Conversation Starter
IMF Sees Strong Growth in Asia Continuing, Further Policy Tightening Needed
IMF Press Release No. 10/393
October 21, 2010
Asia remains firmly in the lead of the global economic recovery and strong growth in the region is set to continue, the International Monetary Fund (IMF) said today in its latest Regional Economic Outlook (REO) for Asia and the Pacific which was released in Jakarta, Indonesia. The expansion in Asia exceeded expectations in the first half of the year, the IMF said, prompting the Fund to revise up its 2010 growth forecast for the region to 8 percent, nearly 1 percentage point higher than its April forecast. Economies across the region are expanding strongly. China and India are leading the way with projected 2010 growth rates of 10.5 percent and 9.7 percent, respectively, while Indonesia is expected to grow by 6 percent. In Japan, growth is now projected at 2.8 percent. In 2011, regional growth is expected to moderate to a more sustainable pace of 6.8 percent.
See the full IMF report here:
Regional Economic Outlook: Asia and Pacific Consolidating the Recovery and Building Sustainable Growth
***CN: The IMF report concludes, in part, that re-balancing Asia’s growth remains the top policy priority over the medium term. With external demand from advanced economies unlikely to return to pre-crisis levels in the foreseeable future, Asia will need stronger domestic demand to continue along a robust growth path. A broad range of reforms are needed to support domestic consumption and investment, including strengthening social safety nets, ensuring access to credit, easing restrictions in service sectors and improving infrastructure, the IMF says.
Lead Stories
Geithner's Goal: Rebalanced World Economy
By DAMIAN PALETTA And DAVID WESSEL, WSJ.com
Treasury Secretary Timothy Geithner said he would use weekend meetings of G-20 finance ministers to advance efforts to "rebalance" the world economy so it is less reliant on U.S. consumers, to move toward establishing "norms" on exchange-rate policy, and to persuade others the U.S. doesn't aim to devalue its way to prosperity.
http://jlne.ws/dhk1kK
Fannie, Freddie could need $363 billion, FHFA says
By Steve Goldstein, MarketWatch
The Federal Housing Finance Agency on Thursday released projections of the financial performance of Fannie Mae and Freddie Mac and estimated they could draw between $221 billion to $363 billion from the government under the preferred stock purchase agreements. To date, the firms have drawn $148 billion. The projected credit losses in each scenario primarily reflect possible further losses on the enterprises' pre-conservatorship mortgage business
http://jlne.ws/9GCUlw
Americans Aren't Saving Enough for Retirement, Study Finds
By CATHERINE RAMPELL, The New York Times
The typical middle-age American is saving far too little for retirement, and the Employee Benefit Research Institute has estimated the shortfall: an average of $47,732 per individual over the course of that person’s retirement.
http://jlne.ws/d5gjWc
Japan’s Toxic Cocktail Fails U.S. Taste Test: Caroline Baum
By Caroline Baum, Bloomberg
Japan is an old country, and I’m not talking about the place. Twenty percent of the population is 65 or older, putting Japan in first place, in a tie with Italy, in the geriatric country competition, according to the Stanford Center on Longevity.
http://jlne.ws/daSSiq
G20 to mull current account targets: U.S. aide
By Greg Robb, MarketWatch
Finance ministers and central bank governors of the Group of 20 nations will discuss setting targets for current account deficits at their meeting in South Korea this weekend, a senior U.S. Treasury official said Wednesday.
http://jlne.ws/cHQn80
Bernanke Makes Case for Further Fed Moves to Boost Economy
By JON HILSENRATH, WSJ.com
Federal Reserve Chairman Ben Bernanke made a case for new steps by the central bank to boost economic growth, saying inflation was running below the Fed's objective of 2% and that the economy was on a course to grow too slowly to reduce unemployment.
http://jlne.ws/aqjSZt
US Treasury seeks advice on adding 5-yr, 30-yr TIPS
Reuters
The U.S. Treasury signaled on Friday it may add more inflation-indexed notes to its auction calendar, asking government bond dealers their views on a second quarterly reopening for 5-year and 30-year Treasury Inflation Protected Securities (TIPS).
