November 18, 2010: First Fully-Electronic Interest Rate Swap Trade Executed and Cleared in U.S. [NEWSLETTER]

Conversation Starter

First Fully-Electronic Interest Rate Swap Trade Executed and Cleared in U.S.
Press Release
Tradeweb, a leading global provider of fixed income and derivatives markets, today announced the completion of the first interest rate swap trade by a client to be electronically executed and cleared in the U.S. The U.S. dollar-denominated swap transaction was executed on the Tradeweb platform between a U.S.-based asset manager and Deutsche Bank, with Deutsche Bank acting as the clearing member. The trade was then cleared by CME Clearing, and is the first transaction which could be considered swap execution facility (SEF)-ready under the expected regulatory framework soon to be defined and finalized by the CFTC and SEC.
http://jlne.ws/dawNBA

**CN: CME has been clearing interest-rate swaps since Oct. 18. This event is an example of how OTC derivatives could be traded once regulations under Dodd-Frank come into play.

Related Media Reports:
--Tradeweb Executes Its First Cleared U.S. Electronic Rate SwapBloomberg
Tradeweb LLC, the bond- and derivatives-trading network whose owners include Wall Street’s largest banks, said it executed its first electronic interest- rate swap in the U.S. that was cleared at CME Group Inc.
http://jlne.ws/cNxKX2

--Tradeweb Delivers Milestone in Electronic Swaps Trade
By KATY BURNE, WSJ.com
Tradeweb, an online derivatives marketplace, has become the first trading venue in the U.S. to facilitate execution of a fully electronic interest-rate swap that was then processed by a central clearinghouse.
http://jlne.ws/aLKJCb

--Interest rate swaps trading jumps on Tradeweb
Reuters
Tradeweb said interest rate swaps trading jumped by 71 percent on its online market in the first four months of 2010 as pressure increased for more transparent derivatives markets in the wake of the financial crisis.
http://jlne.ws/ccXxKC

--OTC Derivatives Volumes Fell 4% In First Half To $583T -BIS
By Katy Burne Of DOW JONES NEWSWIRES
The global over-the-counter derivatives market contracted almost 4% to $583 trillion in the first half of this year, compared with a 2% rise in the second half of 2009, according to survey results from the Bank for International Settlements on Monday.
http://jlne.ws/cLLVPn


Lead Stories

Bernake/QE2

Financial Crisis Commission Delays Report to Obama, Congress Until January
By Jesse Westbrook and Peter Eichenbaum, Bloomberg
Democrats on the Financial Crisis Inquiry Commission, the panel assigned to probe the worst U.S. economic collapse since the Great Depression, voted to delay the group’s final report on its findings amid Republican opposition.
http://jlne.ws/avOHZY

Fed likely to buy entire $600 bln in plan
Reuters
A top Federal Reserve official said on Wednesday the central bank is likely to follow through on its entire $600 billion bond buying program based on an anticipated weak economic recovery.
http://jlne.ws/d5SqI3

Warren Buffett's Warning: Fed Easing Creates 'Dangers' for Confidence in Dollar
By Alex Crippen, CNBC
Warren Buffett has written a 'Thank You' note to 'Uncle Sam' for preventing a catastrophic economic meltdown in September of 2008, but he's not as enthusiastic about what the Federal Reserve is doing right now to boost the economy.
http://jlne.ws/9P5LFl

***CN: Warren Buffett using a little drama to draw some attention to his views.

New York Fed purchases $8.154 bln in Treasury coupons
Press Release
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system...
http://bit.ly/9Yp9Lv

BOB RUBIN: "US In Terribly Dangerous Territory," Bond Market May Be Headed For "Implosion"
Business Insider
Warning of the risk of an "implosion" in the bond market, former Treasury Secretary Robert Rubin says the soaring federal budget deficit and the Fed's quantitative easing are putting the U.S. in "terribly dangerous territory."
http://jlne.ws/9FFEc5

Fed’s Rosengren: Bond Buying Action Fully Consistent With Fed Mandate
By Michael S. Derby, WSJ.com
The Federal Reserve’s recent decision to purchase $600 billion in Treasury securities is essentially the same as conventional monetary policy, and should be an effective action that will counter a worsening economic environment, a top central banker said Wednesday.
http://jlne.ws/an6ruy

