Also the Fed’s real or at least takeaway a tailwind, from a
1.50% 1.50%

commitment to reducing the balance sheet housing market that continues to struggle.
has been in question as several members of
1.25% 1.25%
In the coming months the housing market
the Federal Open Market Committee
1.00% 1.00% is also likely to lose the other major
suggested that the Fed could reenter the 0.75% 0.75% stimulus it has received with the first-time
market for mortgage-backed securities if 0.50%
April 2, 2010
0.50%
homebuyer tax credit scheduled to expire.
March 26, 2010
problems arose. With the recovery in the March 2, 2010 The combination will likely hold down sales
0.25% 0.25%

first quarter and expectations for further Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 activity through the summer months.
growth, the flight to safety trade that
favored U.S. Treasury debt became less
Mortgage Data
attractive. Bond issuance for both high
grade and high yield has grown sharply Week 4 Weeks Year
over the last three months. Equity markets Current Ago Ago Ago
have improved. Therefore, the opportunity Mortgage Rates
costs have risen for continued investing in 30- Y r Fixed 5.08% 4.99% 4.97% 4.78%
Treasury debt. For the rest of this year our 15- Y r Fixed 4.39% 4.34% 4.33% 4.52%
view is that interest rates will continue to 5/1 ARM 4.10% 4.14% 4.11% 4.92%
rise. We see that investor demand will 1- Y r ARM 4.05% 4.20% 4.27% 4.75%
decline as more attractive alternatives
become available. Our concern is that the MBA Applic ations
interplay of policy risks and diminished Composite 602.8 595.0 629.9 1,194.4
domestic and foreign demand may create Purc hase 243.0 227.5 214.5 268.0
more upside risks to the interest rate Refinanc e 2,707.8 2,744.7 3,054.3 6,600.1
outlook than earlier anticipated. Source: Freddie Mac, Mortgage Bankers Association and Wells Fargo Securities, LLC

6
Economics Group Topic of the Week Wells Fargo Securities, LLC
Topic of the Week
Does Another Debt Crisis Await Argentina?
Argentine Real Gross Domestic Product
Argentina has been in the news once again as investors Year-over-Year Percent Change
are worried that Argentina may default on its external 15% 15%
debt. This speculation is a repeat of what happened
during 2008 and 2009, and it seems to be more related 10% 10%
to internal political fights than to the current condition
of government finances, though government finances
5% 5%
have continued to deteriorate. Argentina is still
negotiating with holdout bondholders from the 2005
restructuring of its defaulted external debt. Argentina’s 0% 0%
access to international financing markets has been
closed since the default in 2001, and some investors -5% -5%
holding about $20 billion in defaulted debt did not
accept the debt renegotiation in 2005.
-10% -10%
While we do not expect Argentina to default during the
next several years, the seeds of a potential default are
-15% -15%
being planted today. First, the administration is using
stocks to pay for what it owes instead of relying on its Real Gross Domestic Product: Q4 @ 2.6%
cash flow. Second, the government is tampering with -20% -20%
2000 2002 2004 2006 2008
inflation numbers to pay less in interest on some part of
its current debt. Third, government expenditures are
growing too fast for fiscal sustainability, especially if the Argentine Consumer Price Index
Year-over-Year Percent Change
economy does not make a strong recovery. 14% 14%
The administration has been moving to make a final
offer to the 2005 holdouts from the 2001 debt default. 12% 12%
According to the Argentine minister of economics,
Amado Boudou, the holdouts should expect no more
10% 10%
than 35 cents on the dollar. If the holdouts accept this
offer from the government, the country will be able to
access the international capital markets once again, and 8% 8%
will likely be able to find financing rates close to the
single digits, much better than today’s rates of 15 to 20 6% 6%
percent. However, if the government runs into trouble
obtaining financing in the short- to medium-run, then
4% 4%
we should expect a higher inflation tax, devaluation and
more confiscatory measures against different productive
sectors of the economy. The outcome of these measures 2% 2%
will determine how close or how far away another debt Consumer Price Index: Feb @ 9.1%
default may be. 0% 0%
2004 2005 2006 2007 2008 2009 2010