http://jlne.ws/9bU2Zv
***CN: An opportunity to be heard, government bond dealers.
Cost of bank reform could explode: Deutsche Bank CEO
By Steve Slater, Reuters
The economic cost of tougher global capital rules for banks could explode if further requirements on big banks are not co-ordinated, Deutsche Bank (DBKGn.DE) chief executive Josef Ackermann said.
http://jlne.ws/aBMRRr
B of A pressured to buy back bad mortgages
By Wallace Witkowski, MarketWatch
A bondholders' group is seeking to force Bank of America Corp. to buy back some $47 billion in bad mortgages packaged by Countrywide Financial Corp., according to a published report Tuesday. Bloomberg News, citing unnamed people familiar with the matter, reported that Pacific Investment Management Co., BlackRock Inc., and the Federal Reserve Bank of New York wrote to Bank of America and Bank of New York Mellon Corp., the debt's trustee, faulting Countrywide for not servicing the loans properly.
http://jlne.ws/9d3epe
Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages
By Jody Shenn, Bloomberg
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
http://jlne.ws/dfaHUg
Osborne: Bank levy to be permanent
BBC
A levy on bank balance sheets will be made permanent, potentially raising billions of pounds, Chancellor George Osborne has confirmed. The chancellor said he would introduce legislation on Thursday in order "to extract the maximum sustainable tax revenues from financial services."
http://jlne.ws/9ejhbI
Buffett Raises Stake in Munich Re
BY WILLIAM LAUNDER AND ERIK HOLM, WSJ.com
German reinsurer Munich Re said billionaire investor Warren Buffett continues to increase his stake in the company and that he plans to raise the holdings further over the next year.
http://jlne.ws/bpdHR3
China Raises Interest Rates
By ANDREW BATSON, WSJ.com
China raised interest rates for the first time since emerging from the financial crisis, in a surprise move that highlights the widening gap in the world economy between economically vibrant developing countries and the rich nations trying to fend off stagnation.
http://jlne.ws/copgpn
Officials Hint Fed on the Verge of More Easing
By Mark Felsenthal and Pedro da Costa, Reuters
A string of Federal Reserve officials on Tuesday indicated the central bank will soon offer further monetary stimulus to the economy, with one saying $100 billion a month in bond buys may be appropriate.
http://jlne.ws/dx0XF4
Bondholders Pick a Fight With Banks
By RUTH SIMON, WSJ.com
As banks restart foreclosures they had suspended, bondholders are stepping up efforts to recoup losses on soured mortgage portfolios amid concern about sloppy mortgage servicing and underwriting practices.
http://jlne.ws/cZjmb4
Basel III to ease in new bank liquidity rules
Reuters
Global banking supervisors agreed on Tuesday to phase in the introduction of a key new global standard on lenders' minimum short-term funding cover, handing further relief to a sector facing a hefty funding gap.
http://jlne.ws/dtcUqQ
Former Citadel trader fined $1.1 million
Chicago Tribune
Mikhail 'Misha' Malyshev ordered to pay fine to 2 charities after violating judge's order to preserve potential evidence in lawsuit
A former executive of hedge fund manager Citadel Investment Group LLC recently gave about $1.1 million to two Chicago charities, but the payments were not an act of good will.
http://jlne.ws/dybm3i
Memory of 1995 Treasuries Rally Spurs Debt Before November U.S. Election
Bloomberg
Bond investors are looking back to the last time a Democratic president lost control of Congress and concluding, like then, that gridlock in Washington is good news for Treasuries.
http://jlne.ws/dgTX7r
Events
Mortgage Foreclosures and the Future of Housing Finance
When: Oct. 25-26, 2010
Where: L. William Seidman Center, Arlington, VA
Full info: http://www.chicagofed.org/webpages/events/2010/frbc_fdic_mortgage_foreclosure.cfm#
Details: The Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC) are co-hosting a two-day conference highlighting policy-oriented research focused on U.S. housing and mortgage markets. The conference will emphasize two major issues: mortgage foreclosures and the future of housing finance. We will evaluate the current foreclosure situation, emphasizing the adverse neighborhood spillover effects and evaluations of efforts to mitigate foreclosures including loan modification efforts. We will also take a broader perspective and evaluate the future of housing finance. This will include an evaluation of the mortgage interest tax deduction, affordable housing issues, the future role of government-sponsored entities, the future of private-label mortgage securitization, the viability and role of private mortgage insurance, and the role of the Community Reinvestment Act.
