May 5, 2011
JLN Interest Rates - http://www.jlninterestrates.com
Conversation Starter
Ben Bernanke (c) Christine Marie Nielsen/JLN
Federal Reserve Chairman Ben Bernanke revisited his "Pudd’nhead Wilson" reference Thursday at the Federal Reserve Bank of Chicago's 47th Annual Conference on Bank Structure & Competition. The conference is focusing on the topic of Implementing Dodd-Frank, and runs until May 6.
The Pudd’nhead name refers to Mark Twain's fictional lawyer character who opined that if you put all your eggs in one basket, you better “watch that basket!” Bernanke first made the reference in a speech made Apr. 4, and noted increased reliance on clearinghouses to address problems in other parts of the system. "We will watch that basket very carefully," he said Thursday.
--Bernanke: Implementing a Macroprudential Approach to Supervision and Regulation--May 5, 2011
http://jlne.ws/lb7ukY
--Bernanke: Clearinghouses, Financial Stability, and Financial Reform--April 4, 2011
http://jlne.ws/kyDQxn
--Information About Chicago Fed's 47th Annual Conference on Bank Structure and Competition http://jlne.ws/hG0Gzg
Five Minutes with Richard M. McVey, Chairman and CEO of MarketAxess
Richard M. McVey has been chief executive officer and chairman of the board of directors of MarketAxess since its inception. As an employee of J.P. Morgan & Co. - one of the founding broker-dealers of MarketAxess - McVey was instrumental in the founding of MarketAxess in April of 2000. This week he talked with JLN Managing Editor, Christine Nielsen, about increasing efficiencies in bond trading and growth at MarketAxess.
1. Could you give me a quick rundown of your background and how you came to MarketAxess?
McVey: Prior to founding MarketAxess in April of 2000, I was managing director and head of North America fixed income sales at J.P. Morgan, overseeing the institutional distribution of fixed-income securities to investors. Through this and prior experience, it became clear to me how greater efficiencies could be introduced to traditional bond trading, which was a manually intensive process (with product and price discovery conducted over the telephone between two or more parties). Led by a group of the largest dealers in the fixed income market, including J.P. Morgan, we created MarketAxess in response to investors' need for a single trading platform with easy access to multi-dealer competitive pricing in a wide range of credit products.
2. How would you characterize the current financial industry landscape for MarketAxess? It appears the company just released some healthy 1Q11 earnings - including record revenues of $43.6 million, up 25.0 percent.
McVey: Thank you, we were very pleased to report a record quarter for the firm. I would characterize credit market conditions through the first quarter as very healthy. We have seen a combination of significant inflows into bond funds and opportunistic issuance by corporate treasurers, which has led to strong trading activity in the primary and secondary markets. U.S. high grade trading volumes were up 31 percent from the fourth quarter and 11 percent from a year ago, based on the FINRA’s TRACE data on bond market activity. With low short-term rates, we have continued to see strong demand for credit due to the improving appetite for risk and continued demand for yield.
The results of the first quarter reflect not only favorable market conditions, but also demonstrate robust growth in many product areas of our business. In our core product - U.S. high grade bonds - we have continued to grow our average market share to approximately 10 percent of TRACE volume, driven by a combination of increased investor order flow and improved dealer hit rates. In addition, we have successfully broadened our customer participation on the system, both in terms of market making dealers as well as institutional investor firms.
3. Based on your financial results, it looks as if there has been particularly strong growth in the “other" category. What’s the driver behind that increase?
McVey: Yes, the strong growth in the "other" category, which includes our newer products, reflects the expansion in electronic trading of U.S. agency debt and emerging market bonds, where we saw record quarterly volumes. We are excited about the increased traction of our agency business, as we strive to be a single destination for our customers to trade credit on MarketAxess. For emerging markets bonds, we are continuing to make headway in e-trading adoption and have seen particular client demand for emerging market corporate bond trading, which is representing a greater percentage of trading versus emerging market sovereign debt.
4. What other areas of the market are you entering?
McVey: Recently, we have added to the platform the capabilities to electronically traded preferred stock and asset-backed securities. The ability to trade these asset classes electronically are marketplace firsts, and both fit well with the trading protocols for corporate bonds and our trading community. At the same time, we’ve continued to build our institutional trading network to 80 market making dealers and over 800 active institutional investor firms.
5. MarketAxess has said it hopes to create a swap execution facility (SEF) once the rules are finalized. Could you tell us a little more about the intent there?
McVey: MarketAxess continues to be focused on being the leading institutional credit marketplace, which is why we are so excited about the opportunities that the regulatory reforms present. The Credit Default Swap electronic trading market fits hand in glove with what we’ve always done in the corporate bond market, which is as true now as it was when we were the first to introduce a client-to-multi-dealer platform for CDS over five years ago. Moreover, throughout the last 10 years, we have built the right network of institutional users and developed the best trading technology to allow them to trade in the spirit of what has been set forth by Dodd-Frank.
