May 19, 2011: IMF Begins Succession Process [Newsletter]

May 19, 2011

JLN Interest Rates - http://www.jlninterestrates.com


Conversation Starter


Should BABS Make A Comeback?

U.S. Treasury Acting Assistant Secretary for Economic Policy, John Bellows, in a blog posted on the U.S. Treasury Web site this week, recommended that Build America Bonds (BABs) be brought back. He contended that at a time of mounting deficits and a need to cut costs from the state to the federal level, there’s a strong case to be made for bringing back the BABs program. Created as part of the Recovery Act, BABs are taxable bonds for which the U.S. Treasury Department paid a 35-percent direct subsidy to the issuer to offset borrowing costs. The original program ended at the end of 2010.

According to new Treasury analysis, state and local governments that issued BABs realized considerable savings compared to what they would have paid to issue tax-exempt bonds. President Barack Obama’s proposal to reinstate and expand BABs at a revenue-neutral 28-percent subsidy rate would provide greater certainty in municipal financing, a broader and more efficient market for municipal debt, lower underwriting and transaction costs and additional savings on borrowing costs for state and local governments.

Related items:

U.S. Treasury Department Treasury Analysis of Build America Bonds Issuance and Savings
http://jlne.ws/iJ1K0p

The Administration’s Fiscal Year 2012 Revenue Proposals
http://jlne.ws/kDltJS


--Christine Nielsen







Lead Stories

IMF Begins Succession Process
By Ian Talley, WSJ.com
Global leaders have started the formal process to replace International Monetary Fund Chief Dominique Strauss-Kahn, who early Thursday resigned following his weekend arrest on sexual assault charges, World Bank President Robert Zoellick said.
http://jlne.ws/kdin6a

Dented IMF Will Need To Reorient Focus After Strauss-Kahn
Heather Struck, Forbes
Dominique Strauss-Kahn, who resigned from his post as managing director of the International Monetary Fund yesterday, has firmly denied the allegations that led to his internment in a New York City prison on Riker’s Island. The former head of the IMF will appeal Thursday to a second judge to release him between court dates for charges against him that include the attempted rape and imprisonment of a hotel maid in Manhattan. He was denied his first request for bail by a New York judge on Monday.
http://jlne.ws/ka6cCn

Mortgage rates drop for fifth straight week
By Amy Hoak, MarketWatch
Fixed-rate mortgages continued their march downward this week, with the 30-year loan averaging 4.61% — its lowest average this year, according to Freddie Mac’s weekly survey of conforming mortgage rates.
http://jlne.ws/jqgIPf

**CN: Conventional mortgage applications have risen for the past five straight weeks ending May 13.


Japan plunged back into recession
BBC
Japan's devastating earthquake and tsunami have pushed the country back into recession. In the first three months of 2011 the economy shrank by 0.9% following a massive drop in exports and consumer spending.
http://jlne.ws/lKXrxi

Student loan debt now equivalent to 7 percent of U.S. GDP
Dr. Housing Bubble
The explosive growth of student loan debt is troubling for a variety of obvious and not so obvious reasons. More needed attention is being drawn to higher education and questions are being sharply directed at the way college education is financed.
http://jlne.ws/ikyf0L

Don’t close the lid on bank fraud
By John Gapper - Financial Times
The news this week that Eric Schneiderman, the New York attorney-general has launched yet another inquiry into Wall Street’s role in the mortgage crisis will no doubt be greeted with groans at investment banks. Four years – and multiple investigations – after the meltdown started at two Bear Stearns hedge funds, isn’t it time to move on?
http://jlne.ws/jwaOAk

IMF Managing Director Dominique Strauss-Kahn Resigns
Mr. Dominique Strauss-Kahn today informed the Executive Board of the International Monetary Fund (IMF) of his intention to resign as Managing Director with immediate effect.
http://jlne.ws/lBu4uv

Geithner Suggests That Strauss-Kahn Step Aside
By LIZ ALDERMAN, NY Times
As Dominique Strauss-Kahn was left to spend another day behind bars in New York, a pack of would-be successors wasted little time Tuesday maneuvering for his job as managing director of the International Monetary Fund, one of the most powerful positions in global finance, and U.S. officials openly suggested that he step down.
http://jlne.ws/kIj18t

