January 19, 2012
JLN Interest Rates - http://www.jlninterestrates.com
Conversation Starters
Federal Reserve: Inflation Dashboard
By Cindy Ivanac-Lillig
Check out the updates to the Atlanta Fed's inflation dashboard. It visually depicts where inflation is in the context of a longer term trend. As you drill down into the component parts, you get a flavor for not only which direction the indicators are moving, but how similar indicators relate to one another.
See the Fed's Inflation Dashboard here.
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Press Release: National Futures Association begins accepting registration applications from swap dealers and major swap participants
January 19, Chicago - National Futures Association (NFA) announced today that it has begun accepting applications from swap dealers (SDs) and major swap participants (MSPs) pursuant to the recent final registration rules and delegation of authority order that were approved by the Commodity Futures Trading Commission (CFTC) on January 11.
The CFTC's final rules require all SDs and MSPs to be registered with the Commission and become members of a registered futures association. NFA is currently the only such organization. Applying for registration will not be mandatory until the CFTC finalizes its rules defining SDs, MSPs and swaps and they become effective. However, persons who believe that they are SDs or MSPs may apply for registration before then.
The SDs and MSPs applying for registration will be granted provisional registration while the CFTC continues the process of finalizing rules defining compliance requirements under section 4s of the Commodity Exchange Act.
The CFTC has previously authorized NFA to conduct a full range of registration functions with regard to futures commission merchants, commodity pool operators, commodity trading advisors, introducing brokers, leverage transaction merchants, floor brokers, floor traders and retail foreign exchange dealers.
"Over the years, NFA has developed a comprehensive electronic online registration system," said NFA President Dan Roth, "and during the past few months we have enhanced the system to accommodate these two new registration categories."
NFA has developed a new section of its website (www.nfa.futures.org) to provide information and guidance to SDs and MSPs, and NFA will update its website over time to provide further regulatory and registration information.
Individuals can also direct their questions to NFA's Information Center at (312) 781-1410 or (800) 621-3570 between the hours of 8:00 a.m. and 5:00 p.m. CT, Monday through Friday.
NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.
**CN: Note: Edward Dasso, vice president of market regulation for the NFA, has talked with JLNIR about applications from swap dealers and major swap participants. Watch for his comments in an upcoming JLNIR video piece about the evolution of the interest rates markets.
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Press Release: 2011 World Federation of Exchanges (WFE) Market Highlights: 2011 equity volumes remained stable despite a fall in market capitalization. Derivatives, bonds, ETFs, and securitized derivatives continued to grow strongly
Total turnover value remained stable in 2011 at USD 63 tn despite a sharp decrease of the global market capitalization (-13.6% at USD 47 tn). High volatility and global uncertainty created from the sovereign debt crisis affected volumes all year through and made August 2011 the most active month in terms of trading value, a highly unusual annual peak for markets.
Despite overall unfavorable conditions for primary markets in several regions, WFE members increased their total listings by 1.7% totaling 45 953 companies listed.
Total number of trades decreased by 6.4% at 112 tn. This trend combined with the stability of turnover value led to a small increase in the average size of transaction which was USD 8 700 in 2011.
The high volatility and lack of confidence that affected financial markets globally probably drove the needs of hedging as derivatives contracts traded grew by 8.9%.
WFE members continued to diversify their products range as other products such as bonds, ETFs, and securitized derivatives all had solid growth in 2011.
See the full WFE release here.
Lead Stories
EU's Bailout Fund Capacity Can Be Adjusted By Governors-Draft
Reuters
The combined capacity of the euro zone's permanent and temporary bailout funds will remain at 500 billion euros for now, but will be reviewed in March and may be raised by the permanent fund's board of governors once it is operational, according to a draft treaty obtained by Reuters on Thursday.
http://jlne.ws/xWcP7Q
ECB's Draghi in Confident Mood
Reuters
European Central Bank President Mario Draghi said Thursday he is "confident" that "the overall situation for the euro will look much better in 2012," as many euro-zone states address their fiscal and structural deficits.
http://jlne.ws/y4mJZQ
Eastern Europe May Need Funding Deal to Avert Credit Drought
BusinessWeek
Eastern Europe may require funds from the International Monetary Fund and other international lenders to pre-empt a banking crisis and a shortage of credit in the region's economies as western banks pare assets.