We expect to qualify as a SEF and are working to meet that objective, and we have CDS trading engines built for index, single name and bid/offer list trading. While much uncertainty remains on the timing of implementation, we continue to stay engaged with the regulators and market participants, enhance our trading technology, and build important connectivity to our customers, prime brokers, affirmation hubs and clearing houses.
6. Last month, you announced several SEF-like electronic trades with J.P. Morgan and six investor clients, trading both single-name and index CDS in the U.S. and Europe. Could you give some background on those transactions?
McVey: CDS currently represents the largest investment we are making in product capabilities, and those transactions were a good example of how the market is evolving. Some of the CDS trades completed this quarter were submitted for electronic affirmation and central clearing, a model for the new market envisioned by Dodd-Frank regulatory reform. Although it remains unclear when the implementation of the new rules will take place, we want to continue to demonstrate that we are taking all the steps necessary to provide electronic trading capabilities to our customers that will be aligned with tomorrow’s regulatory regime.
7. How do you feel about how the regulatory process for the OTC market has been handled thus far?
McVey: Overall, we are pleased with the OTC derivative trading rules proposed by the CFTC and SEC. Throughout this commentary period, they have demonstrated that they are listening attentively to all market participants and taking in their considerations as they shape the final rules. Certainly we have offered comments to both regulatory agencies and continue to be engaged with them. Among the concerns we have expressed are the regulatory and compliance requirements for SEFs and security-based SEFs. We are hopeful that the associated compliance costs will not prove overly burdensome as to discourage trading, stifle innovation and limit competition. As the regulatory rules are finalized, MarketAxess stands ready to provide technology solutions to our customers to help them comply with the new regulations.
8. What do you feel is the greatest challenge that MarketAxess faces at this time?
McVey: Although the trade winds are currently in our favor in the U.S., the market environment in Europe remains a bit weaker due to the sovereign debt crisis. However, that has not held us back from enhancing our technology, trading workflow, and STP solutions to our European customers. Moreover, we have seen substantial growth in the volume of North American products being traded by our European investor clients over the last few years. We see an opportunity to grow the cross-border trading activity in both directions and continue to engage and connect our U.S. clients to trade Eurobonds with our UK market-making dealers.
--Christine Nielsen
Lead Stories
Lawmakers Demand Definition of Too Big to Fail
By Victoria McGrane, WSJ.com
On Wednesday, Treasury Secretary Timothy Geithner said that regulators’ identification of which large financial firms pose a risk to the financial system “in some ways [is] the central choice at the heart of financial reform.”
http://jlne.ws/kz7sEt
Sen. Durbin says Dodd-Frank rollback would kneecap regulators
By Mark Schoeff Jr., InvestmentNews
As House Republicans begin to move legislation this week that would roll back parts of the Dodd-Frank financial reform law, a prominent Senate Democrat indicated today that he will fight efforts to scuttle or delay implementation.
http://jlne.ws/l6TKCW
Bernanke Spurs Rally in Higher-Yielding Local Law Bonds
By Ben Bain, Bloomberg
Federal Reserve Chairman Ben Bernanke is making investors more comfortable buying Argentina’s dollar bonds sold under local law after indicating U.S. interest rates are likely to remain near zero.
http://jlne.ws/mF5kBp
Regulators Must Avoid ‘Burdensome’ Rules: Bernanke
By Scott Lanman and Meera Louis, Bloomberg
Federal Reserve Chairman Ben S. Bernanke said the government must avoid imposing burdensome rules on financial companies as it carries out the biggest regulatory overhaul in seven decades.
http://jlne.ws/lNl9E
ECB keeps euro zone interest rates on hold for now
Euronews
The European Central Bank, as expected, has kept euro zone interest rates on hold with markets now waiting for a indication that they will face a hike in June or July.
http://jlne.ws/kbeORz
ECB: Introductory statement to the press conference
Jean-Claude Trichet, President of the ECB, Vítor Constâncio, Vice-President of the ECB, Helsinki, 5 May 2011
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference here in Helsinki. I would like to thank Governor Liikanen for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today’s meeting of the Governing Council. We will now report on the outcome of the meeting, which was also attended by Commissioner Rehn.
http://jlne.ws/m8OuxD
ECB examines covered bond sector
By Jennifer Hughes, Financial Times
Covered bond experts have been called to Frankfurt to discuss the health of their market with the European Central Bank. The ECB bought E60bn of the bonds, an ultra-safe form of securitisation, during the financial crisis and has since taken a strong line on improving the transparency and investor-friendliness of the products.
