Frontrunning: March 5

• Fannie, Freddie may ask banks to eat $21 billion of sour loans (Bloomberg)
• Tresuries tumble after snow posturing ends up being great strawman (Bloomberg)
• No snow issues here - striking greek workers shut down transport, try to storm parliament (Bloomberg)
• French debt coming under investor scrutiny (Reuters)
• Singapore's GIC becomes UBS' biggest shareholder (Bloomberg)
• Market forecast- confusing (Barron's)
• How much does the national debt matter? (Forbes)

NFP -36K, Unemployment Rate 9.7%, Average Hours Worked Down By 0.1 to 33.8

Key highlights from the February report:

• Total Civilian labor force at 153,512, compared to 153,170 in January
• Actual unemployment: 14,871, compared to 14,837 in January
• The pool of available workers at 21,041, 239k increase from January's 20,802
• The Over 20 split of unemployed men/women was 10.0%/8.0%
• The labor force participation rate was 64.8%, compared to 64.7% in January
• Average hourly earnings increased by +0.1% compared to consensus estimate of +0.2%
• Total average hours worked in the private industry at 33.8, down from 33.9 in January; The low was in the Leisure and Hospitality services at 25.7, the high in Mining and Logging at 42.6

Daily Highlights: 3.5.10

• Asian stock markets rise as optimism ahead US jobs report grows; Tokyo jumps 2 percent.
• Asian stocks rose, after U.S. jobless claims fell & on speculation Bank of Japan will expand easing measures.
• China plans to sell $29B of Yuan debt this year as part of stimulus.
• China sets 8% GDP goal for 2010.
• Fed Presidents say interest rates need to be low early in US recovery.
• Greece raised $6.85B in a bond sale, but looming debt auctions by EU countries could make it difficult for borrowing more.
• Japan says it won't comply with possible bluefin tuna export ban ahead of key int'l vote.

Must Read: Seth Klarman On The True And False Lessons From The Financial Crisis, Blasts Government Market Intervention

The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost. (Investors believe this now and, worse still, the government believes it as well. We are probably doomed to a lasting legacy of government tampering with financial markets and the economy, which is likely to create the mother of all moral hazards. The government is blissfully unaware of the wisdom of Friedrich Hayek: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”) - Seth Klarman

Chinese Premier: "Protectionism Is Clearly Reasserting Itself"

At the start of today's Chinese National People's Congress, Chinese premier Wen Jiabao poured water over expectations that the renminbi may appreciate any time soon, and also indicated that China will "continue its expansionary fiscal policy" by maintaining appropriately loose monetary policy (translation: it is now next to impossible for the Chinese supertanker to steer off direct collision course with the bubble iceberg). He also noted that "The foundation for global economic recovery remains weak; financial risks have not been completely eliminated" and, most disturbingly, said that "trade protectionism is clearly reasserting itself." The ramification for US trade policy as a result of this admonition will likely continue to be made felt over the next 12 months. Yet in an odd moment of clarity, when discussing the domestic economy, Wen noted "latent risks in the banking and public finance sectors among the key challenges to economic growth, alongside now-standard warnings about industrial overcapacity and shortcomings in income distribution." As for the biggest question of how China will approach the USD-CNY relationship, Wen provided little clarity besides promising to "continue to improve the mechanism for setting the (yuan) exchange rate and keep it basically stable at a reasonable and balance level." As Market News notes, that wording, which is frequently trotted out in government statements, is identical to that contained in last year's report.

Sovereign Default Time Capsule: What People Were Saying In Real Time As Debt And Currency Crises Played Out

From the unthinkable, to the possible, the unavoidable, the actual and finally, the patently obvious

"I kept thinking about prior sovereign events I lived and invested through, and how the “unthinkable” eventually became the “possible”, the “unavoidable”, the “actual” and finally, the “patently obvious”. This week's Sovereign Default Time Capsule shows what people were thinking and saying in real time as sovereign debt and currency crises played out. This is not meant to say that Greece is Argentina; there’s a big difference between Mercosur and the European Union, and it looks like the First Act of the EMU drama will be a bailout for Greece. But it’s instructive to remember how politicians, markets, investors and analysts can underestimate the depths of a problem". - Michael Cembalest, CIO, JP Morgan, Global Wealth Management

Bank Loan And High Yield Inflows Drop, Still Positive After Massive Outflows In Mid February

Lipper FMI has reported that bank loan mutual funds saw $179 million in inflows, while HY funds increased their capital by $314 million in the week ended March 3. This compares to inflows of $228 million and $470 million in the prior week, and HY outflows of $1 billion for two weeks running in the weeks prior to this. If HY bond and loan mutual fund flows track the market, one would have expected a more spirited appearance from HY investors this past week.