June 2, 2011: May's Corporate Bond Boom Just Missed Record [Newsletter]

June 2, 2011

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


Conversation Starter


Old Money

The Bureau of Engraving and Printing (BEP) will attend the American Numismatic Association’s World’s Fair of Money Convention, August 16-20, 2011 at the Donald E. Stephens Convention Center in Rosemont, IL. The BEP will proudly showcase its “Billion Dollar Exhibit” which features more than $1 billion of rare and antique currency including sheets of $100,000 currency notes, Treasury Bonds, and Gold and Silver Certificates. Additional exhibits include: currency face plates representing the Federal Reserve Bank of Chicago; Series 1934-B, 12-Subject $10,000 plate; and, a Series 1934-C, 12-Subject $5,000 plate. Additionally, an antique 19th Century Spider Press will be on display at this convention.

**CN: Get more details on the money convention here.




Lead Stories

May's Corporate Bond Boom Just Missed Record
By Kellie Geressy, WSJ.com
The allure of historically low interest rates and a global search for yield propelled dollar-denominated corporate-bond volume to its second-highest monthly total in May, according to data provider Dealogic.
http://jlne.ws/mmUJVb

Inflation is always and everywhere a monetary phenomenon…what about deflation?
By Amol Agrawal, Mostly Economics
Masaaki Shirakawa gives another superb speech covering many issues. He suggests three research agendas for future: Against the backdrop, I put a bubble and a resultant financial crisis at the top of the research agenda. Beyond a variety of discussions prompted by the global financial crises, we need to make further progress on this front. The second issue is economic and social consequences of sizeable demographic changes, such as a declining population and ageing.The third issue is repercussions of natural disasters on economic activity.
http://ow.ly/58qi8


CBO: Fannie, Freddie Guarantees to Cost Government $42 Billion
By Jeffrey Sparshott, WSJ.com
Mortgage guarantees made by Fannie Mae and Freddie Mac in the coming decade are expected to cost the government another $42 billion, the Congressional Budget Office said Thursday.
http://jlne.ws/japqaE

**CN: Through the end of March, the government provided about $154 billion in capital to Fannie and Freddie, while the two government-sponsored enterprises paid out more than $24 billion in dividends to the government — resulting in a net cost of about $130 billion so far.

EU warns US to speed up bank reform
By Peter Spiegel in Brussels, Financial Times
The European Union’s top financial regulator has warned the Obama administration that it must speed up and toughen its new banking rules in order to prevent American banks from having unfair advantages over their European counterparts.
http://jlne.ws/m6LhqL

Moody's warns big banks of possible downgrades
By Matthew Craft, Forbes.com
Moody's Investors Service said Thursday that it was reviewing the ratings of Bank of America Corp. Citigroup Inc. and Wells Fargo & Co. for possible downgrades.
http://jlne.ws/k34QEW


Moody’s: If no progress on raising statutory debt limit, it expects to place U.S. gov rating under review for downgrade
-Risk of short-lived default by U.S is very small, but rising
-If US debt limit is raised and default avoided AAA rating will be maintained
-Degree of political entrenchment into conflicting positions over debt ceiling has exceeded expectations
-Heightened polarization over the debt limit has increased the odds of a short-lived default
http://jlne.ws/mPIoyy


US House votes against raising debt ceiling
By James Politi in Washington, Financial Times
The first vote to increase the $14,300bn US borrowing limit has failed, highlighting the persistence of deep divisions between Republicans and Democrats over budgetary policy two months ahead of a crucial deadline to avert a potential default.
http://jlne.ws/j7Yiom


Eurozone debt crisis: It is not all the fault of credit default swaps
By David Oakley, Financial Times
The eurozone debt crisis has turned many assumptions about the safety of government debt on its head. It has also sparked a debate over the use of derivatives as a way of hedging risk.
http://jlne.ws/infvQN

No Love Lost for U.S. Debt as Bond Dealers Share Fewer Treasuries With Fed
By Cordell Eddings and Liz Capo McCormick, Bloomberg
The world’s biggest bond dealers are finding fewer Treasuries to sell to the Federal Reserve as its $600 billion purchase program nears an end, a signal of rising demand even as the largest buyer steps away.
http://jlne.ws/iPdgfr