http://jlne.ws/miHI7Z
ECB's VP Constancio - Debt Crisis Has Not Abated
Reuters
The euro zone sovereign debt crisis has not abated despite the commitments made by debt strained countries to repair their finances, European Central Bank Vice President Vitor Constancio said on Monday.
http://jlne.ws/jN5WEh
Bank of England Holds Rate at 0.50%
Central Bank News
The Monetary Policy Committee of the Bank of England maintained the official Bank Rate paid on commercial bank reserves unchanged at 0.5%. The Bank also "voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion." The Bank will release inflation and output projections on the 11th of May and will release the minutes of this monetary policy meeting on the 18th of May.
http://jlne.ws/jeIRH1
The Fed's Language Problem on Inflation
The New York Times
The Federal Reserve has made clear that it’s not worried about inflation right now, despite spikes in the price of oil, food and other commodities. It has had a harder time explaining why.
http://jlne.ws/jWzhGb
‘ET’ stokes fears about sweeping swaps rules
By Aline van Duyn, FT.com
A new buzzword is flying around the derivatives industry: “ET.” Short for “extraterritoriality”, the legal term under which people or companies are exempt from local laws, the ET theme is becoming a hot topic in the global derivatives markets as swaps become subject to regulation following the financial crisis.
http://jlne.ws/irtUI6
Banks anxious over Fed regulations
By Tom Braithwaite in Washington and Justin Baer and Aline van Duyn in New York, Financial Times
Wall Street banks are warning they may have to cede much of the European derivatives market to the likes of Deutsche Bank and Barclays Capital if US regulators follow through on proposals to apply new regulations extraterritorially. The Federal Reserve and other banking regulators recently proposed rules that would force the non-US arms of US banks to collect collateral, or “margin” in the form of cash or securities, “without regard to whether the counterparty is located inside or outside the United States”.
http://jlne.ws/kRrZ5V
Geithner: U.S. to press China on bank reform
Market Watch
Treasury Secretary Timothy Geithner said Tuesday that the U.S. is going to begin pressing China to move more quickly to reform its financial sector. In comments before the U.S.-China Business Council, Geithner called bank reform "the next frontier" in China's efforts to become a more balanced economy. Geithner, ahead of strategic dialogue talks next week...
http://jlne.ws/kHJIN8
Morgan Stanley, Goldman Counter Bearish Gross on Treasuries
BusinessWeek
Morgan Stanley and Goldman Sachs Group Inc. are dropping bets against Treasuries.
http://jlne.ws/imKCwG
SIFMA Supports United States Covered Bond Act Of 2011
Press Release
SIFMA today issued the following statement from Ken Bentsen, executive vice president, public policy and advocacy in support of H.R. 940, the United States Covered Bond Act of 2011, which faces a vote in the Subcommittee on Capital Markets and Government Sponsored Enterprises of the House Financial Services Committee.
http://jlne.ws/mimk8s
Personal Bankruptcy Filings Moderate
By Sara Murray, WSJ.com
Personal bankruptcy filings dropped last month, as the surge of bankruptcies spurred by the economic downturn continued to moderate. The National Bankruptcy Research Center and the American Bankruptcy Institute tallied 134,720 consumer filings in April, down nearly 6.8% from the same month a year ago. So far this year filings are 6.5% below the same period in 2010 and bankruptcy experts believe the gush of filings over the past few years is beginning to slow.
http://jlne.ws/iliIBl
Inflation Measurement Gives Us Food for Thought - Economic Letter, May 2011 - FRB Dallas
Global food prices are soaring. Since February 2009, the United Nations Food and Agriculture Organization world food price index has risen roughly 67 percent, surpassing the previous peak in June 2008 (Chart 1). The last food price surge, from early 2007 to mid-2008, prompted riots in many countries; the latest rise has also fueled riots and may have been a factor in political unrest sweeping through North Africa and the Middle East
http://jlne.ws/kBZpLm
FDIC Completes First CMBS
IDD: Asset Securitization Report
The Federal Deposit Insurance Corporation (FDIC) closed on a sale of securities as part of a securitization backed by approximately $394.3 million of performing commercial and multi-family mortgages from 13 failed banks.
http://jlne.ws/iiktxV
CFTC Provides Concepts And Questions Document Ahead Of Joint CFTC-SEC Public Discussion On Dodd-Frank Implementation
Press Release
Staff of the Commodity Futures Trading Commission (CFTC) today released a document setting forth concepts that it is considering with regard to the effective dates of final rules for swaps under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The document, which is being providedto panelists participating in the May 2-3, 2011, public roundtable being hosted by the CFTC and the Securities and Exchange Commission (SEC), also presents a series of relevant questions concerning how to phase the implementation of new rules.
http://jlne.ws/lg8GOo
Regulatory newbies may be eased into US swaps reforms-CFTC
By Christopher Doering, Reuters
Market participants not used to strict regulatory oversight may be given more time to comply with new swaps rules, but those with ties to big banks could be hit sooner, under rough guidelines the Commodity Futures Trading Commission is considering.