Open season on Ben
By MARK DeCAMBRE, NYPOST.com
Ben Bernanke better hope he has some fireproof suits in the closet. The Federal Reserve chairman came under another scorching attack yesterday as former Republican government officials and economists ripped apart his $600 billion plan to revive the economy.
http://jlne.ws/9dEKs1

Huge List Of Investors And Economists Pen Open Letter To Ben Bernanke Slamming QE
Business Insider
The Wall Street Journal ran this open letter to Ben Bernanke from many noted economists, professors and fund managers. The list is a who’s who of Wall Street and the general message is not dissimilar to what Sarah Palin and Glenn Beck (not exactly the people you want to be next to when making economic prognostications) have been saying – in essence, cease and desist Chairman Bernanke.
http://jlne.ws/co4rQn

Republican group to urge Fed to drop QE2: report
A group of Republican-leaning economists will launch a campaign this week calling on U.S. Federal Reserve Chairman Ben Bernanke to drop his plan to buy $600 billion more in Treasury bonds, the Wall Street Journal reported on Monday.
http://jlne.ws/ckjHXd

Fed dismisses idea that QE is 'some sort of chapter in a currency war'
Telegraph
The Federal Reserve has robustly defended its latest efforts to reignite a US recovery, with the central bank's vice chairman dismissing the idea that they're writing "some sort of chapter in a currency war."
http://jlne.ws/cAigf4

Fed's `New World Order' May Boost Treasury Volatility, Morgan Stanley Says
Bloomberg
Bank of America Merrill Lynch's MOVE index , measuring price swings based on over-the-counter options maturing in 2 to 30 years, climbed yesterday to 91.60, the highest level since Nov. 2, the day before the central bank announced that it will buy $600 billion in additional government debt through.
http://jlne.ws/91KWQo

____________________________________________

MORE LEAD STORIES

30-Year Fixed Mortgage Rates Up 27 Basis Points To Four-Month High
By Lauren Riefflin, Zillow
Mortgage rates for 30-year fixed mortgages rose this week, with the current rate borrowers were quoted on Zillow Mortgage Marketplace at 4.34 percent, up from 4.07 percent at this same time last week. This is the highest average rate reported on Zillow Mortgage Marketplace in 16 weeks.
http://jlne.ws/ajB0WW

U.S. Rating Not Under Pressure This Year or Next
By Dennis Fitzgerald and Deirdre Bolton, Bloomberg
The U.S. Aaa rating won’t be under pressure this year or next from record budget deficits, according to Moody’s Investors Service Inc.
http://jlne.ws/9FNkOP

Geithner Sees Tax-Cut Deal This Year
By DAMIAN PALETTA, WSJ.com
WASHINGTON—U.S. Treasury Secretary Timothy Geithner said Tuesday it is "quite likely" the White House and Congress will reach a deal to address the expiring Bush-era tax cuts by the end of the year.
http://jlne.ws/bAQMEp

Bond Market Defies Fed
By MARK GONGLOFF, WSJ.com
Bucking the Federal Reserve's efforts to push interest rates lower, investors are selling off U.S. government debt, driving rates in many cases to their highest levels in more than three months.
http://jlne.ws/bo7wGY

Battle With Bondholders Looms After G-20 Agrees on Basel Rules
By Simon Clark and John Glover
The next hurdle to bank reform is looming after U.S. President Barack Obama and other Group of 20 leaders endorsed the Basel Committee on Banking Supervision's new rules in South Korea last week: the bond market.
http://jlne.ws/bGk2Dy

Deficit panelist says consumption tax needed
Reuters
The United States needs to consider a European-style tax on consumption to help tackle the burgeoning U.S. deficit, a member of a presidential deficit panel said on Tuesday.
http://jlne.ws/dfTR1b

Wolin Says U.S., EU Must Collaborate on Derivatives Oversight
By Rebecca Christie, Bloomberg
The U.S. and Europe need to join forces on derivatives oversight to make sure that international firms can't gain advantage by switching regulators, Deputy U.S. Treasury Secretary Neal Wolin said today in a speech at the London Stock Exchange.
http://jlne.ws/9zBceP