Lack of unity on IMF successor
By Richard McGregor in Washington, Financial Times
Emerging nations have yet to unite behind a candidate to take over as the head of the International Monetary Fund, even as they reiterate their long-held stance that the position should not be reserved for a European.
http://jlne.ws/jp4YLK

Female IMF employee wrote letter warning about IMF chief's behavior 3 years ago
Article by: CHRIS HAWLEY, Associated Press
The hotel maid accusing IMF chief Dominique Strauss-Kahn of trying to rape her as she went to clean his suite is telling the truth, has "no agenda" and did not know even know who he was until after the fact, her lawyer said Tuesday.
http://jlne.ws/mvglq3

Deutsche Bank CEO touted to head IMF - paper
Reuters via Yahoo! India News
Deutsche Bank Chief Executive Josef Ackermann is being touted in Berlin as a potential successor to Dominique Strauss-Kahn as head of the International Monetary Fund (IMF), German daily Bild said on Tuesday.
http://jlne.ws/m7Q35E

PIMCO's El-Erian says doesn't want IMF chief job
Reuters
PIMCO's Mohamed El-Erian, the chief executive of the world's largest bond fund, said on Tuesday he wouldn't want to head the International Monetary Fund if its managing director, Dominique Strauss-Khan, resigns over sexual assault charges.
http://jlne.ws/my5nEh

Mohamed El-Erian: The Odds Of A Greek Default Just Shot Up Due To Strauss-Kahn
By Joe Weisenthal, Business Insider
Mohamed El-Erian was on Bloomberg TV today discussing the sovereign debt, Strauss-Kahn, and Greece. By far the most important angle is that he thinks the DSK arrest could really have a serious impact on the situation in Europe.
http://jlne.ws/mNRcTD

Dimon stresses commodities and international growth
eFinancial News
Jamie Dimon, chairman and chief executive of JP Morgan Chase, highlighted commodities and international growth at yesterday's shareholder meeting, which was marred by protests about the bank s mortgage foreclosures.
http://jlne.ws/iucv0w

Moody’s downgrades seven Danish banks
By Clare MacCarthy in Copenhagen, Financial Times
Moody’s rating agency announced downgrades of seven Danish banks – including the country’s two largest lenders – on Thursday in a move that reflects continued investor concern over Denmark’s practice of making senior creditors share the pain when bank’s fail.
http://jlne.ws/kL2sme

ECB steps up rhetoric against Greek restructuring
David Mchugh, AP
The European Central Bank has stepped up its opposition to proposals that Greece not pay its debts on time -- deepening a split with other top European officials over how to combat the eurozone's debt crisis.
http://jlne.ws/ji8hpQ

ECB Stern With Greece
By GEOFFREY T. SMITH, WSJ.com
Top European Central Bank officials damned the idea of cutting Greece any more slack on its debt repayments Wednesday, repeating that Athens has to persevere with its rescue plan even though European governments are acknowledging that it may not be enough to turn the country around.
http://jlne.ws/iYTXMv

Greece Has Ways to Fix Debt Woes, but All Lead to Misery
By STEVEN M. DAVIDOFF, NY Times
What should be done with Greece? The country that gave birth to Western civilization appears increasingly likely to be the first euro sovereign to restructure its debt. It all has the potential to be a mess.
http://jlne.ws/mbBnZK

Greece Set to Miss Deficit Targets
BY ALKMAN GRANITSAS, WSJ.com
Greece's economy is expected to contract more than previously expected this year, the European Commission said Friday, while it warned that the country's budget deficit would be sharply higher than government targets.
http://jlne.ws/mk2lcB

FOMC Minutes: No Decision on Normalizing Policy
By Gary Siegel, the Bond Buyer
More discussion of normalizing policy was needed and no decisions were made at the Federal Open Market Committee meeting of April 26-27, according to minutes of the meeting, released Wednesday.
http://jlne.ws/jiqz90

How Well Do You Know Your Central Bankers?
Bloomberg BusinessWeek
Investors pick apart the minutes of central bank meetings and the speeches of central bankers for clues about rates. See if you can match these phrases with the banks and bankers that produced them.http://jlne.ws/mOb6Y1