http://jlne.ws/jac0HR
Promises, Promises. Better Measuring the Effect of Pension Reform – The IMF Blog
By Benedict Clements, IMF Direct
We all hope to retire one day. Our pensions hold the promise of that. But when that promise is a public pension, it’s also a lot like debt the government has to pay at some point in the future.
http://jlne.ws/kESVBm
Frank Introduces Bill to Concentrate Fed Power in DC
By Luca Di Leo, WSJ.com
U.S. Rep. Barney Frank (D., Mass) Tuesday introduced a bill that would let interest rates be set only by Federal Reserve officials picked by the government, a new attempt to move power away from regional Fed officials chosen by the private sector.
http://jlne.ws/j4uUfH
PIMCO | Investment Outlook - The Caine Mutiny
William H.Gross
The Gross household is a robe-wearing household – at least on the distaff side. Sue has a closet full of them, all white, and is thrilled each and every Christmas with a new white one under the tree. Go figure. I on the other hand am a little more casual about nighttime attire, a habit I picked up or at least observed during my Navy years in the South China Sea. But I am getting ahead of myself. Back in 1969, yours truly was a lowly ensign whose responsibility among other things was to substitute for the captain when he was sleeping. Vietnam era captains couldn’t be at the helm 24/7 so during relatively calm hours, the benchwarmers got a chance to quarterback the ship. Such was the case on a warm September evening, making 20 knots on our way home to San Diego in the middle of the vast and totally empty Pacific Ocean, 2,000 miles west of Honolulu. I was standing the dreaded “mid-watch” – midnight to 4:00 am – and under instructions to wake the captain if anything “unusual” took place; FAT chance, aside from the occasional mermaid or sea monster sightings, and no one ever woke the captain up for that.
http://jlne.ws/me7Q3G
Treasury Official, Key US Republican Offer Contrasting Opinions of Dodd-Frank
By Alan Zibel and Jeffrey Sparshott, Of DOW JONES NEWSWIRES
A top Treasury Department official and a key House Republican offered sharply contrasting views Monday about whether the financial overhaul law passed last summer will wind up hurting small banks.
http://jlne.ws/jVUKY4
For International Investors, Non-Dollar Bonds More Popular
Fixed income fund managers piled into local currency debt of the big emerging markets for the third straight week, according to fund trackers at EPFR Global in Cambridge, Mass. Overall, fund managers are buying up emerging market government and corporate bonds as it appears clear the US has no intention on raising interest rates anytime soon. But most of the investors choosing emerging market debt are buying bond funds with local currency debt, rather than buying the sovereign or quasi-sovereign dollar denominated bonds that foreign countries like Brazil also issue.
http://jlne.ws/mbPBMV
DOJ to Sue Deutsche Bank Over ‘Reckless Lending Practices’
By Ashby Jones, WSJ.com
This just in: According to a press release issued by the U.S. attorney’s office in Manhattan, the Justice Department will sue Deutsche Bank and its subsidiary MortgageIT for “years of reckless lending practices.”
http://jlne.ws/iVVfod
Deutsche Bank Unit Stuffed Mortgage Reviews in a Closet. Literally.
By Shira Ovide, Deal Journal
Among the damaging charges in the government’s civil lawsuit against Deutsche Bank over its role in allegedly defrauding a government mortgage-insurance program, this charge is a standout.
http://jlne.ws/mwjPPq
Markit Statement on European Commission CDS Inquiry
Markit is aware of the European Commission’s statement that it will open investigations relating to the Credit Default Swaps information and clearing markets. Markit has no exclusive arrangements with any data provider and makes its data and related products widely available to global market participants. Markit has created new and innovative products and services in a competitive marketplace since its inception, bringing greater transparency and information to the CDS market. Markit is unaware of any collusion by other market participants as described by the Commission. Markit does not believe it has engaged in any inappropriate conduct and looks forward to demonstrating that to the Commission.
http://jlne.ws/joZmZP
Citi's Andrew Cox Weighs In On The "Short-Lived Bin Laden Bounce"
Business Insider
Lest you think that the capture of Osama Bin Laden will have any real impact on markets, think again. Citi's Andrew Cox weighs in on the "short-lived Bin Laden bounce":
http://jlne.ws/mwudCK
MBS Wind Down Update - Taxpayers Have Now Recovered Over Half Of Treasury’s Original Investment
By: Mary J. Miller, U.S. Department Of The Treasury
Today, Treasury is providing an update on the continued orderly wind down of its agency-guaranteed mortgage-backed securities (MBS) portfolio. Taxpayers have now recovered more than half ($120.9 billion) of Treasury’s original $225 billion MBS investment.