Incorrigible: Fannie Mae and Freddie Mac Must Go
Forbes
It's another problem we have that seems almost impossible to solve - at least not quickly.
http://jlne.ws/bGBWPM


Events

Introduction to Treasury Futures: Factoring the Risks
When: Dec. 2, 2010
Who: Institute for Financial Markets Full info: www.theIFM.org
Where: New York
Details: Treasury futures are one of the most popular future contracts for both hedging and speculating. Some of the factors that influence value in the Treasury complex include: interest rate risk, inflation risk, and the willingness of investors to continue buying Treasury debt. These factors lead to volatility in the underlying value of debt instruments as interest rates move up or down. If your business borrows money, you can mitigate the effects of higher or lower interest rates by trading the Treasury future complex. Moreover, with Treasury interest rate levels at multi generational lows, a robust case can be made for hedging the threat of higher interest rates in the future now –before interest rates return to ‘normal’ levels.

Treasury Futures Basis: Beyond the Risks
When: Dec. 2, 2010
Who: Institute for Financial Markets Full info:www.theIFM.org
Where: New York
Details: This short course extends the knowledge gained from the IFM's Introduction to Treasury Futures: Factoring the Risks, and explores the important yet subtle nuances of the fixed income future contracts. We start by defining and calculating the gross basis, net basis, implied repo-rates, and the synthetic duration of a hedged position. We next consider how high or low interest rates must move to precipitate a cross-over in the CTD bond/note

Treasury Futures: Using International Fixed-Income and Money Market Spreads
When: Dec. 7, 2010
Who: Institute for Financial Markets Full info: www.theIFM.org
Where: Chicago
Details: This progressive course builds on the knowledge gained in two previous IFM courses: Introduction to Treasury Futures: Factoring the Risks [1], and Treasury Futures Basis: Beyond the Risks[2]. The program provides a decidedly international perspective and explores the enormous spread trading opportunities in trading one sovereign yield curve against another sovereign yield curve, using just futures. We begin with a discussion of the price volatility of various libor-based contracts vs. their sovereign fixed-income sovereign future contract counterparts. We reconcile how many eurodollar futures to spread vs. the ten-year note futures, among many other examples. This discussion is extended to the international arena, initially by calculating how to weight money market spreads using futures, i.e. short sterling spread vs. euribor. Next, we consider trading one sovereign yield curve vs. another one, using just futures, on a duration neutral-basis and currency neutral-basis. These currency hedged yield spreads are now popular macro strategy tool.


Economic News

Global growth set to slow in 2011, says OECD
Growth in the world’s largest economies is likely to be slower in 2011 than this year but should pick up again by 2012, the Organisation for Economic Cooperation and Development said in its latest forecast. It said GDP growth in the 33-member countries was likely to slow to 2.3 per cent in 2011 from 2.8 per cent this year, before recovering in 2010. Within the eurozone, GDP is likely to hold steady next year after expanding 1.7 per cent in 2010.
http://ow.ly/3bVzm

Mid-Atlantic Factory Activity Picks Up
By Michael S. Derby, WSJ.com
Factory operators in the district overseen by the Federal Reserve Bank of Philadelphia expanded at an unexpectedly vigorous pace in November, turning in their best gain since December.
http://jlne.ws/cVMXDp

Philadelphia Factory Index Rises to Highest This Year
By Shobhana Chandra, Bloomberg
Manufacturing in the Philadelphia region expanded in November at the fastest pace this year as orders, sales and employment surged, indicating U.S. and overseas demand will keep fueling growth.
http://jlne.ws/9P0yMf

Leading Indicators Index in U.S. Climbs 0.5% for Second Month
By Courtney Schlisserman and Shobhana Chandra, Bloomberg
The index of U.S. leading indicators rose for a fourth consecutive month, manufacturing surged in the Philadelphia area and jobless claims climbed less than forecast, signaling the world’s largest economy is accelerating.
http://jlne.ws/dl0CRx

