July 7 , 2011: ECB Raises Interest Rates [NEWSLETTER]

July 7, 2011

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


Lead Stories

ECB raises interest rates
FRANKFURT (Reuters) - The European Central Bank raised interest rates for the second time this year on Thursday, tightening policy to address above-target inflation in the euro zone despite the intensifying debt crisis in Greece.
Following is the text of the ECB's statement issued after the meeting:
Based on its regular economic and monetary analyses, the Governing Council decided to increase the key ECB interest rates by 25 basis points, after raising rates by 25 basis points in April 2011 from historically low levels. The further adjustment of the current accommodative monetary policy stance is warranted in the light of upside risks to price stability.
http://jlne.ws/nrCHiN

European Central Bank interest rate rise puts pressure on ailing economies
Heather Stewart, The Guardian
• Jean-Claude Trichet insists weakest nations must avoid default
• Rate rise and tough comments boost European markets
Jean-Claude Trichet, president of the European Central Bank, tightened the screws on Greece, Portugal and Ireland on Thursday by pressing ahead with an increase in interest rates, and insisting the single currency's weakest members must avoid a default at all costs.
http://jlne.ws/r8lVZj

Lagarde pledges change of style
By Alan Beattie in Washington, The Financial Times
Christine Lagarde, the new managing director of the International Monetary Fund, has promised a more inclusive style of management and warned about financial contagion if European governments defaulted on debt.
Ms Lagarde, who took office this week, said she would adopt a more collaborative management style than Dominique Strauss-Kahn, her predecessor, and draw in people from a variety of educational and national backgrounds.
http://jlne.ws/ngXzHn

Debt Talks Turn to Social Security Cuts
By Brian Faler and Heidi Przybyla - Jul 7, 2011
July 7 (Bloomberg) -- President Barack Obama and lawmakers are considering cutting Social Security and increasing revenue by changing the way the government measures inflation.
Four senior congressional aides said lawmakers are discussing using an alternative yardstick to gauge inflation, known as the “chained consumer price index,” to determine annual cost-of-living adjustments for millions of Americans.
http://jlne.ws/nIhH8h

Instant view: BoE leaves rates unchanged as expected
LONDON | Thu Jul 7, 2011 7:13am EDT (Reuters)
The Bank of England held interest rates at a record low 0.5 percent as expected on Thursday, as concerns about Britain's lackluster economic recovery outweighed worries about high inflation.
None of the 60 economists polled by Reuters last week had forecast a rise, and money markets are not fully pricing in a hike until the middle of next year.
http://jlne.ws/n7DeOE

Asian Currencies Strengthen on Economic Growth, Interest-Rate Outlooks
By Yumi Teso, Bloomberg - Jul 7, 2011
Asian currencies gained, led by the Thai baht, on speculation the world’s fastest economic growth and rising interest rates will attract more funds to the region.
http://jlne.ws/pblfVE

Fed's Hoenig: Central Bank Should Have Raised Rates Some Time Ago
By Marshall Eckblad and Michael S. Derby Of DOW JONES NEWSWIRES
ADA, Oklahoma (Dow Jones)--Federal Reserve Bank of Kansas City President Thomas Hoenig again on Thursday argued for the central bank to raise interest rates.
The non-voting member of the interest rate-setting Federal Open Market Committee has long opposed the current course of monetary policy. The Fed has pegged short-term interest rates at zero for some time now and appears in no mood to change that stance, as it completes a controversial program that saw the central bank buy $600 billion in Treasury bonds to help support growth.
http://jlne.ws/pZcose

Fed calls for uniform standards for mortgage servicers
Reuters July 7, 2011
The Federal Reserve said Thursday that it wants to see a uniform set of national standards developed for mortgage servicing companies and for handling foreclosures to prevent abuses of consumers.
In a statement filed with two House financial services subcommittees, the Fed said it also was staying in close touch with the Justice Department on negotiations with five big banks trying to settle over deficiencies in mortgage servicing and foreclosure practices.
http://jlne.ws/raBrHK

Federal Reserve Names David Wilcox as Director of U.S. Economic Research
By Joshua Zumbrun - Jul 7, 2011
The Federal Reserve Board appointed David Wilcox as the director of U.S. economic research, replacing David Stockton, who plans to retire on Sept. 30.
Wilcox, 52, will lead the 325 employees in the Division of Research and Statistics, which provides forecasts for the economic outlook at each meeting of the Federal Open Market Committee, according to a Fed release today in Washington. Wilcox is currently the division’s deputy director.
http://jlne.ws/pOQtRL