http://go.usa.gov/bQg
St. Louis Fed: Trends In Labor Markets -- In U.S. And Abroad -- In Annual Report
The U.S. economy lost almost 8 million jobs in the latest recession, and the unemployment rate rose to over 9 percent. Roughly 1 million jobs have been added to the economy since early 2010, but the unemployment rate remains persistently high. Some policymakers are concerned about the prospect of a prolonged "jobless recovery," a period of rising average income (GDP) with little or no employment growth. There is considerable debate over what, if anything, monetary and fiscal policy can or should do to help the labor market adjust in the wake of one of the worst recessions since the Great Depression.
http://bit.ly/kQ4XBn
Treasury Will Act to Avoid Default
By Naftali Bendavid And Damian Paletta, WSJ
Treasury Department officials said Monday that they will begin to take extraordinary actions Friday to manage the government’s finances so the U.S. won’t default after hitting its borrowing limit on May 16. The moves come amid divisions among congressional leaders over how to raise the $14.29 trillion debt limit and avoid a default that Treasury officials say could cause another financial crisis.
http://jlne.ws/kwc6el
Treasury Making Plans to Live Under a Debt Ceiling
New York Times
Treasury officials now estimate that the emergency measures will allow the government to meet its existing commitments until the first week in August.
http://jlne.ws/l2vBZs
Treasury Urges Small Banks to Embrace Dodd-Frank
By BEN PROTESS, NY Times
The Obama administration has trumpeted its recent overhaul of financial rules as a stern warning to Wall Street. Community bankers, on the other hand, need not fear the new regulatory regime, the administration says.
http://jlne.ws/l0HgOC
New Bundesbank chief takes helm
By Ralph Atkins in Frankfurt, Financial Times
Germany’s new central bank president has taken office calling for a return to “normal” monetary policy in the eurozone – a clear hint he would back further rises in European Central Bank interest rates.
http://jlne.ws/limmez
Events
47th Annual Conference on Bank Structure and Competition
May 4-6, 2011
Chicago Federal Reserve 's Banking Conference - Chicago
http://jlne.ws/hG0Gzg
Washington Update
May 11, 2011
FIA Chicago Presentation On Washington Issues
http://jlne.ws/ict5FH
Eleventh Annual Payments Conference
May 19-20, 2011
Federal Reserve Bank Of Chicago's Annual Payment Conference - Chicago
http://jlne.ws/esi75d
2011 Morningstar Investment Conference
June 8-10, 2011
Morningstar's Conference For Leaders From Across The Investment Industry - Chicago
http://jlne.ws/gD5nJ1
Economic News
Retailers say gas prices are starting to take a bite out of sales
By Anne D'Innocenzio, Associated Press
Retailers reported surging April sales helped by a late Easter, extending strong spending momentum that began late last year.
http://jlne.ws/juZa8Q
Consumer Sentiment in U.S. Increased in April on Jobs
By Shobhana Chandra and Timothy R. Homan, Bloomberg
Confidence among U.S. consumers climbed in April from the lowest level in more than a year as job growth helped Americans withstand rising fuel costs.
http://jlne.ws/kTPYE8
Federal Reserve Bank Of Dallas: Trimmed Mean PCE Inflation Rate FRB Dallas
The trimmed mean PCE inflation rate is an alternative measure of core inflation in the price index for personal consumption expenditures (PCE). It is calculated by staff at the Dallas Fed, using data from the Bureau of Economic Analysis (BEA).
http://jlne.ws/fdBaqC
Global property funding gap falls to $202 bln
By Andrew MacDonald, Reuters
The global debt funding gap on commercial property for the period 2011-13 shrank 17 percent to $202 billion after the amount of outstanding real estate debt in the United States fell and forecast property prices there rose, research showed.
http://jlne.ws/kNbUQb
Productivity of U.S. workers rose 1.6 percent in the first quarter compared with 2.9 percent in the previous quarter
St. Louis Fed
http://jlne.ws/lFudtR
Exchanges, Clearing Houses & MTFs
ICE Announces ICE Link Connectivity to CME Clearing for CDS
Press Release
IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets, announced today that its ICE Link platform will offer connectivity to CME Clearing for credit default swap (CDS) clearing starting in the summer of 2011.
http://jlne.ws/jOIIhD
NYSE Liffe U.S. Announces Wholesale Trader List for Block and Basis Trading in Edllr and Tsys
Press Release
In an effort to provide greater choice and liquidity for customers wishing to execute transactions in sizes that are above the published Exchange block trade minimum thresholds in Interest Rate Futures, NYSE Liffe U.S., the U.S. futures exchange of NYSE Euronext (NYX), today announced the publication of its wholesale trader list. This list contains the names and contact information for leading market participants who have expressed an interest in providing liquidity for wholesale trades, including block and basis trades, in interest rate futures contracts trading on NYSE Liffe U.S.
