February 2, 2012
JLN Interest Rates - http://www.jlninterestrates.com
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Commodity Futures Trading Commission and Securities and Exchange Commission Release Joint Report to Congress on International Swap Regulation
February 2, 2012
Press Release
Washington, DC – The Commodity Futures Trading Commission and the Securities and Exchange Commission delivered to Congress a report on international swap regulation, as required by Section 719(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provision requires the Commissions to report on how swaps are regulated in the United States, Asia, and Europe and to identify areas of regulation that are similar and other areas of regulation that could be harmonized.
See the full CFTC and SEC report here.
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MARKETAXESS RELEASES YEAR-END REVIEW OF 2011 U.S. CORPORATE BOND MARKET
Press Release
NEW YORK and LONDON – February 2, 2012, MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today released its first year-end review of trading activity in the U.S. corporate bond market for 2011. The analysis was conducted by MarketAxess Research.
The analysis is based on FINRA TRACE and other publicly-disseminated data, as well as proprietary trading data from MarketAxess from January through December 2011. MarketAxess Research uses its own proprietary approach to analyze price movements and liquidity trends.
Rick McVey, Chairman and CEO of MarketAxess, said: “Following a period of generally favorable conditions in the credit markets in 2010 and early 2011, the second half of 2011 saw headwinds develop, with widening credit spreads and increased credit spread volatility. Among other factors the ongoing dislocation in the European markets has increased market risk, one indicator of which is the reduction in primary dealer balance sheets for corporate bond market-making. These declined, most notably in the second half of 2011, finishing the year below the credit crisis lows and over 80% below pre-crisis levels. Declining liquidity and challenging market conditions were also reflected in decreasing average trade size throughout the year, evidence that as the year progressed investors found greater success in executing smaller trades versus large blocks.”
2011 Notable Trends:
Overall High Grade TRACE volumes increased slightly to 2.92 trillion in 2011, up from 2.89 trillion in 2010.
However, TRACE volumes decreased 6.6% in the fourth quarter to 617.0bn, compared to 660.9bn in the fourth quarter of 2010.
Primary Dealer corporate bond inventories were down 45.9% for the year and currently stand at $46.7 billion, according to the Federal Reserve Bank of New York. This is 21.9% below the credit-crisis low of $59.8bn.
Various measures of market liquidity declined throughout the year. Turnover, defined as the total amount traded divided by the total amount outstanding for the bonds that traded, declined 2.8 percentage points to 16.8% in the fourth quarter, compared to 19.6% in the fourth quarter of 2010.
According to MarketAxess estimates, bid-ask spreads were flat at around 10 basis points (bp) for the first half of the year but widened out significantly beginning in August, ending the year at around 20bp.
Block size trades (greater than 5 million in size) decreased 4.0 percentage points to 36.7% of overall TRACE volumes in the fourth quarter of 2011, compared to 40.7% in the fourth quarter of 2010.
Consistent with a more challenging trading environment, as well as the trend in annual numbers released by FINRA, counterparty diversification on the MarketAxess electronic trading platform increased for institutional investor clients. The percentage of volume executed by ‘new’ dealers on the MarketAxess trading system (defined as dealers who have joined MarketAxess since 2008) accounted for almost 21.4% of volume on the system in Q4 2011, compared to 17.5% in Q4 2010.
The cost savings for MarketAxess clients trading electronically increased 22.0% to 6.7 bps in the fourth quarter, compared to 5.5 bps in the fourth quarter of 2010. We calculate transaction cost savings by comparing trade prices on MarketAxess with the weighted average spread of comparable trades in the same bond reported to TRACE.
Total global trading volume on MarketAxess in 2011 increased 31% to $525bn, compared to $402bn for 2010.
High-grade volumes on MarketAxess in 2011 increased 33% for the full year, compared to a year ago. MarketAxess’ estimated high-grade market share increased to 11.1% in 2011, compared to an estimated 8.4% in 2010.
See the entire MarketAxess release here.
-- Christine Nielsen
Lead Stories
Fed will protect U.S. from Europe fallout: Bernanke
Reuters via Yahoo! News
WASHINGTON (Reuters) - Europe's financial crisis still threatens the U.S. recovery, and the Federal Reserve will do everything it can to prevent it from damaging the economy, Fed Chairman Ben Bernanke said on Thursday. Bernanke told Congress he was seeing signs that some of the uncertainty dampening U.S. business investment, including European banking woes, might be waning.
http://jlne.ws/xzHBlf
Sustainable budget should be top US priority: Fed
AFP via Yahoo! News
The US Federal Reserve chairman Ben Bernanke told Congress Thursday that achieving a sustainable budget and debt balance should be a "top priority" for the government.