http://jlne.ws/yJ2Emu
Speech: CFTC Gensler testifies to Congress on Volker rule
Futures Magazine
http://jlne.ws/xmc69i
Volcker Rule Regulators Resist Lawmakers Calls to Scrap Proposal
Bloomberg
U.S. regulators, responding to criticism of their Volcker rule proposal, told lawmakers they will refine plans for the ban on banks' proprietary trading while resisting calls to scrap the measure and start over.
http://jlne.ws/yTUH5A
Fed seeks to allay Volcker rule concerns
By Shahien Nasiripour in Washington - Financial Times
The US Federal Reserve has sought to allay lawmakers’ fears of mass job losses and reduced market liquidity as a result of a proposed rule aimed at banning banks from trading for their own account.
http://jlne.ws/yNPKuj
Fed: Volcker rule complicates market liquidity
Market Watch
WASHINGTON (MarketWatch) -A top Federal Reserve official on Wednesday acknowledged that the distinction between prohibited profit-making speculative proprietary trading and permissible market-making, liquidity-injecting trades can be difficult to draw, all of which complicates the implementation of the Volcker Rule.
http://jlne.ws/Ah29eU
Fed Transcripts Underscore Government's Shortcomings
Forbes
Despite all its expertise and resources, the Fed failed to foresee the housing collapse. It is silly to believe that government can protect us from future systemic risk.
http://jlne.ws/AcDxL9
Fed pushes for government action to help revive housing
The Washington Times
Top Federal Reserve officials are prodding the White House and Congress to take more aggressive action to stop the free-fall in the housing market, warning that the U.S. economy will remain sluggish and vulnerable and will not fully recover until housing returns to better health.
http://jlne.ws/yQEwqQ
Fed Officials Open to Additional Easing as They Monitor Risks to Economy
Bloomberg via Yahoo! Finance
Federal Reserve officials are staying open to further monetary easing this year as they monitor risks that threaten to move the economy further away from their mandate for stable prices and full employment.
http://jlne.ws/wIWgEC
The Case for Quantitative Easing
The Motley Fool
It seems increasingly likely that the Fed will initiate another round of quantitative easing. Is this the right thing to do?
http://jlne.ws/yjB3Tn
Computer programmer from Federal Reserve Bank of New York facing charges he stole computer code valued at near $10 mln
CBS News
(CBS/AP/Reuters) NEW YORK - A computer programmer who worked at the Federal Reserve Bank of New York is facing charges he stole computer code valued at nearly $10 million and used for his own computer training business.
http://jlne.ws/AugYsP
IMF requests $500bn for bail-out loans
By Alan Beattie in Washington and Peter Spiegel in Brussels - Financial Times
The International Monetary Fund has asked its member countries for an extra $500bn in firepower to combat the world’s spreading fiscal emergencies, which it estimates will generate demand for bail-out loans totalling $1tn over the next two years.
http://jlne.ws/A5x1sI
Franc Test Looms for Jordan in Race to Replace Hildebrand
BusinessWeek
Thomas Jordan's first test as interim president of Switzerland's central bank will be to prove he can defend the four-month old cap on the franc as well as its chief architect did.
http://jlne.ws/wiqyL2
New Chief of S&P Defends Its Moves
BY JEANNETTE NEUMANN - WSJ
Doug Peterson, the new president of Standard & Poor's Ratings Services, defended the firm's downgrades of U.S. and European sovereign bonds, rebuffing criticism the ratings company had become more aggressive following the financial crisis.
http://jlne.ws/AyAWQs
US custodian banks hit by shift into cash
By Telis Demos and Dan McCrum in New York - Financial Times
Global custodian banks have adopted a defensive position as fund managers and large institutions shift into cash and ultra-safe assets, putting pressure on the banks’ ability to generate income.
http://jlne.ws/yYrdbh
World Bank warns on risk of global recession
WKBT La Crosse
The World Bank Wednesday slashed its 2012 growth forecasts for both emerging and developing economies from its estimates of only six months ago, and warned the world is on the cusp of a new global recession that could be as bad as the crisis four years ago.
http://jlne.ws/xkYuiS
Obama Said to Consider Nominating Summers as World Bank Chief
BusinessWeek
President Barack Obama may put his mark on the World Bank by nominating Lawrence Summers, his former National Economic Council director, to lead the bank when Robert Zoellick's term expires later this year, according to two people familiar with the matter.