http://jlne.ws/jt6dNM
ICE Announces ICE Link Connectivity to CME Clearing for CDS
NEW YORK, May 3, 2011 /PRNewswire/ -- IntercontinentalExchange (NYSE: ICE), a leading operator of global regulated futures exchanges,
clearing houses and over-the-counter (OTC) markets, announced today that its ICE Link platform will offer connectivity to CME Clearing for credit
default swap (CDS) clearing starting in the summer of 2011.
http://jlne.ws/jOIIhD
Eris Exchange Looks To Step Up Regulatory Status
By Jacob Bunge, Of Dow Jones Newswires
Eris Exchange LLC aims to step up its regulatory status in a move that will bring broader oversight of its nascent derivatives markets and better economic terms for customers.
The company last week filed documents with the Commodity Futures Exchange Commission to gain status as a "designated contract market," which would place it alongside long-established venues like the Chicago Mercantile Exchange and the New York Mercantile Exchange.
http://jlne.ws/mONCOW
Firms & Banks
Citigroup Is Said to Hire Former UBS Americas Investment Banking Chief Cox
By Zachary R. Mider and Laura Marcinek, Bloomberg
Citigroup Inc. (C) hired UBS AG (UBSN)’s Kevin Cox, a top adviser to industrial companies and former head of the Swiss firm’s investment-banking unit for the Americas.
http://jlne.ws/ilJ8I8
Moody's Points to Countrywide 'Challenges'
BY DAVID BENOIT, WSJ.com
In the latest signal that Bank of America Corp., the nation's largest bank by assets, is dealing with a persistent headache in its mortgage operations, Moody's Investors Service downgraded the bank's underlying mortgage-servicing ratings.
http://jlne.ws/j5EzOk
Freddie’s Capital Markets Chief Announces Departure
IDD
GSE sources and advisors close to both Fannie Mae and Freddie Mac say the two are beginning to witness more high level departures as the job market
improves for financial services executives.
http://jlne.ws/ieRsgp
Sandler O'Neill adds veterans to fixed income group
IFR
Sandler O’Neill, a boutique investment bank that specialises in financial services firms, announced that Gregory Heher has joined the firm as a principal.
http://jlne.ws/jsHmeq
Lehman Hires Morgan Stanley to Sell as Much as $675 Million of Muni Bonds
Bloomberg
Lehman Brothers Holdings Inc. hired Morgan Stanley (MS) to market a portfolio of municipal securities valued at as much as $675 million to "monetize" the assets for creditors, the bankrupt securities firm said.
http://jlne.ws/jze5pj
Lehman Seeks $500 Million From Barclays in Bonus Dispute
BusinessWeek
Lehman Brothers Holdings Inc. is claiming $500 million from Barclays Plc for allegedly failing to pay all of the bonuses the U.K. bank agreed to when it bought the defunct investment firm's North American business.
http://jlne.ws/jYi9Fo
Citadel to Start Quant Business With Nazarali, Cushman From Knight Capital
By Saijel Kishan, Bloomberg
Citadel LLC, the $11 billion hedge fund run by Ken Griffin, hired Jamil Nazarali and Matt Cushman, former executives at Knight Capital Group Inc. (KCG), to lead a new effort in quantitative trading.
http://jlne.ws/mgTmde
The Inflation Project: Longer-Term Deflation Probabilities Down To 8 Percent
Prices of Treasury Inflation-Protected Securities (TIPS) with similar maturity dates in 2015 can be used to measure probabilities of a net decline in the consumer price index over the five-year period starting in early 2010.One measure of this deflation probability decreased from 11 percent on April 20 to 8 percent on April 27. An alternative lower bound on this deflation probability declined from 1 percent on April 20 to 0 percent on April 27.
http://jlne.ws/iCtEFk
Failed-Trade Charge for Mortgage Bonds Proposed, Pimco Balks
By Jody Shenn, Bloomberg
Dealers and investors in agency debt and government-backed mortgage bonds should face penalties for failing to complete trades at agreed times, according to an industry group that guides market rules.
http://jlne.ws/lDbX1t
MERS names CitiMortgage chief new CEO
Mortgage Electronic Registration Systems announced the appointment of former chairman and CEO of CitiMortgage, Bill Beckmann, as president and chief executive officer of MERSCORP. MERS provides a national national, real-time database that tracks mortgages.
http://jlne.ws/k4EAqt
JPMorgan Loses Two West Coast Tech Bankers-Source
By Nadia Damouni, Reuters
JPMorgan Chase & Co (JPM.N) lost two West Coast technology investment bankers to competing firms last week, according to a source familiar with the matter.