UK consumer recovery set to be slowest in 180 years
By Daniel Pimlott, FT.com
The UK economy is set to experience the slowest pick-up in consumer spending of any post-recession period since 1830, according to a Financial Times analysis of official forecasts. Families are expected to spend just slightly more by 2015 than they were before the financial crisis hit in 2008, as high inflation, tax rises and slow wage growth eat into disposable incomes.
http://jlne.ws/jQkRa4

U.K. Treasury Rebuked on Data Release
By AINSLEY THOMSON, WSJ
LONDON—The U.K. Treasury has been rebuked over its handling of official statistics after market-sensitive inflation data were sent to 400 lawmakers and government officials prior to the public release last week. In a letter to Chancellor of the Exchequer George Osborne, the head of the U.K. Statistics Authority Thursday said the Treasury had made a "serious lapse" in its handling of the consumer price index data.
http://jlne.ws/ir0sj9

President Obama Announces Intent to Nominate Bryson as U.S. Department of Commerce Secretary
Today, President Obama will announce his intent to nominate John Bryson as the Secretary of U.S. Department of Commerce. Mr. Bryson will play a key role as a member of the President’s economic team, bringing decades of knowledge and experience in the public and private sectors, and will provide valuable ideas and initiatives to strengthen America’s competiveness around the world.
http://jlne.ws/kotf5G

**CN: Previously, John Bryson was chairman and chief executive officer of Edison International, the parent company of Southern California Edison and Edison Mission Group, from 1990 to 2008.


John Bryson to Be Named Obama Commerce Secretary
By JACKIE CALMES, The New York Times
President Obama named a California utility and energy executive, John E. Bryson, as his second secretary of commerce at the White House on Tuesday afternoon, ending a search for an executive to add a business outlook to his economic team.
http://jlne.ws/mGe0Rw

Is bond trading dying?
Reuters
Fixed income trading revenue is falling, and some of the best minds on Wall Street disagree on whether this is temporary weakness or slow death.
http://jlne.ws/jZ1omL

BlackRock’s Fink Says Europe’s Financial Problems Go ‘Way Beyond’ Greece
By Rishaad Salamat and Bei Hu, Bloomberg
Europe’s financial problems aren’t confined to Greece and a reorganization of the continent’s banking system is necessary, Laurence D. Fink, chief executive officer of BlackRock Inc. (BLK), said in a Bloomberg television interview today.
http://jlne.ws/m3YQU2

Trichet to Leave a Difficult Legacy at ECB
By JACK EWING, The New York Times
Since Europe’s debt crisis became acute last year, the European Central Bank has gone beyond its role as arbiter of monetary policy to become in effect the adult supervision for quarreling heads of government.
http://jlne.ws/mGzMSa

Sarkozy Pledges to Defend Euro
By Christian Wienberg, Bloomberg
Greece was only able to join the euro through deception and the currency bloc’s leaders have been “too polite” ever since to deploy adequate sanctions that could have averted the region’s debt crisis, former European Central Bank Chief Economist Otmar Issing said.
http://jlne.ws/kGCygf


Dodd-Frank act drives tie-ups and innovation
By Telis Demo, FT.com
The world’s exchanges must be exhausted. It was scarcely a decade ago that many of the largest groups – including the New York Stock Exchange, the London Stock Exchange, the Chicago Mercantile Exchange – became public companies.
http://jlne.ws/mdKLWL

Geithner Says 'Ask The Women About IMF Culture'
The Daily Bail
This is a very impressive response. We give him credit. Tim likely wants the job as IMF chief - $500K per year tax free, he could stay in D.C., he could prove all of us wrong by not going directly to Goldman - you know he wants the job. And Christine Lagarde is not looking so good now that she's facing prosecution for financial sleaze in France. When asked by Politico's Mike Allen if he knew about IMF's notorious culture of harassment against women, Geithner said you should ask the women.
http://jlne.ws/l6qMSm


Economic Soft Patch Creates Political Problems
By Kathleen Madigan, WSJ.com
Washington politicians are discovering what has been evident to consumers and economy watchers. The U.S. economy is barely growing, and hiring isn’t strong enough to bring down the jobless rate.
http://jlne.ws/kLk8Df

Greece Will Have To Restructure Its Debt - Roubini
WSJ.com
Greece will be forced to restructure its debt but this will happen in an orderly manner, Nouriel Roubini, professor of economics at New York University, said Friday.
http://jlne.ws/mvVUke