Mortgage delinquencies decline, but foreclosure rates soar
By Les Christie, CNN Money
Mortgage delinquency rates dropped in the last three months -- but only because more borrowers had their homes repossessed. You can't be late on your mortgage payment if you've already lost your home.
http://jlne.ws/d64vKP

Consumer Price Index Summary
Press Release
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.2 percent before seasonal adjustment.
http://jlne.ws/cS0Rml

Economists React: Inflation Remains ‘No Show’
By Phil Izzo, WSJ.com
Economists and others weigh in on the consumer price index report, which noted muted inflation in October.
http://jlne.ws/cpmhEl

US inflation muted in October
By Alan Rappeport, FT.com
Inflation in the US remained muted last month, as falling prices for cars and computers held back the producer price index, government figures showed on Tuesday. Separately, industrial production was flat in October and homebuilder sentiment picked up in November as buyers became more serious about making purchases.
http://jlne.ws/cYpXkl

U.S. Homebuilder Confidence Index Increased to 16 in November
By Bob Willis, Bloomberg
Confidence among U.S. homebuilders improved for a second month in November, a sign residential construction may hold at depressed levels.
http://jlne.ws/cUfyEQ

***CN: Depressing.


Firms & Banks

Citigroup May Need to Refile Thousands of Foreclosure Documents
By Donal Griffin, Bloomberg
Citigroup Inc., which has proceeded with foreclosures as some rivals stopped to recheck documents, said it may need to refile affidavits in cases that began before an overhaul of its procedures.
http://jlne.ws/doodX3

BofA's seizure of $500 mln Lehman deposits unauthorized
Reuters
Bank of America Corp (BAC.N) was ordered by a U.S. judge to return $500 million of deposits it seized from Lehman Brothers Holdings Inc (LEHMQ.PK) shortly after Lehman's record bankruptcy in September 2008.
http://jlne.ws/d7YKal

Large Banks Should Face Quarterly Stress Tests, Stanford's Duffie Proposes
By Matthew Leising and Shannon D. Harrington, Bloomberg
The world’s largest banks and investment firms should undergo quarterly stress tests to identify risks that could sink the financial system, according to a proposal by Stanford University finance professor Darrell Duffie.
http://jlne.ws/cq3bnB

HSBC Is Said to Double Base Pay for Some Investment Bankers as Bonuses Cut
By Jon Menon, Bloomberg
HSBC Holdings Plc, Europe’s biggest bank, may as much as double the base salary of some investment bankers following similar increases by competitors, said a person with knowledge of the plans.
http://jlne.ws/d3Pszw

U.S. Civil Suit Against UBS Withdrawn
BY MARTIN VAUGHN AND KATHARINA BART, WSJ.com
The U.S. Internal Revenue Service dropped its civil lawsuit against UBS AG, claiming victory in a years-long effort to uncover the identities of alleged tax offenders that are the Swiss bank's U.S. clients.
http://jlne.ws/a5prB0

U.S. drops case against UBS, ends harmful tax row
Reuters
U.S. tax authorities have withdrawn a summons against UBS aimed at getting data on the bank's U.S. clients, the Swiss government said, putting an end to a tax row that had threatened to bring the bank down.
http://jlne.ws/8XZJIM

Paulson Trims Bank of America, Sells Entire Goldman Sachs Stake
By Dakin Campbell and Katherine Burton, Bloomberg
Paulson & Co., the hedge fund run by John Paulson, trimmed positions in Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. in the third quarter as regulatory changes and disputes over faulty mortgages threatened to hurt bank profits.
http://jlne.ws/bG3oZD

Banks invest in varied skills of elite few
The Age
Aiden Allen works for private equity clients of UBS, the investment bank that won the mantle this year of best investment bank.
http://jlne.ws/9K6NdE

Morgan Stanley adds advisers from UBS
Reuters
Morgan Stanley Smith Barney has added four financial advisers from UBS .
http://jlne.ws/9FpH5R

OneWest Buys $1.4 Billion in Loans From Citigroup
BusinessWeek
OneWest Bank, formed in the aftermath of IndyMac Bancorp's failure, purchased $1.4 billion in commercial real estate loans from Citigroup Inc.
http://jlne.ws/aMkieR