Most at Fed want rate hikes before asset sales
Reuters
Most Federal Reserve officials prefer to raise benchmark interest rates before selling assets when the time comes to tighten policy, minutes of their April meeting showed on Wednesday.
http://jlne.ws/jezn8d

New Dodd-Frank Flash Point: 'Customary' Appraisal Fees
By Kate Berry/ American Banker/IDD
As home prices fall again and regulatory reforms take hold, long-simmering tensions between mortgage lenders and appraisers are flaring up anew.
http://jlne.ws/mFLlds

Lawmakers warning on derivatives rules Derivs rules impose significant competitive disadvantages on US banks
By Tom Braithwaite, FT.com
New York lawmakers led by Charles Schumer are warning the Federal Reserve and other regulators that they risk flouting the US Congress with new derivatives rules that impose “significant competitive disadvantages” on US banks. In a letter to Ben Bernanke, Fed chairman, and other regulatory heads, the members of Congress say that US banks will be unfairly hurt if their foreign subsidiaries are forced to demand collateral from non-US customers.
http://jlne.ws/iNbEm5

Big banks take hit on capital surcharge
By Brooke Masters, FT.com
The world’s biggest banks are likely to be hit by capital surcharges that increase progressively based on a lender’s size, how connected it is to other banks and how easily it could be replaced in a crisis, global regulators have told the Financial Times. The proposals would be good news for the huge, but domestically focused Chinese and Japanese banks and for second-tier European and US banks
http://jlne.ws/ldyGcw

Bank Dividends Threatened by Overregulation
By Philip van Doorn, The Street
The Federal Reserve is expected to propose a new rule on annual stress tests for the largest U.S. banks, according to a Financial Times report, which is likely to be quite harmful to investors over the short term.
http://jlne.ws/jGBQ3N

SEC Proposes Rules to Increase Transparency and Improve Integrity of Credit Ratings
The Securities and Exchange Commission today voted unanimously to propose new rules and amendments intended to increase transparency and improve the quality of credit ratings.
http://jlne.ws/k7pyEc

Investors return to US municipal bonds
By Nicole Bullock, FT.com
Yields on US municipal bonds have fallen back to levels last seen in autumn when investors began stampeding out of the market, as concerns about mass defaults recede.While some states and cities struggle, investors have come to believe that warnings of catastrophic, widespread de­f­aults were overblown, dra­w­ing buyers to municipal bonds at a time when new bonds sales have dried up.
http://jlne.ws/ieqSbn

Sterling bonds in vogue
By Julian Hofmann, Investors Chronicle
It seems counterintuitive that at a time of rising inflation - the general consensus is that we could hit 5 per cent consumer-price inflation before the summer is out - that the sterling corporate bond market is suddenly showing signs of life again after a quiet year in 2010 and for most of 2011. Investment-grade sterling bonds issuance has topped £10bn so far, well ahead of 2010's paltry £3bn and halfway towards the £21bn record set in 2009.
http://jlne.ws/mwafjn

Debt fund plumps for high yield
Ayesha Javed, Financial News
Babson Capital Europe, the European debt fund manager which spun out of Duke Street Capital, is positioning itself to take advantage of the booming high yield market in Europe as it prepares to launch its first high yield fund in the next month.
http://jlne.ws/kkOfwM

SIFMA Statement On Senate Banking Hearing On State Of Securitization Markets
SIFMA today issued the following statement from Ken Bentsen, executive vice president, public policy and advocacy, on the Senate Banking Subcommittee’s hearing on the state of the securitization markets:
http://jlne.ws/iE17Y3

Seven of 10 poll respondents confident Congress will raise the $14.29 trillion debt limit
By Mike Dorning and David J. Lynch
Global investors, by an almost 2-to-1 majority, believe the U.S. government won’t be able to substantially cut its budget deficit without raising taxes, rejecting a core stand of congressional Republicans.
http://jlne.ws/mQEbpl

CFTC Working At 'Cross-Purposes' On Overhaul -FIA Chief
By Jacob Bunge, Of DOW JONES NEWSWIRES
The push by regulators to overhaul the U.S. derivatives market is becoming disorganized as agencies crank out a welter of proposals, the head of the main futures trade body said Wednesday.
http://jlne.ws/juKAK5