China Raises Interest Rates
Customers at a supermarket in Shanghai in May. Consumer prices rose 5.5 percent in the month from the same period last year.
By BETTINA WASSENER, NYTimes.com July 6, 2011
HONG KONG — China on Wednesday raised interest rates for the fifth time in nine months, the latest in a series of moves aimed at cooling the pace of economic growth and the steep price rises that have accompanied expansion.
http://jlne.ws/ngG2l6

USE to enter interest rate futures
BS Reporter / Mumbai July 07, 2011
The United Stock Exchange (USE) will enter the interest rate futures (IRFs) trading segment. The exchange will soon apply to the Securities and Exchange Board of India (Sebi) for permission, a senior USE official told Business Standard.
At present, the USE is engaged in currency trading and competes with the National Stock Exchange (NSE) and MCX Stock Exchange (MCX SX). It has a 20 per cent market share in currency trading.
http://jlne.ws/q51jbL

RATE FUTURES REPORT: Euro Zone Debt Fears Far From Fading
WSJ.com
By Howard Packowitz Of DOW JONES NEWSWIRES
CHICAGO (Dow Jones)--Frayed nerves about Europe's debt problems were on full display Tuesday in U.S. interest rate futures markets, only a week after investors expressed optimism that the crisis might not trigger a global economic slowdown.
Prices shot up Tuesday, particularly for longer-dated Eurodollar futures contracts, as traders projected short-term rates will stay low for a prolonged period.
http://jlne.ws/oLkFMR

U.S. Treasury MBS portfolio declines to $94.5 bln
WASHINGTON, July 6 (Reuters) - The U.S. Treasury said on Wednesday its holdings of mortgage-backed securities bought during the financial crisis have been shrunk by more than half to $94.5 billion.
http://jlne.ws/nv59Lp



Events


Clinton Global Initiative
U.S. Department of the Treasury
Secretary Tim Geithner will sit down with former President Bill Clinton at the Clinton Global Initiative America Conference in Chicago, Illinois. At the closing session of CGI America, he'll talk about the state of the economy and the Obama Administration’s plans to help spur private sector job creation and improve America’s competitiveness.
Watch it Live Today at 5:30pm ET
http://jlne.ws/ntfBk1




Economic News

Goldman Economist Sees Rebound, but Risks of Recession Rising
By Jon Hilsenrath, WSJ.com
Jan Hatzius, the chief U.S. economist of Goldman Sachs, started out the year among the most bullish economists on Wall Street about 2011 economic growth. Six months later, after a disappointing first half, he’s less optimistic and growing a little antsy about the risk of renewed recession.
In an interview with The Wall Street Journal, Mr. Hatzius said he saw a 15% to 20% chance of renewed recession next year. His baseline forecast is still for a resumption of stronger growth in the second half of 2011 and into 2012, but he has taken down his 3.5% to 4% forecast by a half percentage point and increased his unemployment rate forecast to 8.25% from 8% by the end of 2012.
http://jlne.ws/mYqYDO

ECB suspends Portugal collateral rules
By Peter Garnham, Financial Times
The euro recovered from session lows against the dollar after the European Central Bank said it had decided to suspend the minimum rating requirement threshold for Portuguese government debt that can be used by banks as collateral for loans from the central bank.
http://jlne.ws/ow4ja3

Brazil Trade Minister Bemoans Real's Strength, High Interest Rates
Nathalie Boschat, PARIS (Dow Jones)--The strength of the Brazilian real and the high level of interest rates are hampering the Brazilian economy and particularly its exports, the country's trade minister said Thursday at a conference.
"The valuation of currencies, of the euro and the real is creating a new kind of difficulty," Fernando Pimentel, Brazilian minister of development, industry and foreign trade, told a conference organized by The Economist in Paris.
http://jlne.ws/p0JWdq

Denmark raises interest rates, mirroring ECB
COPENHAGEN, July 7 (Reuters) - Denmark's central bank raised its lending rate by a quarter percentage point to 1.55 percent on Thursday to match a similar increase by the European Central Bank and steady the Danish crown against the euro.
The Nationalbank, which runs a fixed exchange-rate monetary policy, also raised its certificate of deposit (CD) rate by 25 basis points to 1.20 percent and its current account rate by the same amount to 1.10 percent.
http://jlne.ws/oZqm2t