http://jlne.ws/lpkn77
MF Global Expands Capital Markets, Institutional Sales Initiatives
NEW YORK--(BUSINESS WIRE)--MF Global Holdings Ltd. (NYSE: MF), a broker-dealer providing trading and hedging solutions, has made substantive progress in expanding its capital markets and institutional sales teams. In the last several months, MF Global has made significant sales and trading hires, advancing the firm’s efforts to establish an integrated sales and distribution process and deliver a more complete client offering of capital markets products and services.
http://jlne.ws/jsyV7Q
Banks boost customer service in fierce market
Independent
After years of bad publicity, fines for misselling products and unrest over charges, Britain's banks have opened up an unlikely new battleground: customer service. The reasons are varied and include the need to restore their battered reputations, the renewed importance of retail depositors, increased transparency over customer complaints and competition.
http://jlne.ws/lZt7NW
Munger Says Wall Street Bankers Share Blame for European Crisis
BusinessWeek
Charles Munger, whose Berkshire Hathaway Inc. holds $5 billion of options on Goldman Sachs Group Inc. stock, said the role of investment bankers in helping to mask Greece's financial troubles was "perfectly disgusting."
http://jlne.ws/lppdVh
WestPark Capital New Hire, Adam Lucks, Head of Fixed Income Trading
Business Wire
LOS ANGELES--(BUSINESS WIRE)--WestPark Capital Inc., the Los Angeles-based international investment banking firm, has hired Adam M. Lucks as Head of Fixed Income Trading. Mr. Lucks is a fixed income trader with more than 12 years of experience in the retail/institutional fixed income trading arena. Specifically, Lucks will be working with major banks, regional firms, and select institutions ...
http://jlne.ws/igZm5Q
Regulators
Fed's Narayana Kocherlakota: Some Contingent Planning for Monetary Policy
The Federal Reserve Bank of Minneapolis
Thank you very much for that generous introduction. I am delighted to have this opportunity to be part of this year's Santa Barbara County Economic Summit. Over the past 25 years, monetary policymakers all over the world—including here in the United States—have become more transparent about their deliberations and their thinking. Speeches like this one play a huge role in that process. So I thank you for your invitation to join you here today and for the opportunity to share my views.
http://jlne.ws/kh4YYw
CFTC Chairman Gary Gensler: Testimony Before the Senate Committee on Appropriations Subcommittee on Financial Services and General
Government
Good morning Chairman Durbin, Ranking Member Moran and members of the Subcommittee. I thank you for inviting me to today’s hearing on the Commodity Futures Trading Commission’s (CFTC) fiscal year (FY) 2012 budget request. I am pleased to testify on behalf of the Commission. The CFTC is a good investment for the American public, overseeing vast markets with a relatively small staff. At its core, the mission of the CFTC is to ensure the integrity and transparency of derivatives markets so that hedgers and investors may use them with confidence. Derivatives emerged as tools to allow producers and merchants to be certain of the prices of commodities that they planned to use or sell in the future. Derivatives markets are used to hedge risk and discover prices and work best when they are transparent and free from fraud and manipulation.
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Commodity Futures Trading Commission Votes to Establish a New Subcommittee of the Technology Advisory Committee
Press Release
Commissioner Scott D. O’Malia, the chairman of the Technology Advisory Committee (TAC), announces that the Commission has voted to establish a Subcommittee on Data Standardization to develop recommendations regarding a standardized reference data depository representing the universe of legal and financial terms utilized in describing, defining, and valuing the various derivatives and other financial instruments which are presently and in the future may be traded on and off of regulated exchanges.
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EU Financial System Still Weighed Down By Risk - European Parliament
Press Release
The risk burden still threatens Europe's financial stability, and the crisis aftermath will last many years, the two vice chairs of the EU's new financial risk watchdog warned the Economic and Monetary Affairs Committee on Monday. Mervyn King and Andrea Enria repeatedly called for the EP's support when pushing through difficult reforms, particularly in better times when the financial sector would lobby fiercely against regulation.
The Problem With the FDIC’s Powers
By SIMON JOHNSON, Today's Economist
Under the Dodd-Frank financial regulation legislation (in Title II of that act), the Federal Deposit Insurance Corporation is granted expanded powers to intervene and manage the closure of any failing bank or other financial institution. There are two strongly held views of this legal authority: that it substantially solves the problem of how to handle failing megabanks and therefore serves as an effective constraint on their future behavior, and that it is largely irrelevant.
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Remarks By U.S. Treasury Secretary Tim Geithner At The Detroit Economic Club
Press Release
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Jean-Claude Trichet: Short Address In Honor Of Axel Weber
Speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the Deutsche Bundesbank Festakt, Frankfurt am Main, 2 May 2011.
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Chicago Fed Annual Report
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FSA fails to publish report into Royal Bank of Scotland collapse
The Telegraph
The Financial Services Authority is to admit defeat in its efforts to publish a comprehensive report on the failure of the Royal Bank of Scotland this spring, and will announce it has called in Andrew Tyrie, the chairman of the Treasury Select Committee, to rescue the project.