Greece is Changing
Hellenic Observatory 11th Annual Lecture in association with APCO worldwide
When: Nov. 8, 2010
Where: LSE Campus
Full info: http://www2.lse.ac.uk/publicEvents/events/2010/20101108t1830vLSE.aspx
Details: The Greek sovereign debt crisis of 2010 has received world-wide attention and has elicited unprecedented action by the European Union and its member governments as well as by the IMF. Greece is now obliged to follow the terms of the 'Memorandum' agreed with the 'bail-out' loan it has received. Is Greek economic policy on track? What are its future prospects?
Deutsche Bank Annual Financial Technology Senior Executive Forum
When: Nov. 9-10, 2010
Where: The Pierre in New York
Full info: http://conferences.db.com/americas/fintech10/
Details: Participants will include prominent figures from exchange, FCM / Inter-dealer broker, trading technology, merchant acquiring, payment processing, prepaid, information provider, and financial software companies. Through a series of interactive panels, these senior business leaders will explore the challenges and opportunities as they expand into new markets, face increasing global competition, and respond to an ever-changing regulatory environment.
For context, this is not a research analyst conference but rather, a forum that organized to engage senior executives in industry-related discussions. This forum is also an excellent networking opportunity as the individuals who attend are decision-makers within their organizations. Similar to last year, this year's forum will feature panel discussions comprised of senior executives and board members from a variety of industry sub-sectors.
***CN: Note, Deutsche Bank reserves the right to determine which attendees have priority for admission.
Economic News
Housing Starts Rise to Five-Month High in Sign of Stabilization
By Bob Willis, Bloomberg
Builders in the U.S. unexpectedly began work on more homes in September, a sign the real estate market was stabilizing at depressed levels heading into the recent upheaval in the foreclosure crisis.
http://jlne.ws/chRo0z
Production in U.S. Unexpectedly Falls for First Time in a Year
Bloomberg
Production in the U.S. unexpectedly dropped in September for the first time in more than a year, evidence of the slowdown in growth that is concerning some Federal Reserve policy makers.
http://jlne.ws/bkun8b
U.S. Workers' Compensation Claims Decline in 2009 as Unemployment Lingers
Bloomberg
Workers’ compensation claims declined last year, extending a slide that began in 1991, as improving job conditions and higher unemployment reduced accident frequency, preliminary insurance-industry data show.
http://jlne.ws/c1FBeD
Sept. leading economic index climbs 0.3%
By Steve Goldstein, MarketWatch
U.S. economic growth is "slow" and doesn't have momentum, the Conference Board said Thursday as it reported that its leading economic index rose 0.3% in September. The leading economic index - a weighted gauge of ten separate indicators - rose as economists polled by MarketWatch had anticipated. The six-month change has slowed to 0.8% from 5.1%. The index for August was revised lower to 0.1%, from the 0.3% rise initially reported, and the July index was revised higher to 0.2%, from the 0.1% rise initially reported.
http://jlne.ws/9lL1NW
Jobless claims fall, but still stuck
By Hibah Yousuf, CNNMoney.com
The number of Americans filing for first-time unemployment benefits fell last week, but continued to drift in the same range they have been for about a year, signaling ongoing weakness in the labor market.
http://jlne.ws/9TPzfS
Exchanges, Clearing Houses & MTFs
Micex Eases Investor Rules to Double Bond Market: Russia Credit
By Emma O’Brien, Bloomberg
Russia is seeking to lure buyers for a record amount of debt sales by easing foreign investor restrictions and offering futures on government bonds for the first time.