Greece ‘Cheated’ to Join Euro, Former ECB Economist Otmar Issing Says
By Christian Wienberg
Greece was only able to join the euro through deception and the currency bloc’s leaders have been “too polite” ever since to deploy adequate sanctions that could have averted the region’s debt crisis, former European Central Bank Chief Economist Otmar Issing said.
http://jlne.ws/kpq6ML

ISDA Releases 2011 Operations Benchmarking Survey Results
Identifies operational processing trends in the industry. Provides individual firms with a benchmark against which to measure the promptness and accuracy of their processing of trades, confirmation procedures and settlement. It is the first industry-sponsored survey to provide detailed quantitative information on the processing of privately negotiated derivatives
http://jlne.ws/iv59XF

Forget the debt ceiling and focus on debt
By Glenn Hubbard, Financial Times
On May 15, the US hit its “debt ceiling” of $14,300bn, covering publicly owned debt held by the Federal Reserve and government trust funds, and Washington is in a furore. While budget debates are often more talk than action, this one needs more talk – but of a different kind. That the US has an unsustainable fiscal trajectory is clear, but the problem is not the debt ceiling per se. My wife and I don’t vote on whether we will pay our bills. Rather, we discuss whether our spending or income needs adjustment. So too must it be for our national “family”.
http://jlne.ws/mehPvu




Events


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

Factory orders fell in April after parts shortage
By MARTIN CRUTSINGER, Forbes.com
Businesses cut back on their orders for heavy machinery, computers and autos in April, partly because the March earthquake in Japan has made components parts harder to come by.
http://jlne.ws/jzsAcS


Initial claims for unemployment decline to 422,000 - St. Louis Fed
http://jlne.ws/knVj4K

May Data Indicate Slowdown
BY KATHLEEN MADIGAN, WSJ.com
The U.S. manufacturing sector slowed sharply in May, according to data released Wednesday by the Institute for Supply Management. Price pressures lessened.
http://jlne.ws/j8ARws

Chicago Business Barometer dropped to 56.6 from 67.6 in April. This was below consensus expectations of 62.3
The Chicago Purchasing Managers reported the CHICAGO BUSINESS BAROMETER dropped toward neutral, indicating decelerating expanding economic activity, but posted a twentieth month of growth.
http://jlne.ws/kQQNiK


US house prices below 2009 low, Case-Shiller indicates
US house prices fell in March, dipping below their 2009 low, as the housing market continued to be affected by weak demand, an index has shown.
http://jlne.ws/lcYKK8

Consumer confidence drops in May: Conference Board
Reuters
Consumer confidence slid in May as consumers turned more pessimistic on the outlook for the labor market and inflation worries rose, according to a private sector report released on Tuesday.
http://jlne.ws/l7Ya84

Trimmed Mean PCE Inflation Rate - Economic Data - 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


US consumer spending up 0.4% in April
By Michael Stothard, FT.com
US pending home sales plunged 11.6 per cent in April and consumer spending rose by less than expected, providing a further sign of the mixed and sluggish nature of the economic recovery.
http://jlne.ws/mQhMvD

U.S. Michigan Consumer Sentiment Index Rose to 74.3 in May
Alex Kowalski, Bloomberg/Businessweek
U.S. consumers grew more confident in May than a month earlier as declining gasoline prices helped lift Americans’ spirits.
http://jlne.ws/mIi9Yf


Exchanges, Clearing Houses & MTFs

CME Takes Aim at NYSE Euronext Interest-Rate Business
BY JACOB BUNGE, WSJ.com
CME Group Inc. laid out plans to launch a new slate of European-flavored interest-rate contracts, escalating a battle with NYSE Euronext over one of the world's most heavily traded derivatives markets. The Chicago-based exchange company aims to launch futures and options on the Euribor, a key rate reflecting the cost of borrowing euros on the inter-bank market, in the second half of 2011.
http://jlne.ws/iuVFui







Firms & Banks

Veteran FA Advises a Rookie on Morgan Stanley Smith Barney’s Multicultural Financial Advisor Blog
Press Release
In the latest feature on the Morgan Stanley Smith Barney Multicultural Financial Advisors Forum (MFAF) http://multiculturalfaforum.com, new branch analyst Tyres Jones II interviews Rodney Loo, a Wealth Advisor and Family Wealth Director in San Rafael, Calif., on his career and what it takes to be a successful financial advisor.
http://jlne.ws/iWfN9k