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OTC
Swaps Players Seek Clarity from U.S. Regulators
Finance Technology Network
Wall Street banks and major market players said they are equipped to comply with derivatives reforms, but accused U.S. regulators of dragging their feet on clarifying how and when they will go into effect.
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Global News
Spain’s cajas reshape corporate landscape
By Miles Johnson, FT.com
Ongoing restructuring of Spain’s financial system is likely to trigger the largest redistribution of holdings in some of the country’s biggest companies since privatisation in the 1980s and 1990s.
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Spain’s jobless total nears 5m
By Miles Johnson, FT.com
Spanish unemployment climbed to almost 5m in the first quarter of the year, hitting the highest level in 14 years as the consequences of an imploded construction bubble continued to depress the eurozone’s fourth-largest economy. The proportion of adults out of work rose to 21.3 per cent, up from 20.3 per cent in the previous quarter as the Spanish government this week embarked on measures to clamp down on unofficial work in the black market.
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Malaysia Central Bank Increases Rate 25bps to 3.00%
Central Bank News
The Bank Negara Malaysia increased the Overnight Policy Rate (OPR) by 25 basis points to 3.00% from 2.75% and the floor and ceiling rates of the corridor for the OPR were also raised to 2.75 percent and 3.25 percent respectively. The Bank also increased the Statutory Reserve Requirement (SRR) Ratio from 2.00% to 3.00%, effective from 16 May 2011. Malaysia saw inflation of 3% in March, bringing the average to 2.8% for the first quarter of 2011. On inflation the bank noted "the increase was mainly due to higher food and fuel prices."
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Philippine Central Bank Hikes Rate 25bps to 4.50%
Central Bank News
The Bangko Sentral ng Pilipinas increased the overnight borrowing rate by 25 basis points to 4.50% from 4.25% and the overnight lending rate to 6.50% from 6.25%. The Bank noted that its baseline inflation projections suggest that the 3-5% inflation target for 2011 is at risk. The Bank also said "International oil prices have remained elevated due to strong global demand as well as concerns about supply gaps. Global non-oil markets also continued to tighten,". The Philippines reported inflation of 4.5% in April, up from 4.3% in March.
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Portugal Reaches Deal on Bailout
BY PATRICIA KOWSMANN, WSJ.com
Portugal agreed to a €78 billion ($116 billion) financial bailout program with the European Union and the International Monetary Fund over three years to help its ailing economy, in a deal caretaker Prime Minister José Sócrates described as friendlier than what other rescued euro-zone economies received.
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Portugal deal earmarks E12bn for banks
By Peter Wise in Lisbon, Financial Times
More than 15 per cent of Portugal’s E78bn financial rescue package will be used to shore up the country’s banks, which will be required to increase their capital substantially over the next 18 months, according to sources close to the negotiations.
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S.Korean banks' profits rise 1.2% in Q1
US News
South Korean banks' net profits rose 1.2 percent in the first quarter from a year earlier as gains in interest income and derivatives trading offset an increase in provisions for loan losses, the financial regulator said Tuesday.
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The central bank’s role in the currency derivatives mess
The Reserve Bank of India last week fined as many as 19 public, private sector and foreign banks for contravening its norms on the use of over-the-counter derivatives. The list of banks includes the largest in the country such as State Bank of India, ICICI Bank Ltd, HDFC Bank Ltd, Axis Bank Ltd, Citibank NA and Standard Chartered Bank.
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Banks Set Sights on Islamic Bond Market
VTB Group and Gazprombank are vying to become the first Russian borrowers to sell Islamic debt in a bid to attract Middle Eastern investment. VTB, Russia’s second-largest bank, aims this year to raise about $200 million selling sukuk, debt that complies with Islam’s ban on interest, Herbert Moos, the lender’s deputy chairman, said in an interview Wednesday. Gazprombank, the lending arm of gas export monopoly Gazprom, is in talks with at least 10 Moscow-based companies on arranging a sale and will meet investors in the Persian Gulf in September, said Alexander Kazakov, director of structured and syndicated finance.
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Ghana Commercial Bank Q1 profit falls
Ghana Commercial Bank (GCB.GH) reported a 7.1 percent fall in first-quarter net profit to 19.76 mln cedis ($13.08 mln) on Friday as interest income slipped and operating expenses ticked higher.
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Ireland cuts growth forecasts
Reuters/FT.com
Ireland cut its growth forecasts sharply on Friday, following similar downgrades by analysts, and said its debt would peak at 118 per cent of gross domestic product in 2013 rather than the 102.5 per cent forecast four months ago. Ireland’s finance ministry said it expected gross domestic product growth of 0.8 per cent in 2011, down from the 1.7 per cent forecast in December.
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