Finance Banter : INVESTORS' GUIDE TO THE DEBT CEILING DEBATE: Finance Banter Economics
Jeff Miller, Finance Banter
As a professional analyst of public policy issues, the forecasting of political events is a favorite topic. My record has been good.
http://jlne.ws/iwn1Rb
Testimony Of Finra's Ketchum Before Subcommittee On Oversight And Investigations Committee On Financial Services
Chairman Neugebauer, Ranking Member Capuano and Members of the Subcommittee: I am Richard Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority, or FINRA. On behalf of FINRA, I would like to thank you for the opportunity to testify today. Unfortunately, we are here today because of a massive fraud that has had tragic results for many investors. No regulator can feel good about its performance regarding Stanford. Notwithstanding the jurisdictional limits that confronted us, FINRA clearly could have done better and we deeply regret we did not. In the wake of Stanford, FINRA stepped back and took a hard look at our regulatory programs and approaches, and searched for ways to more effectively uncover misconduct, especially fraud, and enhance our programs to better protect investors.
http://jlne.ws/jSfF7x

Businesses step into US debt limit battle
By James Politi, FT.com
Corporate America stepped into the political battle over the US debt limit, pleading for congressional leaders to raise the country’s borrowing authority in a “timely fashion” to avoid damaging the economy.
http://jlne.ws/klob6U



Events

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

Introduction to Treasury Futures: Factoring the Risks
June 16, 2011
IFM's Course On Cash And Futures Treasury Trade - New York City
http://jlne.ws/kdOeSQ

Treasury Futures Basis: Beyond the Risks
June 16, 2011
IFM's Course On the Treasury Futures Basis - New York City
http://jlne.ws/kdOeSQ

Treasury Futures: Using International Fixed-Income and Money Market Spreads
June 16, 2011
IFM's Course On Using International Fixed-Income and Money Market Spreads - New York City
http://jlne.ws/kdOeSQ

Making Sense of Credit Default Swaps
June 22, 2011
IFM's Course On Credit Default Swaps - Chicago
http://jlne.ws/kdOeSQ

FIA Treasury & Rates Forum
September 14, 2011
FIA Program On Growing Role Of Treasury Futures - New York City
http://jlne.ws/fQFQXP




Economic News

Forecasters predict slower growth over the next four years
Federal Reserve Bank of Philadelphia
Growth in the U.S. economy looks a little slower now than it did three months ago, according to 44 forecasters surveyed by the Federal Reserve Bank of Philadelphia. Our panelists expect real GDP to grow at an annual rate of 3.2 percent this quarter, down from the previous estimate of 3.5 percent. On an annual-average over annual-average basis, the forecasters also predict slower real GDP growth over the next four years. The forecasters see real GDP growing 2.7 percent in 2011, down from their prediction of 3.2 percent in the last survey. The forecasters predict real GDP will grow 3.0 percent in 2012, 2.8 percent in 2013, and 3.3 percent in 2014, each somewhat lower than their respective predictions in the last survey.
http://jlne.ws/jFTnJQ

Philly Fed factory activity index plunges in May
Reuters
A measure of manufacturing in the U.S. Mid-Atlantic region grew much more slowly than expected in May, a survey showed on Thursday, falling short of even the most pessimistic predictions of a Reuters poll of economists.
http://jlne.ws/iWRXM6

Southeast housing update: Polls show existing home sales softened in April
Federal Reserve Bank of Atlanta
As noted in Atlanta Fed President Dennis Lockhart's speech last week, "The housing sector impacts economic growth in two basic ways—one direct and one indirect." Because of its importance we continue to closely monitor developments in our region.
http://jlne.ws/mgvgA0

US factory output falls for the first time in 10 months
BBC
US factories produced fewer goods for the first time in 10 months, driven mainly by a slump in vehicle production as a result of a shortage in parts from Japan.
http://jlne.ws/lfcm5q

Construction of new homes falls in April Economic Report
By Jeffry Bartash, MarketWatch
Builders started construction on fewer new homes in April while permits also fell, reflecting no sign of a rebound in the battered U.S. housing market.
http://jlne.ws/m5BBSq