Mizuho buys BlackRock stake for $500m
By Michiyo Nakamoto in Tokyo, FT.com
Mizuho is buying a 2 per cent stake in BlackRock, the world's largest asset manager, for $500m, in the latest move by a Japanese bank towards globalising its operations.
http://jlne.ws/90ZX1w

Barclays pension fund eyes emerging markets hike
Reuters Finance News (EU) via Yahoo! UK & Ireland Finance
Barclays (LSE: BARC.L - news) ' UK employees pension fund could double its exposure to fast-growing emerging markets, an executive said, as it seeks higher returns and a wider spread of investments. The 17.3 billion pounds Barclays UK Retirement Fund, one of the largest in the UK, currently invests about 6 percent of its total assets in emerging market equities. "It would make ...
http://jlne.ws/aaziyz

US gets UBS account names
BigPond News
Swiss bank UBS AG has been forced to disclose thousands of account holders suspected of cheating on US taxes
http://jlne.ws/bicDMT

BlackRock Lobbies to Avoid Fed Supervision on Systemic Risk
By Ian Katz
BlackRock Inc. executives met with Federal Reserve officials this month to explain why the world's largest money manager doesn't pose enough risk to the financial system to merit central bank supervision.
Bloomberg
http://jlne.ws/a7u4hB


Regulators

Fed's Yellen Defends Bond-Purchase Plan
By JON HILSENRATH, WSJ.com
Janet Yellen, the Federal Reserve's new vice chairwoman, said in an interview that the central bank isn't trying to drive down the dollar's value or push inflation above 2%, defending the Fed against the strong backlash that followed its Nov. 3 decision to purchase $600 billion more of U.S. Treasury bonds in a bid to strengthen economic growth.
http://jlne.ws/doTK6Q

Dodd-Frank Rules To Split The $583 Trillion Swaps Market
By Katy Burne Of DOW JONES NEWSWIRES
The derivatives industry, grappling with an overhaul brought about by the Dodd-Frank Act, is about to be split in two. The result will be a radical alteration of a $583 trillion marketplace that for the last 20 years has been the cash cow of investment banks.
http://jlne.ws/avegZL

G-20 refuses to back US push on China's currency
Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency's value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.
http://jlne.ws/cdH5qN

New regulations set to hit banks' profits
Banks' trading desks will struggle to achieve sufficient returns to cover their cost of capital amid the combined effects of Basel III capital requirements and additional regulatory costs imposed by the so-called Dodd-Frank US legislation, a top Wall Street analyst has warned.
http://jlne.ws/abcXbn

G20 Leaders Endorse Financial Stability Board Policy Framework For Addressing Systemically
The G20 Leaders at the Seoul Summit on 11-12 November endorsed the Financial Stability Board's (FSB) policy framework for Reducing the moral hazard of systemically important financial institutions (SIFIs), including the work processes and timelines set out in the report submitted to the Summit.
http://jlne.ws/cxgbC5

Lobbying Dodd-Frank
eFinancial News
Anyone who doubted for a second that the financial services industry would do it all it can to slow down the Dodd-Frank regulatory reform act just needs to take a look at the thousands of lobbyists they have hired.
http://jlne.ws/av9MYx

CFTC's Dunn Says Swaps Industry May Have to Pay for Reforms
By Matthew Leising - Bloomberg
The derivatives industry may have to pay for regulatory reforms if Republicans in Congress limit funding, said Commodity Futures Trading Commissioner Michael Dunn.
http://jlne.ws/aaxLYi

Federal Reserve Issues Proposal To Implement Volcker Rule Conformance Period
The Federal Reserve Board on Wednesday requested comment on a proposed rule to implement provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that give banking firms a defined period of time to conform their activities and investments to the so-called Volcker Rule.
http://jlne.ws/9drBT9

Fed’s Lacker Sees Inflation Risk as Jobless Rate Remains High
By Martin Vaughan, WSJ.com
The U.S. Federal Reserve shouldn’t wait too long to tighten monetary policy, even if unemployment remains historically high, a top Fed official said Sunday.
http://jlne.ws/dljNG1