http://jlne.ws/do2J0O
***CN: Bold move on the part of Micex.
Nasdaq's IDCG Broadens Swap-Clearing Service As Business Rises
By Jacob Bunge, Of DOW JONES NEWSWIRES
A derivatives clearing venture backed by Nasdaq OMX Group Inc. (NDAQ) has broadened the way it handles customers' swap transactions as the still-small platform gathers business. The International Derivatives Clearing Group, or IDCG, in recent weeks has moved to allow customers to back up interest-rate swap transactions in their existing form, alongside an existing service that converts swap deals to futures contracts, according to the company's chief executive.
http://jlne.ws/9JERBv
CME Group Begins Interest-Rate Swap Clearing Service
By JACOB BUNGE, WSJ.com
CME Group Inc. on Monday rolled out a new service that will handle over-the-counter derivatives transactions tied to fluctuations in global interest rates.
http://jlne.ws/92RTes
CME Group Begins Clearing OTC Interest Rate Swaps
Press Release
CME Group, the world's leading and most diverse derivatives marketplace, announced today that it has begun clearing over-the-counter (OTC) interest rate swaps through CME Clearing.
http://jlne.ws/aKXl27
CME Group wants facelift for credit default swaps
Reuters
CME Group Inc. will try to revamp its languishing credit default swaps clearing service, which has been all but eclipsed by rival clearinghouse operator IntercontinentalExchange Inc., a CME executive said on Monday.
Crain's Chicago Business
http://jlne.ws/9sxAJm
Citi Clears First Interest Rate Swap Trades for Clients on Chicago Mercantile Exchange
Press Release
Citi, a global leader in central clearing, announced today that it has cleared its first client trades through the Chicago Mercantile Exchange (CME) on the CME’s newly launched interest rate swap clearing platform. The trades executed through CME reflect Citi’s commitment to a consolidated, global and platform-agnostic approach to central clearing. In addition to CME, Citi currently clears interest rate swap trades for clients through LCH.Clearnet’s Swapclear service.
http://jlne.ws/bODNdv
Firms & Banks
Big Banks May Escape Capital Surcharge as Global Talks Founder
Bloomberg
Leaders of the world’s largest economies, divided over how to curb risk-taking by their biggest banks, will likely fail to agree on a capital surcharge.
http://jlne.ws/aJumaf
UBS in Talks With Dozens of Prop Traders Mulling Hedge Funds
Bloomberg
UBS AG the largest Swiss bank, said it has been in talks with “dozens” of proprietary traders from firms worldwide who may start their own hedge funds as banks seek to comply with new U.S. rules aimed at curbing risk.
http://jlne.ws/bt0McK
Wells Fargo Reports Record Earnings
BY MARSHALL ECKBLAD, WSJ.com
Wells Fargo & Co. harnessed a surge in mortgage originations in the third quarter to post record earnings, even as new regulations and a soft economy hurt other revenue, such as overdraft fees and interest income.
http://jlne.ws/bABAIG
Goldman Sachs Profit Beats Estimates as Expenses Drop
By Christine Harper, Bloomberg
Goldman Sachs Group Inc., the biggest securities firm by revenue, said profit dropped 40 percent, beating analysts’ estimates, as lower costs and higher investment-banking revenue cushioned a decline in trading.
http://jlne.ws/9KpupS
Guy Hands Testifies in Case Against Citigroup
The New York Times
Guy Hands, the charismatic British financier, took the witness stand on Tuesday before a packed federal courtroom in Lower Manhattan to pursue his fight with Citigroup. Mr. Hands’s private-equity firm, Terra Firma Capital Partners, has sued the bank over its failed buyout of the EMI Group, accusing Citigroup of lying to him about the presence of another bidder during the auction of the music company.
http://jlne.ws/bNed9a
Citigroup to Have 1.5B Shares Sold Off by Treasury
ThirdAge
Citigroup is preparing for a large sale of shares by the U.S. Treasury after the government agency said Tuesday it was preparing to sell 1.5 billion shares of common stock out of its holdings of 3.5 billion shares.
http://jlne.ws/cwlynM
Goldman Sachs Cuts Compensation Pool to $370,706 per Employee
By Christine Harper and Michael J. Moore, Bloomberg
Goldman Sachs Group Inc. set aside $13.1 billion for compensation and benefits in the first nine months of the year, down 21 percent from a year earlier, as revenue fell 14 percent.
http://jlne.ws/c0pfJW
Morgan Stanley Said to Get Nod to Sell C.I.C.C.