Petrol costs push up US consumer prices
By Shannon Bond, FT.com
US consumer prices rose 3.2 per cent year-on-year in April, the most since October 2008, as high energy and food costs lifted core inflation. The rise, slightly above the 3.1 per cent forecast by economists, followed a 2.7 per cent advance in March, the labour department said on Friday. Month-on-month, prices were up 0.4 per cent, in line with expectations, following March’s 0.5 per cent gain.
http://jlne.ws/iR0t1O

Philadelphia Fed Forecasters Mostly Cut Growth Projections
By Gary Siegel, The Bond Buyer
The economy is not looking as strong as it did three months ago, according to the Federal Reserve Bank of Philadelphia’s survey of professional forecasters, which was released Friday.
http://jlne.ws/mdx71n

U. of Mich. May Index at 72.4 vs. 69.8 in April
By Gary Siegel, The Bond Buyer
The University of Michigan's preliminary May consumer sentiment index reading was 72.4, compared to the final April 69.8 reading, the preliminary April 69.6, and the final March 67.5, according to market sources.
http://jlne.ws/iS5byc




Exchanges, Clearing Houses & MTFs

ERIS EXCHANGE SUCCESSFULLY LAUNCHES ERIS SWAPBOOK ELECTRONIC TRADING PLATFORM
Press Release
Eris Exchange, a US-based exchange offering flexible interest rate swap futures, today announced the successful launch of the Eris SwapBook electronic trading platform for trading Eris Interest Rate Swap Futures cleared by CME Clearing. Eris SwapBook allows market participants to trade centrally-cleared, spot-starting interest rates swap derivatives with immediate trade certainty against streaming, executable orders from dedicated liquidity providers.
http://jlne.ws/j23vf8

Plus creates new swap contract for derivatives launch
By Philip Stafford - Financial Times
Plus Markets Group is to make a new interest rate swap contract the centrepiece of its new derivatives exchange as it converts itself from niche UK microcap listings platform to stock and derivatives bourse. The UK group will launch its own US dollar-denominated swap interest contract (SIC) in conjunction with FTSE International, the index compiler.
http://jlne.ws/k3tBgw

NYSE Euronext lists Commerzbank Certificates on Portuguese Government Bonds
Lisbon, 18th May 2011 – NYSE Euronext Lisbon lists from today Certificates on Government Bonds (“Certificados OT”), an innovative product issued by Commerzbank.
http://jlne.ws/lEvXKg

MEXDER LAUNCHES NEW FUTURES CONTRACTS ON THE 5 AND 30 YEAR BOND (M5 AND M30)
Press Release
Mexico City – May 17, 2011 – Two new futures contracts were listed on the Mexican Derivatives Exchange (MexDer), the derivatives subsidiary of the Mexican Exchange (Bolsa Mexicana BMV), whose underlying assets are the 5 and 30 year Federal Government Development Bond (M5 and M30). BMV is the second largest exchange in Latin America and home to some of the world’s leading financial companies.
http://jlne.ws/ifSunB

MEXDER LAUNCHES NEW FUTURES CONTRACTS ON THE 5 AND 30 YEAR BOND (M5 AND M30)
As from May 16, 2011 MexDer will be listing Futures Contracts on the 30-Year Fixed Interest Rate Government Bonds (M30). As from May 16, 2011 MexDer will be listing Futures Contracts on the 5-Year Fixed Interest Rate Government Bonds (M5).
http://jlne.ws/lzuqBr

Eurodollar block trades successfully executed on NYSE Liffe US
Marco Bianchi, NYSE Liffe U.S.
NYSE Liffe US Eurodollars keep growing. Our customers are responding well to our wholesale trading initiative and Friday, May 13th, we saw 50 thousand lots of Eurodollar futures business executed via a series of block trades. We are very excited about these latest developments and expect to set a new record in Open Interest on the back of these trades.
http://jlne.ws/kTKFbj

Banks look to counter LSE’s TMX deal
By Bernard Simon and Jeremy Grant - Financial Times
This week a giant blue illuminated ball and electronic ticker tapes were inaugurated at the London Stock Exchange as the UK bourse launched a new market opening ceremony to kick off trading each day. It was probably a welcome distraction for Xavier Rolet, LSE chief executive, from having to follow the progress of his planned “merger of equals” with TMX Group, operator of the Toronto and Montreal exchanges, thousands of miles away in Canada.
http://jlne.ws/kzrgfr