Fed Official Calls For More Mortgage Modifications
By Greg Robb and Ronald D. Orol, MarketWatch
Two top Federal Reserve officials on Friday blasted banks for their mortgage practices, with one official using her first speech since joining the central bank to argue the entire system is broken.
http://jlne.ws/c6V7FD


Global News

UK's Cameron discusses Ireland, spending cuts
Reuters
British Prime Minister David Cameron answered questions on Thursday from lawmakers on subjects including the Irish debt crisis and British government spending cuts.
http://jlne.ws/cwH2h2

LCH.Clearnet doubles deposit on Irish debt trading
By David Oakley, FT.com
The European Central Bank bought tens of millions of euros in eurozone government bonds on Wednesday to steady prices as private investors boycotted the market due to increasing uncertainty over Ireland, according to traders. Moves by LCH.Clearnet, Europe’s biggest clearing house for fixed income, which increased charges for trading Irish bonds, and a poor debt auction in Portugal shook confidence in the eurozone markets.
http://jlne.ws/cFwbpN

Hungary should phase out bank tax from 2012
Reuters
Hungary should phase out a special tax on the financial sector from 2012, as extending the extra tax for longer could cause serious damage to the economy, Banking Association Chairman Tamas Erdei said.
http://jlne.ws/cUarVp

Greece Reaches Agreement With Lenders on Budget
BY COSTAS PARIS AND NICK SKREKAS, WSJ.com
Greece reached an agreement Wednesday with its international lenders on the final draft of next year's budget after adopting up to €4 billion ($5.4 billion) in additional austerity measures, a senior government official with knowledge of the talks said.
http://jlne.ws/dwAuIK

Greece will meet targets, finance minister says
By William L. Watts, MarketWatch
Greek Finance Minister George Papaconstantinou on Tuesday said Athens would meet its budget goals after Austria said it may withhold aid unless Greece shows it can meet its revenue targets. Speaking to reporters ahead of a meeting of euro-zone finance ministers in Brussels, Papaconstantinou repeated that Greece plans to take additional steps to meet its 2011 budget target and that it would meet its 2010 targets
http://jlne.ws/cYFdHb

U.K. Support Sought for Ireland Bailout
BY MARCUS WALKER AND PATRICK MCGROARTY, WSJ.com
European finance ministers working on an international aid package for Ireland want the U.K. to make bilateral loans to Dublin as part of a larger aid package that could total up to €100 billion ($135 billion) and include credit from the euro zone and International Monetary Fund, according to people familiar with the matter.
http://jlne.ws/9C5ole

EU intervention for Ireland under way: opposition
By Lorraine Turner and Natsuko Waki, Reuters
Ireland signaled on Monday its banks, not the state, could need help with funding but its impatient euro zone partners urged a swift decision on any EU rescue, saying the uncertainty was rattling markets and hurting them.
http://jlne.ws/blCPrF

Citigroup Says Ireland Financial Bailout Would Exert Pressure on Portugal
Bloomberg
A request by Ireland for aid from the European Financial Stability Facility would increase pressure on Portuguese government bonds, Citigroup Inc. said.
http://jlne.ws/9kblaC

Bank of Korea `Dangerously Behind' After Record Run of Negative Real Rates
Bloomberg
The Bank of Korea's second interest- rate increase this year leaves its benchmark below the pace of inflation, a sign the central bank will need to add to its move in coming months or risk eroding households' savings.
http://jlne.ws/c4jwMW

Banks in Europe Said to Be Poised to Escape Basel Rules That Curtail Debt
By Jim Brunsden, Bloomberg
Banks in Europe may escape global rules designed to limit their debt, as several countries push the European Union to drop a so-called leverage ratio, two people close to the discussions said.
http://jlne.ws/cht0y3

Portugal Fin Min: High Risk Portugal Will Need Intl Help
MarketNews.com
The risk is high that Portugal will have to turn to the international community for assistance, Finance Minister Fernando Teixeira dos Santos told the Financial Times in a story released Monday evening.
http://jlne.ws/c5nKAk