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7
Economics Group Market Data Wells Fargo Securities, LLC
Market Data " Mid-Day Friday
U.S. Interest Rates Foreign Interest Rates
Friday 1 Week 1 Year Friday 1 Week 1 Year
4/2/2010 Ago Ago 4/2/2010 Ago Ago
3-Month T-Bill 0.16 0.13 0.21 3-Month Euro LIBOR 0.58 0.58 1.49
3-Month LIBOR 0.29 0.29 1.18 3-Month Sterling LIBOR 0.65 0.65 1.63
1-Year Treasury 0.41 0.43 0.40 3-Month Canadian LIBOR 0.41 0.41 1.00
2-Year Treasury 1.10 1.04 0.88 3-Month Yen LIBOR 0.24 0.24 0.60
5-Year Treasury 2.67 2.59 1.75 2-Year German 0.96 1.00 1.41
10-Year Treasury 3.94 3.85 2.77 2-Year U.K. 1.15 1.20 1.35
30-Year Treasury 4.80 4.75 3.60 2-Year Canadian 1.73 1.70 1.12
Bond Buyer Index 4.44 4.44 4.92 2-Year Japanese 0.18 0.17 0.41
10-Year German 3.08 3.15 3.16
Foreign Exchange Rates 10-Year U.K. 3.92 4.04 3.37
Friday 1 Week 1 Year 10-Year Canadian 3.56 3.55 2.86
4/2/2010 Ago Ago 10-Year Japanese 1.36 1.39 1.38
Euro ($/€) 1.348 1.341 1.346
British Pound ($/!) 1.519 1.490 1.473 Commodity Prices
British Pound (!/€) 0.887 0.900 0.914 Friday 1 Week 1 Year
Japanese Yen (¥/$) 94.650 92.520 99.520 4/2/2010 Ago Ago
Canadian Dollar (C$/$) 1.011 1.027 1.238 WTI Crude ($/Barrel) 84.87 80.53 48.39
Sw iss Franc (CHF/$) 1.064 1.065 1.134 Gold ($/Ounce) 1120.05 1107.50 904.05
Australian Dollar (US$/A$) 0.919 0.904 0.715 Hot-Rolled Steel ($/S.Ton) 615.00 615.00 450.00
Mexican Peso (MXN/$) 12.296 12.496 13.752 Copper (¢/Pound) 357.70 337.10 184.55
Chinese Yuan (CNY/$) 6.826 6.827 6.835 Soybeans ($/Bushel) 9.27 9.30 9.45
Indian Rupee (INR/$) 44.918 45.595 50.730 Natural Gas ($/MMBTU) 4.09 3.98 3.69
Brazilian Real (BRL/$) 1.765 1.819 2.274 Nickel ($/Metric Ton) 25,011 22,806 10,005
U.S. Dollar Index 81.279 81.676 84.446 CRB Spot Inds. 505.56 501.12 339.52

Next Week’s Economic Calendar

Monday Tuesday Wednesday Thursday Friday
5 6 7 8 9
ISM Non -Ma n . Mi n u t es of FOMC Con su m er Cr edi t Wh ol esa l e In v en t or i es
Febr u a r y 5 3 .0 Ja n u a r y $5 .0 B Ja n u a r y -0 .1 %
Ma r ch 5 3 .5 (W ) Febr u a r y $1 .4 B (C) Febr u a r y 0 .4 % (C)
U.S. Data

Eu r o-zon e Ger m a n y Ca n a da
Global Data

PMI Ser v i ces In du st r i a l Pr od. (MoM) Net Ch g Em pl oy m en t

Pr ev iou s (Feb) 5 3 .7 Pr ev iou s (Ja n ) 0 .6 % Pr ev iou s (Feb) 2 0 .9 K
UK UK
PMI Ser v i ces Mfg Pr odu ct ion (MoM)
Pr ev iou s (Feb) 5 8 .4 Pr ev iou s (Ja n ) -0 .9 %

Not e: (W ) = W ells Fa r g o Est im a t e (c) = Con sen su s Est im a t e

8
Wells Fargo Securities, LLC Economics Group

Diane Schumaker-Krieg Global Head of Research (704) 715-8437 diane.schumaker@wellsfargo.com

& Economics (212) 214-5070

John E. Silvia, Ph.D. Chief Economist (704) 374-7034 john.silvia@wellsfargo.com

Mark Vitner Senior Economist (704) 383-5635 mark.vitner@wellsfargo.com
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Kim Whelan Economic Analyst (704) 715-8457 kim.whelan@wellsfargo.com
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