New York Times
Morgan Stanley has obtained regulatory approval for its planned sale of a 34.3 percent stake in Chinese investment bank China International Capital Corp , state media reported on Tuesday, according to Reuters.
http://jlne.ws/btcQvW
Goldman Pushes Its Image Rehab
By LIZ RAPPAPORT, WSJ.com
Goldman Sachs Group Inc. is taking its first steps to change the way it does business after it weathered harsh criticism and paid a $550 million fine tied to its actions before and during the financial crisis.
http://jlne.ws/98UNdN
Auctions & Statistics
Treasury to Offer $25B 56-Day Cash Management Bill
By Gary Siegel, The Bond Buyer
The Treasury Department said it will auction $25 billion 56-day cash management bills on Wednesday, October 20.
http://jlne.ws/aZJ48w
Regulations
FSB Seeks to Reduce Reliance on Rating Agencies
BY NATASHA BRERETON, WSJ.com
Financial Stability Board Chairman Mario Draghi said the body's members have endorsed principles to reduce the excessive reliance by governments and financial institutions on credit-rating agencies.
http://jlne.ws/cox1xd
Commodity Futures Trading Commission judge says colleague biased against complainants
The Washington Post
As George H. Painter was preparing to retire recently as one of two administrative law judges presiding over investor complaints at the Commodity Futures Trading Commission, he issued an extraordinary request: Please don't assign my pending cases to the other judge.
http://jlne.ws/a45q8o
Rubin Says U.S. Should Focus on Deficit, Not More Stimulus
By James Sterngold, Bloomberg
U.S. policy makers should focus on deficit reduction rather than an economic-stimulus package or additional bond purchases by the Federal Reserve, former Treasury Secretary Robert Rubin said.
http://jlne.ws/danWND
Prichard Appointed First Vice President - Philadelphia Fed
Press Release
The Federal Reserve Bank of Philadelphia today announced the appointment of D. Blake Prichard to first vice president and chief operating officer, effective January 1, 2011. Prichard is currently the executive vice president responsible for Information Technology Services, Customer Relations, and Treasury and Payment Services. He also oversees the Federal Reserve System's Groupware Leadership Center, which provides national e-mail and related services. He will succeed William H. Stone, Jr., who announced his plans to retire earlier this year after serving as the Bank's first vice president for 23 of his 40 years of service.
http://jlne.ws/cWCbFQ
Fed Is Monitoring Mortgage Foreclosure Process
By Michael S. Derby, WSJ.com
The leader of the Federal Reserve Bank of New York addressed the ongoing saga of mortgage foreclosures, saying “the Federal Reserve actively encourages efforts to find viable alternatives to foreclosure, like loan modifications, or deeds in lieu.” But he added, “we also support due process and access to legal counsel for homeowners facing foreclosure, for instance through legal aid programs.”
http://jlne.ws/avYnWI
CFTC Proposes Swaps Reporting as Step Toward Position Limits
By Alan Bjerga and Asjylyn Loder, Bloomberg
The top U.S. commodities regulator today proposed a rule that will require traders to report over- the-counter swaps based on raw materials including oil and corn, a prelude to trading limits.
http://jlne.ws/bw1dSY
Fed’s Lockhart ‘Leaning In Favor’ of Action
By Michael S. Derby, WSJ.com
Another U.S. central bank official is giving support to the Federal Reserve embarking on a program of asset buying to help spur growth in a moribund U.S. economy.
http://jlne.ws/btpfQ1
Global News
Could the Bank of Canada be forced to cut rates again?