Wall Street Rally May Spell Pullback for U.S. Stocks
Advanced Trading By Reuters
July 05, 2011
NEW YORK -- A pullback could be on the table this week for U.S. stocks after their best weekly performance in two years, especially if a raft of data headlined by the June jobs report doesn't bolster the argument of a strengthening economy.
Stocks rose for five straight days last week as the fog of the Greek debt crisis appeared to once again be lifted while better-than-anticipated economic numbers such as Friday's manufacturing data gave weight to the belief the U.S. economy was starting to recover from a soft patch.
http://jlne.ws/oJLG5r

Bond yields tick lower as 'ongoing jitters' keep coming
Jul. 6, 2011
By Julianne Pepitone July 6, 2011
NEW YORK (CNNMoney) -- Bond yields had been flagging for months until a stunningly rapid rise last week, sparked by defused concerns about Greek debt. It seemed yields had finally snapped out for their rut.
http://jlne.ws/p46ycG

U.S.-Listed China Stocks Decline on Rate Rise
By Belinda Cao, Bloomberg - Jul 6, 2011
China’s stocks listed in the U.S. retreated from a one-month high after the nation raised interest rates for the third time this year to tame inflation that has quickened to the fastest pace since 2008.
http://jlne.ws/o8XVSt

Fed's Bullard Slams Core Price Focus Again In New Research Note
By Michael S. Derby, Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- Federal Reserve Bank of St. Louis President James Bullard is again attacking the idea of setting monetary policy based on measurements of inflation stripped of food and energy factors.
http://jlne.ws/oTwsys

U.S. Treasury has more money than you think
CanadianBusiness.com
By Thomas Watson July 05, 2011
After pinching pennies to avoid a U.S. default on debts in July, U.S. Treasury Secretary Tim Geithner now insists Uncle Sam will have to break its obligations to creditors in August unless the federal government’s debt ceiling is raised.
http://jlne.ws/mQbbj1

Rep. John Boehner Slams Obama on Debt Ceiling, Debt Limit Talks
Republicans and Democrats are at an impasse over raising taxes as negotiations continue this week on raising the debt ceiling before the August 2nd deadline set by U.S. Treasury Secretary Timothy Geithner. After August 2nd, if the debt limit isn’t increased, the U.S. will no longer be able to borrow money to pay its bills. The current debt ceiling is set at $14.3 trillion.
http://jlne.ws/rg7ig6

TREASURIES-Bonds rise as Portugal revives contagion fears
By Richard Leong, Reuters Wed Jul 6, 2011 12:13pm EDT
NEW YORK, July 6 (Reuters) - U.S. Treasury prices rose on Wednesday as Portugal's downgrade to junk status revived fears that Europe's debt problems could cascade, spurring safe-haven demand for low-risk government bonds.
http://jlne.ws/n83HqT

State is now dominant force in US capital markets
By Gillian Tett, Financial Times
By the time you read this column today, a fascinating shift will almost certainly have occurred in the nature of US finance: for the first time the government will be the biggest source of outstanding home mortgage and consumer credit loans in the US, eclipsing private sector banks or investors.
http://jlne.ws/jOps2f




Exchanges, Clearing Houses & MTFs

ELX Futures Plans New Push For Institutional Business
By Jacob Bunge Of DOW JONES NEWSWIRES
The bank-backed challenger to the dominance of CME Group Inc. (CME) in the U.S. listed derivatives market is targeting institutional funds and asset managers to boost its still-small share after two years of operations.
ELX Futures LP Chief Executive Neal Wolkoff said advancements in trading technology will make its markets more attractive and accessible for buyside institutions such as pension-plan managers, mutual funds and hedge funds, touting cheaper trading costs than its Chicago-based rival.




Firms & Banks

Weber named next UBS chairman
By Haig Simonian in Zurich, Financial Times
Axel Weber is to be the next chairman of UBS, resolving succession issues at the Swiss banking group and removing any possibility the former Bundesbank president might take a top executive role at Deutsche Bank.
http://jlne.ws/k19gyu

Deutsche Bank clariffies CEO comment on Greece
Market Watch
Deutsche Bank AG said Thursday that its CEO Josef Ackermann had been misquoted in a Financial Times report that quoted him as saying the bank would take part in a solution to the Greek debt crisis "but not because we are doing it willingly." Ackermann said the bank expected to find a solution "not because we are doing it gladly, but actually to enable politicians to do so ...
http://jlne.ws/lzqLsh

SunGard Identifies Ten Trends in Credit Risk Management
Press Release
New York City – June 30, 2011 – Marcus Cree (http://twitter.com/MarcusCreeRisk), vice president of risk solutions for SunGard’s Adaptiv business unit, said, “Financial services firms have recognized that they need to manage collateral, market risk and credit risk on an enterprise-wide basis. They will adhere to that principle while launching projects to strengthen their control over credit, trading and counterparty exposure and comply with regulatory requirements such as Dodd-Frank and Basel III.”
http://jlne.ws/mnmzX3