http://jlne.ws/yGqRwg
Federal Reserve says full recovery could take 3 more years
York Daily Record
WASHINGTON-The Federal Reserve signaled Wednesday that a full economic recovery could take nearly three more years, and it went further than ever to assure consumers and businesses that they will be able to borrow cheaply well into the future.
http://jlne.ws/zxHAm7
Trying to read between the lines of the Fed rate message
Reuters via Yahoo! News
NEW YORK (Reuters) - For a central bank that wants to make transparency its hallmark, the Federal Reserve's new forecast of nearly three more years of super-low rates has left room for a few doubts.
http://jlne.ws/yoJSoc
Dollar Tumbles on Fed Interest Rate Pledge, Greek Debt Talks
BusinessWeek
The dollar fell against all its most-traded counterparts after the Federal Reserve pledged to keep interest rates low for at least three years, spurring investors to seek higher-yielding assets.
http://jlne.ws/zS1UOz
Economic forecast is good; Federal Reserve economic advisor provides outlook to chamber
Kutztown Area Patriot
The economic forecast for 2012 is positive. "The economy is performing better than a year ago," Luke Tilley, Ph.D., Regional Economic Advisor, Federal Reserve Bank of Philadelphia, told Northeast Berks Chamber of Commerce members recently. "Things have been looking up.
http://jlne.ws/wo3fsd
Federal Reserve System evolving
Jacksonville Daily Record
While Ron Paul was trying to win votes Tuesday in Florida with his calls to "end the Fed," one Federal Reserve official was explaining to a group of Jacksonville business people what the Fed actually does for them.
http://jlne.ws/yU66vR
Small biz loan demand up, Federal Reserve says
CNN
A growing portion of the nation's banks saw a spike in demand for loans to smaller firms late last year, according to the latest Federal Reserve figures.
http://jlne.ws/xlH1kb
Boston Federal Reserve elects 3 new members
Boston Globe
The Federal Reserve Bank of Boston announced the election of three new members to its Board of Directors and the reelection of a current member. The new members are: Peter L. Judkins, Roger S. Berkowitz, and Gary L. Gottlieb. The reelected director is Kathryn G. Underwood.
http://jlne.ws/wbtUfc
The Richest Members of the Federal Reserve
CNBC
WASHINGTON (Reuters) - It's hardly a huge surprise: those Federal Reserve officials that made careers in the financial sector are much wealthier than their colleagues, according to new disclosures on Tuesday.
http://jlne.ws/wxtVxE
**CN: This issue also noted in the JLN Metals Newsletter. Turns out the Dallas Fed's Richard Fisher owns around $1 million in gold.
Goldman Sachs Among Banks Fighting to Exempt Half of Swaps Books
BusinessWeek
More than half of the derivatives- trading business of Goldman Sachs Group Inc., Morgan Stanley and three other large banks could fall largely outside the Dodd- Frank Act if they succeed in lobbying regulators to exempt their overseas operations, government records show.
http://jlne.ws/yNbbnf
U.S. Cuts Quarterly Borrowing Estimate 18% to $444 Billion
BusinessWeek
The U.S. Treasury Department lowered its borrowing estimate for the current quarter by 18 percent to $444 billion, reflecting higher receipts and lower spending.
http://jlne.ws/yAlztf
US Treasury Mulls Floating-Rate, Negative-Yield Notes
FOX Business
The U.S. Treasury Department plans to decide this spring whether to offer floating-rate and negative-yield securities, though the agency would need additional time before it could issue these bills and notes, a senior department official said Wednesday.
http://jlne.ws/yUZ9lA
US Treasury Forcing Mortgage Principal Forgiveness
http://jlne.ws/tMNY8O
By Diana Olick, Real Estate Reporter, CNBC NEW YORK (CNBC)-- Late Friday the U.S. Treasury Department announced a major expansion of its Home Affordable Modification Program (HAMP). The three-year-old program has been largely deemed unsuccessful, as it has provided just about 750,000 borrowers with permanent loan modifications.
http://jlne.ws/zGYG85
Legg Mason Launches Fixed Income Fund of Hedge Funds
http://jlne.ws/ymiuPZ
TIPS Beating Treasuries for 4th Year Seen With Fed at Zero
BusinessWeek
Bonds that pay negative yields are turning into the hottest part of the $9.94 trillion market for U.S. Treasuries, a sign of shaken investor confidence in an economy the Federal Reserve says shows only "modest" strength.
http://jlne.ws/wqUGpm
Obama seeks to broaden reach of housing assistance
Associated Press via Yahoo! News
Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages.
http://jlne.ws/yQfi2r
Most of the missing MF Global funds found
http://jlne.ws/xLnI8h
Jon S. Corzine, former MF Global Holdings chairman and CEO, is sworn in on Capitol Hill in Washington in December prior to testifying before the Senate Agriculture Committee.