Firms & Banks

Nomura Announces New Senior Management Appointments
Here Is The City
Nomura Holdings, Inc. has announced a series of top management appointments to strengthen its global leadership team further. All appointments are effective from June 1, 2011, and are subject to local regulatory approvals.
http://jlne.ws/kuPeJh

Penson CEO Sees FY Profit As Damage-Limitation Continues
By Doug Cameron Of DOW JONES NEWSWIRES
The head of Penson Worldwide Inc. (PNSN) said Wednesday that the U.S. clearing and settlement specialist expects to be "nicely profitable" this year as he worked to rebuild confidence after problems with the collateral underlying its core business. Phil Pendergraft, chief executive, reiterated his apology to stakeholders after the company disclosed it was exposed to a large, illiquid bond, triggering a sharp slide in its stock price.
http://jlne.ws/jRQle3

Penson Director Resigns; Shares Dive On Collateral Disclosure
By Jacob Bunge Of DOW JONES NEWSWIRES
A board member of Penson Worldwide Inc. (PNSN) resigned Thursday after the company's disclosure of his relationship to a large, illiquid bond position held by the company, which sent shares in the clearing and settlement firm to an all-time low. Penson reported this week that it held as trading collateral $42.6 million in bonds issued by a horse-racing track operator that maintains ties with director Thomas R. Johnson, which the company said in a filing this week could bring a "material" write-down.
http://jlne.ws/m9twIH

Morgan Stanley to stay with Smith Barney timeline
By Lauren Tara LaCapra, Reuters
Morgan Stanley (MS.N) Chief Executive James Gorman said the bank still plans to acquire Smith Barney under a previously announced timeline.
http://jlne.ws/kryk0H

Lehman gets green light on $144 mln NY settlement
By Nick Brown, Reuters
Lehman Brothers Holdings Inc's (LEHMQ.PK) $144 million settlement with the state of New York over back taxes was approved by a bankruptcy judge on Wednesday.
http://jlne.ws/j9vVQI

BGC Partners Completes First Fully Electronic Euro Interest Rate Options Transaction on BGC Trader
Business Wire
LONDON--(BUSINESS WIRE)--BGC Partners, Inc. (NASDAQ: BGCP), ("BGC Partners" or "BGC"), a leading global brokerage company servicing the wholesale financial markets, announces its first fully electronic Euro Sterling Interest Rate Option (IRO) trade using BGC's award-winning Volume Match tool on the BGC Trader platform. Volume Match is integrated into BGC's proprietary platform, BGC Trader and ...
http://jlne.ws/kVFsaK

UBS: Banks will have too much cash after Basel III
Market Watch
(Adds detail and comments from Gruebel throughout.) Banks will likely have too much cash by 2019 as a result of the Basel III global banking rules, UBS AG (UBSN.VX) Chief Executive Oswald Gruebel said Thursday. "In the next 10 years, at the end of 2019, we will have overly liquid, overcapitalized banks," said Gruebel, who was addressing a business audience at a conference here.
http://jlne.ws/m7teq6

UBS hires 15 advisers with $1.5 billion in assets
Reuters via Yahoo! Canada News
UBS Wealth Management Americas recently hired 15 financial advisers overseeing $1.5 billion in client assets and generating more than $14 million in annual fees and commissions, according to a source familiar with the business.
http://jlne.ws/jNc4lF

Citigroup Hires Emerging-Market Bond Analyst Eric Ollom From Jefferies
By Drew Benson and Veronica Navarro, Bloomberg
Citigroup Inc. (C) hired Eric Ollom as an emerging-markets debt strategist, luring him away from Jefferies & Co. Ollom, 48, will begin working for Citigroup in late June, bank spokesman Anthony Ingham wrote in an e-mail from New York. Tom Tarrant, a spokesman at Jefferies, declined to comment.
http://jlne.ws/itZKR3