Regulators

Ric Battellino: Recent financial developments
BIS: Address by Mr Ric Battellino, Deputy Governor of the Reserve Bank of Australia, at the
Annual Stockbrokers Conference, Sydney, 26 May 2011.
Introduction
My talk today is about some of the changes taking place in the financing of the Australian economy. As you know, after 15 years of rapid growth, credit has been growing at a much more subdued pace over the past couple of years. In fact, for the first time since the early 1990s, banks are finding that credit is growing more slowly than deposits, with the result that they are able to repay funds previously borrowed in wholesale markets, including from offshore. These developments have been associated with a noticeable increase in national saving and a marked reduction in the current account deficit. I would like to spend some time today going through these developments.
http://jlne.ws/mMLDyE









Global News

Bank of Canada: Indicators of Capacity and Inflation Pressures for Canada
The Bank of Canada monitors a wide range of indicators in assessing the extent of pressures on capacity and inflation. The Bank's conventional estimate of the output gap provides an overall assessment of the degree of slack in the economy, but this estimate is subject to considerable uncertainty. This uncertainty is addressed by considering a wide range of indicators in various markets. Many of these indicators are derived from data published by Statistics Canada, but some reflect information gathered by the Bank's regional representatives as well as by various outside sources. For further discussion of uncertainty as well as the information and analysis used to inform monetary policy decisions at the Bank of Canada, see Jenkins and Longworth1 (2002) and Macklem2 (2002).
http://jlne.ws/maoxWn


Intolerable choices for the eurozone
By Martin Wolf, Financial Times
The eurozone, as designed, has failed. It was based on a set of principles that have proved unworkable at the first contact with a financial and fiscal crisis. It has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution. This is what is at stake.
http://jlne.ws/mCFpiT


German report casts doubt on IMF payout for Greece
Reuters
It seems certain the IMF will not pay its share of an aid tranche to Greece at the end of the month but the global lender is likely take part in any new program, a German newspaper reported on Wednesday. Without quoting any sources, Frankfurter Allgemeine Zeitung (FAZ) said a new bailout program was probably the only way to save Greece from bankruptcy.
http://jlne.ws/k5KkPR

ASIC proposal for credit rating agencies' compliance reporting
Press Release
ASIC today released a consultation paper on the form and content of the compliance report that each of Australia’s credit rating agencies must lodge with ASIC annually as part of moves to help boost the integrity and standards of Australia’s financial system.
http://jlne.ws/luHEHu


Misys Wins Asian Banker Best Back Office Trading System for Bank of Communications Implementation
wallstreet:online AG
SINGAPORE and HONG KONG, May 31, 2011 /PRNewswire/ Misys, the global application software and services company, is pleased to announce that it has won the Best Trading System in China (Back Office) in Asian Banker´s 2011 awards.
http://jlne.ws/lFerdP

Japanese Sovereign Debt Outlook Cut
GFT Forex
The Japanese yen moved lower in currency trading on the FX market today, thanks to a debt outlook cut by Fitch. The ratings agency cut the sovereign debt outlook for Japan from stable to negative. The news had the yen sinking against the greenback, but things have changed.
http://jlne.ws/jyK1oI


Euroclear Bank To Provide Access To Chilean Domestic Debt Securities
Press Release
Euroclear Bank announces today the launch in June of settlement, custody and related services for cross-border Chilean domestic debt transactions. Simultaneously, Depósito Central de Valores S.A. (DCV), the Chilean Central Securities Depository (CSD), will offer similar services involving foreign securities transactions for its clients through Euroclear Bank.
http://jlne.ws/iQxLUd


David Prosser: So much for banks quitting the UK
Independent
Outlook For all the talk about Barclays or HSBC turning their backs on the UK, it would appear that London is more likely to acquire a major new bank than it is to lose one. The Wall Street Journal suggested yesterday that UBS plans to split is investment bank off from its retail operation and to relocate the former out of Switzerland. London is on the shortlist of destinations.
http://jlne.ws/jUMfn3

Jayne-Anne Gadhia: the woman who wants Virgin tied to a Rock
Guardian Unlimited
Jayne-Anne Gadhia's motto is "never give up". Just as well, perhaps, as the Virgin Money boss is accustomed to setbacks – but does not stop to think about them for too long. The imposing and gregarious Midlands-born banker tried and failed to buy Northern Rock before it was nationalised in February 2008 and then missed out on 318 Royal Bank of Scotland branches last year. She is now ready to do it all again, this time with simultaneous offers for 600 Lloyds Banking Group branches plus Northern Rock.
http://jlne.ws/k0rGSp





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