http://jlne.ws/xXTAA7
In MF Global, JPMorgan again at center of a financial failure
By Carrick Mollenkamp, Lauren Tara LaCapra and Matthew Goldstein - Reuters
(Reuters) - In late October, as MF Global Holdings Ltd teetered toward bankruptcy, Jon Corzine phoned his close-knit circle of Wall Street friends for help. His firm, facing demands from customers and other firms for cash, needed to sell billions of dollars in securities to raise the money. As the week progressed, MF Global executives came to believe that JPMorgan Chase & Co., one of MF Global's primary bankers and a middleman moving that cash, was dragging its feet in forwarding the funds.
http://jlne.ws/yd2Tvg
MF Global Commodity Customers Must Be Paid First, CFTC Says
By Linda Sandler
Jan. 18 (Bloomberg) -- MF Global Inc. commodity customers must be paid before all other claimants, including the bankrupt parent company, according to the Commodity Futures Trading Commission. Court papers by the trustee for MF Global Holdings Ltd., Louis Freeh, contain “errors and misstatements of law” in arguing that commodity laws, which require that customers be “made whole” first, don’t apply to brokerage liquidations, the regulator said in a court filing today.
http://jlne.ws/AyGBGM
New Laws Possible In Wake of MF Global's Demise
By BEN PROTESS - NY Times
Lawmakers are considering new policies aimed at preventing a repeat of the MF Global debacle, in which the futures brokerage firm misused an estimated $1.2 billion in customer money as it collapsed.
http://jlne.ws/yWcatt
Foreign holdings of US Treasurys hits record high
Washington Examiner
MARTIN CRUTSINGER AP Economics Writer WASHINGTON Foreign demand for U.S. Treasury debt rose in November to the highest level ever, even as China trimmed its purchases for a second straight month. The Treasury Department says total foreign holdings increased 1.7 percent in November to $4.75 trillion.
http://jlne.ws/yjpfzU
U.S TIC Flows
International Business Times
The U.S Department of the Treasury released this morning the latest estimates of its Treasury International Capital Flows, where Net Long-term TIC flows increased to $48.6 billion in November, from a revised -$39.6 Billion in October.
http://jlne.ws/zHArIx
**CN: This represented a miss of median estimates of $50.0 for November.
Fannie Fees Fail to Offset Record Low Lending Rates: Mortgages
BusinessWeek
Ben S. Bernanke's success in pushing mortgage rates to record lows is enabling Congress to fund last month's payroll tax cut extension by siphoning money from Fannie Mae and Freddie Mac, while homebuyers still benefit from the cheapest borrowing costs in history.
http://jlne.ws/wM05Sp
Exchange-Traded Junk Funds Roil Bond Market as Retirees Jump In
BusinessWeek
Funds that give everyone from retirees to institutional money managers easier access to junk bonds are fueling the biggest price swings in more than two years after their buying power surged 10-fold.
http://jlne.ws/xv9cAP
Events
Fixed Income Markets 2012
January 24, 2012
Tabb Forum Looks At Changes Ahead And Staying Ahead In Fixed Incomes
http://jlne.ws/snQ3VO
RiskVal Demonstrates Live Eris Exchange Markets
January 25 - Online
Thirty minute webinar
http://jlne.ws/wXufot
Treasury Futures: Using International Fixed-Income and Money Market Spreads
January 31, 2012
The IFM Instructs On Using Fixed Income And Money Market Spreads
http://jlne.ws/u7MgUK
National Association of Home Builders' Show
February 10, 2012
Special Session With Fed's Bernanke Open To All Registered Attendees
http://jlne.ws/tEcqjW
Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO
Economic News
January 2012 Business Outlook Survey - Indicators Suggest Continued Growth - Philadelphia Fed
Results from the Business Outlook Survey suggest that regional manufacturing activity continued to expand at a moderate pace in January. All of the broad indicators remained positive this month, and firms continued to report increases in employment. Firms polled reported higher input prices this month, with a notable share of firms reporting price increases for their own manufactured goods. The survey's broad indicators of future activity improved again this month.
http://jlne.ws/zUQntU
Jobless claims near 4-year low, inflation muted
Reuters via Yahoo! Finance
The number of Americans filing for new jobless benefits dropped to a near four-year low last week, pointing to some building up of momentum in the labor market and the economy.
http://jlne.ws/wu8sB3
U.S. Housing Starts Dropped More Than Forecast in December
BusinessWeek
Builders began work on fewer houses than forecast in December, capping the worst year on record for single-family home construction and signaling recovery in the industry will take time.