http://jlne.ws/AmOvoE
U.S. weighs 30 percent "Buffett Rule" tax on millionaires
Reuters
http://jlne.ws/yLdusb
Pimco exec says Federal Reserve's policies have "not been sufficient"
Nasdaq
Pimco Chief Executive and Chief Investor Officer Mohamed El-Erian is joining the chorus of voices warning about the Federal Reserve's recent announcement.
http://jlne.ws/xuagTa
Freddie Mac bets against American homeowners - Tue, 31 Jan 2012 PST
The Spokesman-Review
Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that payoff if homeowners stay trapped in expensive mortgages with interest rates well above current rates.
http://jlne.ws/xCU79G
Rate on 30-year mortgages falls to record low 3.87%
http://jlne.ws/wvX81X
Events
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
U.S. jobless claims fall to 367,000 in latest
Reuters via Yahoo! News
NEW YORK (Reuters) - New U.S. claims for unemployment benefits fell last week, a government report showed on Thursday, pointing to more healing in the nation's battered jobs market.
http://jlne.ws/yZ2Hbn
U.S. consumers fizzle out even as incomes rise
Reuters via Yahoo! News
WASHINGTON (Reuters) - U.S. consumer spending was flat in December as households put the largest rise in income in nine months into their savings, potentially signaling slower consumption early in 2012. It was the weakest reading on spending since June, the Commerce Department said on Monday, and it followed two tepid gains in October and November.
http://jlne.ws/wWiFB6
Exchanges, Clearing Houses & MTFs
ICE Reports Daily Futures Volume for January; $27 Trillion Cleared in CDS Globally to Date
http://jlne.ws/zLh5qt
CME Group Volume Averaged 11.6 Million Contracts per Day in January 2012, up 21 Percent from December 2011
PR Newswire via Yahoo! Finance
CHICAGO, Feb. 2, 2012 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced that January 2012 volume averaged 11.6 million contracts per day.
http://jlne.ws/yPxPGy
MF Global triggers regulatory rethink at CFTC
Reuters via Yahoo! News
WASHINGTON (Reuters) - The head of the Commodity Futures Trading Commission has ordered an extensive review of how futures brokerages are regulated, following the collapse of MF Global three months ago, a CFTC official told Reuters on Wednesday. CFTC Chairman Gary Gensler ordered the review after questions emerged about whether the CFTC or exchange-operator CME Group.
http://jlne.ws/wrAcBy
Niederauer Keeps NYSE Board Support as Deutsche Boerse Backs CEO
BusinessWeek
Duncan Niederauer and Reto Francioni retained the backing of their boards even after regulators in Brussels put an end to their year-long attempt to merge NYSE Euronext and Deutsche Boerse AG.
http://jlne.ws/AClX2n
CME Clearing to Compete in Europe as Volume Grows, CEO Says
BusinessWeek
CME Group Inc.'s European clearinghouse this month processed more than half the volume of last year's trades, as it steps up competition in the region.
http://jlne.ws/zEa2V6
CME Group To Establish Guarantee Fund; 4Q Surges On Tax-Related Adjustment
FOX Business
CME Group Inc. (CME) announced plans Thursday to beef up protections for some customers through a new $100 million fund that will back losses sustained by "family farmers and ranchers" in the event of another failure like MF Global Holdings (MFGLQ).
http://jlne.ws/z3vpZX
EU Blocks Deutsche Boerse-NYSE Euronext Merger
NPR
The EU's executive body said the combined exchange would have controlled more than 90 percent of the trading in European derivatives - complex but highly profitable financial products that allow investors to bet on changes in interest rates or the price of oil.
http://jlne.ws/zTEXZT
Firms & Banks
Credit Suisse Breaks New Ground with Streaming U.S. Treasury Trading
PR Newswire via Yahoo! Finance
NEW YORK, Jan. 31, 2012 /PRNewswire/ -- Credit Suisse is proud to introduce Credit Suisse Onyx Streaming, a new way of trading Cash U.S. Treasury securities.
http://jlne.ws/yFTDjf
Van Eck Plans Slew Of Corporate Bond ETFs
http://jlne.ws/xRJ9ZV via Yahoo! Finance
Van Eck plans six corporate bond funds that aim to serve up extra yield in a yield-starved world.
http://jlne.ws/zhd4nh
Eris forges ahead with cross-margining
http://jlne.ws/yC1Jgs
NFA Signs Agreement with MarketAxess to provide Regulatory Services to MarketAxess' Swap Execution Facility
Press Release
http://jlne.ws/zECurn
Citigroup Says Bank Will Exit Mortgage Brokerage Business
BusinessWeek
Citigroup Inc., the third-largest U.S. lender by assets, plans to stop using brokers to originate mortgages and probably will cut jobs as it exits the business while banks grapple with the fallout from the housing collapse.