By Michael Babad, The Globe And Mail
Economists now believe Bank of Canada Governor Mark Carney won't raise interest rates again until well into next year. Since the recession's end, Mr. Carney has hiked his benchmark overnight rate three times, taking it from its emergency low to 1 per cent.
http://jlne.ws/acqCrM
Bond sales demonstrate stronger Asia links
By Robin Wigglesworth, FT.com
One of the more curious revelations in Dubai’s recent government bond prospectus was a previously unknown $1bn loan from China Construction Bank. Disclosure of the loan underlines the increasingly close ties between the Gulf states and Asia, a trend that is apparent in recent bond sales, where Asian investors have become markedly more significant.
http://jlne.ws/cCVED0
Brazil Hikes Tax On Incoming Fixed Income Investment To 6% -Estado
Dow Jones
Facing continued heavy flows of foreign currency, Brazil Monday raised its financial operations tax on incoming fixed-income investment for the second time in a month, and also hiked the tax on guarantees for derivatives operations, according to the Estado news agency.
http://jlne.ws/bu5xel
BOE Minutes Highlight Divide
BY NEIL SHAH, WSJ.com
Britain's central bankers are butting heads over whether to pump more cash into the economy to keep it from stalling amid conflicting signals on growth and inflation.
http://jlne.ws/cFs5vN
Bank of Canada sees slow growth
By Jeremy Torobin, the Globe And Mail
The Bank of Canada cut its growth forecast for five quarters starting with the July-September period and said the economy won’t be at full tilt until the end of 2012 as households work to trim their debt loads and the U.S. recovery remains sluggish.
http://jlne.ws/cneYao
Hedge Funds Seeking Distressed Assets May Turn to Japan, China, Australia
By Netty Ismail and Rishaad Salamat, Bloomberg
Hedge funds seeking distressed assets in Asia may find the best opportunities in Japan, China and Australia next year as banks sell soured loans, and small and medium-sized businesses struggle to attract funding.
http://jlne.ws/c2VuuI
China Abandons The Abacus
By Jacob Goldstein, NPR/ Planetmoney
China said today that it's raising interest rates by a quarter of a percentage point. That's a big deal. China hasn't raised interest rates since 2007, and the move is a sign of strength for China's economy. One interesting detail: It's the first time in modern history that China's central bank made an interest-rate move that wasn't a multiple of .09. "The reason is that on the abacus, adding multiples of nine was much easier than adding multiples of 10. So the modern People's Bank of China inherited that special character from the old days," an economist with Citigroup in Beijing told Reuters.
http://jlne.ws/b7J8uD
Finance Minister Lagarde Sees Significant Progress on Hedge Fund Rules
Bloomberg
French Finance Minister Christine Lagarde said European Union finance ministers made "significant progress" in agreeing to tougher hedge-fund and private-equity regulations.
http://jlne.ws/bsdrJZ
BOE Governor King Says Some U.K. Inflation Indicators `Extremely Subdued'
By Scott Hamilton and Jennifer Ryan, Bloomberg
Bank of England Governor Mervyn King said that some gauges of U.K. inflation are “extremely subdued,” signaling that he may be open to stepping up bond purchases. Officials are “conscious that the continuing high level of inflation poses the risk that inflation expectations may move up,” King said in a speech today in Dudley, England. Still, the danger that slack in the economy will push price-growth below the bank’s target is “at least as large.”
http://jlne.ws/9455q4
UBS names head executives of Brazil operations
San Francisco Chronicle
UBS AG said Monday it named Lywal Salles as chairman of UBS Group Brazil and Eduardo Centola as CEO of UBS Investment Bank in Brazil. Salles, 64, is the chairman of Banco Itau Europa...
http://jlne.ws/aYug1e
China's holdings of Treasury debt rises in August
Associated Press
China, the largest holder of U.S. Treasury debt, increased its holdings for a second straight month in August after two months of declines. China's holdings of Treasury securities rose to $868.4 billion in August, the Treasury Department reported Monday. That's up 2.6 percent and followed a smaller gain of 0.4 percent in July. China's holdings had fallen 2.8 percent in June and 3.6 percent in May.
http://jlne.ws/ajqV47
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