http://jlne.ws/x6xynV
Exchanges, Clearing Houses & MTFs
ERIS EXCHANGE TO DISTRIBUTE MARKET DATA THROUGH CME GROUP
CHICAGO, January 19, 2012 – Eris Exchange, a US-based futures exchange announced today they have reached an agreement to distribute market data from the Eris SwapBookTM electronic trading platform through the CME Market Data Platform, commencing in March 2012. Distributing market data for its innovative Interest Rate Swap Futures contract through CME Group provides Eris Exchange access to hundreds of thousands of subscribers in 150 countries via CME Group’s eleven global telecommunications hubs.
http://jlne.ws/wKxHn1
NYSE Euronext Named Workplace Leader in Personal Finance Education
Business Wire
NEW YORK--(BUSINESS WIRE)--NYSE Euronext (NYX) is one of nine U.S. organizations that have been honored with the first award for excellence in workplace financial education, which recognizes innovative programs that teach employees how to make better personal financial decisions.
http://jlne.ws/ADbKf6
Firms & Banks
TeraExchange Appoints Former Fannie/Freddie Regulator Martha "Marti" Tirinnanzi to Head Washington, D.C. Office
SUMMIT, N.J. & WASHINGTON, Jan. 19, 2012 -- /PRNewswire/ -- TeraExchange (www.TeraExchange.com), an independent, transparent marketplace for swaps and other OTC cleared derivatives scheduled to launch in Q1, appointed Marti Tirinnanzi as Senior Vice President of Business Development and head of the firm's Washington, D.C. office.
http://jlne.ws/zdqkxa
RBS Says Former Singapore Trader Sought to Manipulate Libor
BusinessWeek
Royal Bank of Scotland Group Plc said it did nothing wrong when it fired a former Singapore trader because he sought to manipulate London interbank offered rates to boost his own profits.
http://jlne.ws/xfbR2o
Bank of America reverses loss and earns $2 billion
Associated Press/USA Today
Bank of America made $2 billion in the last three months of last year, reversing a loss from a year earlier. It offset legal expenses over mortgages and losses in its investment banking business by selling debt and its stake in a Chinese bank.
http://jlne.ws/wXMHL4
Regulators
Federal Reserve Bank appoints Barrera
San Antonio Express-News
Federal Reserve Bank appoints Barrera express-news Copyright 2012 express-news. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Published 10:46 a.m., Tuesday, January 10, 2012 Accion Texas Inc. President and CEO Janie Barrera has been appointed to the board of the Federal Reserve Bank of Dallas' San Antonio branch.
http://jlne.ws/wIK5IR
Federal Reserve Board Names Jon Faust Special Adviser
Nasdaq
http://jlne.ws/w4Nz5O
Global News
France to Sell Up to EU9.5 Billion in Debt After Losing AAA
BusinessWeek
France will seek to raise as much as 9.5 billion euros ($12.8 billion) today in its first sale of medium and long-term debt after it lost the top credit rating at Standard & Poor's.
http://jlne.ws/Aitf3p
Chinese Officials Said to Weigh Easing Constraints on Banks
BusinessWeek
China is allowing the nation's five biggest banks to increase first-quarter lending and weighing a plan to relax capital requirements as economic growth cools.
http://jlne.ws/AoncRf
Brazil Cuts Interest Rate to 10.5% to Shield Economy From European Crisis
Bloomberg
Brazil's central bank cut borrowing costs by half a point for a fourth straight policy meeting, continuing a cycle of monetary easing it began in August to shield the world's second-largest emerging market from the European debt crisis.
http://jlne.ws/yT6AUL
Australia Jobs Fall in December, Zero Growth for 2011
CNBC
Australian employment suffered a surprise fall of 29,300 jobs in December for a subdued end to a year that saw zero jobs growth, adding to the case for further cuts in interest rates and knocking the local dollar lower.
http://jlne.ws/y64qdU
Australia Home-Loan Approvals Gain in November on Rate Cut
BusinessWeek
Australian home-loan approvals rose in November for an eighth straight month as buyers responded to the central bank's first interest-rate reduction in two years.
http://jlne.ws/A1qGhd
Bank of Korea Chief Kim Says Rates Still 'Accommodative'
BusinessWeek
Bank of Korea Governor Kim Choong Soo said that South Korea's interest rates are still below policy makers' desired level and that discrepancy cannot be left for long.
http://jlne.ws/AgtepK
Disclaimer: The John Lothian, Environmental Markets, JLN Metals, JLN Managed Futures, JLN Interest Rates, JLN Options and JLN FX newsletters and blogs and MarketsWiki are products of John J. Lothian & Company, Inc. The opinions expressed in these publications are strictly those of their respective editors. They are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Security futures are not suitable for all customers.
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