Citi reinstates quarterly dividend at 1 cent
Reuters
By Maria Aspan, Reuters
Citigroup Inc (C.N) declared its first dividend in more than two years on Friday, announcing it will pay a penny per share on June 17, but analysts said the bank could take a while to pay the kinds of dividends that its rivals do.
http://jlne.ws/lJJZNa

Citigroup Retention Award for Pandit May Exceed $16 Million
BusinessWeek
Citigroup Inc. will give Chief Executive Officer Vikram Pandit a retention award worth more than $16 million if the company meets performance targets, after he took a $1 salary following the financial crisis.
http://jlne.ws/jJrFRD

NAB caught in British insurance scandal
Brisbane Times
THE National Australia Bank faces a hit to earnings of almost $140 million in Britain after being caught up in a lending insurance scandal that is set to cost the banking sector there billions of dollars in payouts.
http://jlne.ws/iwYz66

HSBC says profit from India to cross USD 1-bn mark in 3-years
PTI via Yahoo! India News
Mumbai, May 12 (PTI) Global banking major HSBC today said India is one of its key markets for growth and profits from the country will cross the USD 1-billion mark in three years."We closed with a profit before tax of USD 671-million in 2010 and one would expect we will achieve the targeted growth number of USD 1-billion in three years...by 2013," HSBC Chief Executive for India Stuart Davis told ...
http://jlne.ws/k8WOiG



Auctions & Statistics

Treasury to Offer $27B 91-Days, $24B 182-Days
By Gary Siegel, The Bond Buyer
The Treasury Department said Thursday it will auction $27 billion 91-day bills and $24 billion 182-day discount bills Monday.
http://jlne.ws/iMhWLk

Treasury to Sell $35B 2-Years, $35B 5-Years
By Gary Siegel, The Bond Buyer
The Treasury Department said it will auction $35 billion two-year notes on Tuesday, May 24, and $35 billion five-year notes on Wednesday, May 25.
http://jlne.ws/ja4rhT

56-Day Cash Management Bills Draw 0.020% High Rate
By Gary Siegel, The Bond Buyer
The Treasury Department Wednesday sold $5 billion 56-day cash management bills, dated May 19, due July 14, at a 0.029% high tender rate.
http://jlne.ws/mgP7MH

Federal Reserve Bank of New York: New York Fed purchases $6.940 billion in Tsy coupons
The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).
http://jlne.ws/kNsAOD





Regulators

Banks excluded from key ESMA panel
By Jeremy Grant - Financial Times
All but one of the biggest banks, and all of the industrial companies that use derivatives have been excluded from a key advisory group appointed by Europe’s new markets regulator to help implement new rules on equities trading, derivatives and clearing.
http://jlne.ws/jRvVzO

Chicago Fed Says We're on the Mend
By Amy Antenora, AMN
Wondering what to expect of the post-recession recovery? "We went through a bad one clearly, but we're on the mend," says William Strauss, senior economist and economic advisor at the Chicago Federal Reserve.
http://jlne.ws/kVNzPS

Chicago Fed's Evans: Making Sense of Monetary Policy
A speech delivered on May 19, 2011, to the Global Corporate Treasurer Forum in Chicago, Illinois
As you know, the Fed has a dual mandate from Congress to encourage conditions that foster both maximum employment and price stability. The FOMC conducts monetary policy with these objectives in mind. In normal times, the FOMC operates by appropriately setting the federal funds rate, which is the interest rate on overnight loans between banks. Other actions may be taken during unusual times, such as those we faced in the past several years.
http://jlne.ws/kulQox

FRB: Minutes of the Federal Open Market Committee, April 26-27, 2011
The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the attached minutes of the Committee meeting held on April 26-27, 2011. A summary of economic projections made by Federal Reserve Board members and Reserve Bank presidents for the April 26-27, 2011 meeting is also included as an addendum to these minutes.
http://jlne.ws/mkBu0L

Fed’s Bullard Says Fed May Tighten in 2011 by Cutting Assets
By Steve Matthews and Michael McKee, Bloomberg Businessweek
Federal Reserve Bank of St. Louis President James Bullard said the central bank may tighten policy this year by allowing its balance sheet to decline even with inflation showing signs of slowing in recent weeks.
http://jlne.ws/juRSnF