Goldman Sachs' Central Bank Connections Reach Ever Deeper
BusinessWeek
The revolving door between Goldman Sachs Group Inc. and central banks is spinning again.
http://jlne.ws/jehNuF

Goldman, BlackRock Complete E-Traded, Cleared Credit Swap
By Katy Burne Of DOW JONES NEWSWIRES
Goldman Sachs Group (GS) and $3.65 trillion asset manager BlackRock Inc. (BK) announced Thursday they have completed an index credit derivative trade along the lines of what was envisaged in the 2010 Dodd- Frank financial overhaul law.
http://jlne.ws/mmpSB9

Goldman Sachs Sambas Into Brazilian Investment Banking
Forbes
Goldman Sachs is relatively a new-comer to the Brazilian market. It commenced full operations in the
http://jlne.ws/jzWg2m

Big Lehman creditor group backs bankruptcy plan
Reuters
Lehman Brothers Holdings Inc said creditors holding more than $100 billion of claims now support its reorganization plan, moving the company closer to emerging from the largest-ever U.S. bankruptcy.
http://jlne.ws/lr3wDF




Auctions & Statistics

New York Fed Puts Brakes On Maiden Lane Sales After Soft Auction
Forbes
The Federal Reserve's $600 billion Treasury bond purchase program known as QE2 wrapped up Thursday, but that wasn't the only Fed program that stopped as the central bank's New York office temporarily paused its disposition of mortgage-backed securities acquired in return for bailing out AIG in 2008.
http://jlne.ws/l8t5LX

New York Fed Halts AIG Mortgage Bond Sales on Market Conditions
By Caroline Salas Gage, Bloomberg
The Federal Reserve Bank of New York is halting its sales of mortgage bonds acquired in the rescue of American International Group Inc.
http://jlne.ws/iX8Luk

Inflation Project: June’s ISM Prices Index fell 8.5 percentage points, from May’s 76.5 percent
The Institute for Supply Management's Prices Index registered 68 percent in June, 8.5 percentage points lower than the 76.5 percent reported in May. This is the second consecutive month the Prices Index has registered below 80 percent since December 2010, and is the 24th consecutive month the index has registered above 50 percent.
http://ow.ly/5uYyw




Global News

World Bank Approves US$1 billion credit to improve rural livelihoods and boost India’s rural economy
Press Release
WASHINGTON, DC, July 05, 2011- The World Bank today approved US$1 billion credit for the National Rural Livelihoods Project (NRLP) aimed at strengthening the implementation of the Government of India’s newly launched National Rural Livelihoods Mission (NRLM), one of the world’s largest poverty reduction initiative of approximately US$7.7 billion, aiming to reach 350 million people or almost a quarter of India’s population.
http://jlne.ws/naC8fx

MONEY MARKETS-Peripheral turmoil seen as threat to ECB rate cycle
By William James
LONDON, July 6 (Reuters) - Escalating credit concerns in the euro zone periphery on Wednesday were not seen denting the European Central Bank's intention to raise interest rates on Thursday, but left the outlook for further rate hikes this year hanging in the balance.
http://jlne.ws/n6HBVX

Brazil's Central Bank Buys Dollars For BRL1.5634 At Auction
WSJ.com
SAO PAULO (Dow Jones)--The Central Bank of Brazil on Wednesday bought U.S. dollars at a snap auction for 1.5634 Brazilian reais to the dollar. The bank did not reveal the volume of dollars it purchased.
http://jlne.ws/o3w5f6

Joint Statement By President Barroso And President Van Rompuy Following The Vote In The Greek Parliament On The Implementing Measures For The Revised Economic Programme
Press Release
We strongly welcome today's approval by the Greek Parliament of the implementing legislation for the country's revised economic programme. This was the second, decisive step Greece needed to take in order to return to a sustainable path. In very difficult circumstances, it was another act of national responsibility.
http://jlne.ws/mJLp9e

Australian police charge central bank ventures
By Gwen Robinson in Sydney, Financial Times
Australian police have charged Securency International, a currency-printing technology company half owned by the country’s central bank, with bribing foreign officials.
http://jlne.ws/mpOuQ0

France shocked by upheaval in Strauss-Kahn case
By Laura Smith-Spark, CNN
France awoke Friday to the unexpected news that the case against French politician Dominique Strauss-Kahn -- accused of sexually assaulting a hotel maid in New York -- appeared to be crumbling.
http://jlne.ws/mMPnLc

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