European bank stress tests – new details
The Financial Regulation Forum
The European Banking Authority (EBA) today published documents explaining the scenarios and methodology for its 2011 EU-wide stress test, which will be applied on a wide sample of European banks covering over 60% of total EU banking assets.
http://jlne.ws/l0nh3V

Euro-zone ministers back Draghi for ECB head
By Polya Lesova, MarketWatch
Euro-zone finance ministers have announced their support for Italy’s Mario Draghi to become the next president of the European Central Bank.
http://jlne.ws/m2exfW

ECB's Stark signals rate hikes, IMF urges caution
By Marc Jones and Christiaan Hetzner, Reuters
ECB policymaker Juergen Stark left little doubt on Thursday more euro zone rate hikes were on the agenda, even as the International Monetary Fund urged the bank to tread carefully to help contain the region's debt woes.
http://jlne.ws/mrpzKW





OTC

OTC Derivatives Cash at Risk Dropped to $21 Trillion, BIS Says
By Matthew Leising, Bloomberg
The amount of cash at risk in the global over-the-counter derivatives market dropped at the end of 2010 as the value of interest-rate swaps declined. Overall trading totals rose 3 percent.
http://jlne.ws/mIWbj6

ICAP’S BrokerTec Credit Electronic Platform Reaches $300 Billion
ICAP PLC (IAP.LN IAPLY), the world's largest interdealer broker, announced Thursday it has surpassed $300 billion in electronically traded U.S. credit default swaps on its BrokerTec platform. That cumulative tally since the broker launched electronic CDS trading in October 2007 signals that dealers are increasingly comfortable trading on-screen without human interaction with a broker.
http://jlne.ws/j71hkX

ISDA Responds to the Financial Stability Board Report on OTC Derivatives Markets Reforms Implementation
ISDA and the industry have worked in close collaboration with global supervisors to achieve greater levels of counterparty credit risk management, regulatory transparency and operational efficiency. The ISDA Industry Governance Committee (IIGC) is comprised of major dealers and buy side institutions and serves as a forum for market participants to communicate with regulators and to further strengthen the OTC derivatives market infrastructure.
http://jlne.ws/jAFr4n






Global News

Santander seals bumper securitisation deal
Reuters Finance News (EU) via Yahoo! UK & Ireland Finance
LONDON (Reuters) - Santander's UK unit has sold 3.75 billion pounds of bonds backed by residential mortgages, the biggest European securitisation deal publicly sold since the financial crisis.
http://jlne.ws/il8oei

Emirates Islamic Bank chief executive resigns
Reuters
The chief executive of Emirates Islamic Bank, an affiliate of Emirates NBD (ENBD.DU), has resigned and his deputy has been appointed acting CEO, the lender said on Wednesday.
http://jlne.ws/iXCA5L

Economics: Canada's banking experience shows concentration can improve stability
The Economist
A CONCENTRATED banking system with appropriate regulation can be good for stability. The case of Canada makes the point. The Canadian nationwide branch banking system evolved from its Scottish roots in the early nineteenth century to its present structure dominated by five big banks. The Canadian set-up can be viewed as a grand bargain whereby oligopoly with limited entry would be permitted in exchange for financial stability but it would be a tightly regulated. From 1900 to 1980 my research with Angela Redish and Hugh Rockoff shows that the Canadian banking system was considerably more stable than its unit banking based US counterpart in terms of no banking panics during the 1930s and a much lower incidence of bank failures. It also was more efficient in terms of a higher rate of return on equity.
http://jlne.ws/kUqYml

Finland approves Portugal's bail-out
BBC
A 25-member parliamentary committee, including members of all eight parties, gave outgoing Finance Minister Jyrki Katainen a mandate to support the package at the eurozone finance ministers meeting on 16 May.
http://jlne.ws/lJzEni

With almost five million out of work, Spain’s unemployment crisis rages on
By Andrew Eatwell, IberoSphere
In January 2009, Spain’s then Labour Minister Celestino Corbacho declared confidently that the number of jobless people in Spain would not surpass the four million mark. It took only three months for him to eat his own words as unemployment shot past that psychologically significant level. It has continued to tick upwards ever since. Corbacho lost his job in October last year.
http://jlne.ws/ih0f1s






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