http://jlne.ws/wXPb1x
RBS Sells Hoare Govett To Jefferies For Nominal Cash Sum
Dow Jones
The Royal Bank of Scotland Group PLC (RBS, RBS.LN) said Wednesday it has agreed to sell its RBS Hoare Govett corporate broking operations to U.S. investment bank Jefferies Group Inc. (JEF).
http://jlne.ws/wWbT2J
Ex-Credit Suisse CDO Chief Charged in Scheme to Boost Bonuses
BusinessWeek
Kareem Serageldin, Credit Suisse Group AG's former global head of structured credit trading, was charged in a scheme to falsify prices tied to collateralized debt obligations to meet targets and boost year-end bonuses for his $5.35 billion trading book.
http://jlne.ws/yDfdc9
Goldman Sachs Appoints Italy Chairman As Head Of Russia Business
Olga Razumovskaya, Dow Jones Newswires
MOSCOW -(Dow Jones)- Goldman Sachs Group Inc. (GS) has appointed Paolo Zannoni, chairman of its Italian investment banking business, as the head of its Russian operations, replacing two co-heads, according to a company memo seen by Dow Jones Newswires on Wednesday.
http://jlne.ws/zGARcA
JPMorgan slashes $710 million Lehman bankruptcy claim
Reuters via Yahoo! News
(Reuters) - JPMorgan Chase & Co has agreed to drop almost all of a $710 million claim against Lehman Brothers Holdings Inc's bankruptcy estate, freeing up more money to be distributed to creditors, Lehman said on Wednesday.
http://jlne.ws/wblZmH
Regulators
Plosser says he didn't back Fed's late 2014 rate pledge
http://jlne.ws/xcnQ2S
Federal Reserve Bank of Philadelphia President Charles Plosser said he didn't support the central bank's decision last month to extend the time frame for low rates at least through late 2014.
http://jlne.ws/zKZWD0
U.S. Regulators Weigh Volcker Exemption for Sovereign Debt
BusinessWeek
U.S. banking regulators are exploring whether they can exempt sovereign debt from the Dodd-Frank ban on proprietary trading after foreign governments complained that the rule could raise borrowing costs and impede the flow of capital, a person familiar with the talks said.
http://jlne.ws/zHHDSB
Bank's Posen says inflation falling as forecast - radio
Reuters via Yahoo! News
LONDON (Reuters) - The Bank of England's quantitative easing policy has not been inflationary and inflation will continue to fall as forecast this year, Bank of England policymaker Adam Posen said in a radio interview on Thursday. "It is going to keep falling all year just as we forecast," Posen told BBC Radio 5 when asked if the central bank's quantitative easing was creating inflation.
http://jlne.ws/weosXs
Turkey's Monetary Policy Overburdened, Fiscal Policies Underutilized: IMF
http://jlne.ws/yMKv5Z
BOE Posen: Banks Aren't Doing Enough To Aid Economy
Dow Jones
LONDON -(Dow Jones)- Banks aren't doing enough to help the U.K. economy, and businesses need more alternatives to bank lending, Bank of England policy maker Adam Posen said Thursday.
http://jlne.ws/xyTmMx
Global News
Bank Of Italy Authorizes Lenders To Buy Back Own Bonds
FOX Business
The Bank of Italy has authorized local lenders to buy back some of their own debt securities that count as regulatory capital.
http://jlne.ws/xKuPff
Brazil Confronting Limits on 'Capacity' to Weaken Currency, Pimentel Says
Bloomberg
Brazil's government faces limits on how much it can do to prevent its currency from strengthening, Trade Minister Fernando Pimentel said.
http://jlne.ws/wh8Mtw
Specter of forced selling haunts rallying Italy debt
Reuters via Yahoo! News
LONDON (Reuters) - Italy's bonds have made sizzling returns this year but fears the country will lose its investment-grade status are putting off long-term investors whose support Rome needs to tackle a mountain of refinancing and ease worries about its debt.
http://jlne.ws/yV4Z0y
Portugal Borrowing Costs Fall At T-Bill Auction
Nasdaq
http://jlne.ws/Amk3cw
Gokarn Says Visible Drop in Indian Prices Will Trigger Rate Cut
BusinessWeek
Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut borrowing costs once it's confident inflation will keep slowing.
http://jlne.ws/xcESSP
Somaliland to pass central bank law within 3 weeks: cbank
Reuters via Yahoo! News
HARGEISA (Reuters) - Somaliland's central bank governor said on Thursday parliament is expected to pass a law within three weeks that will formerly establish a central bank, paving the way for foreign commercial banks to start operating in the self-declared country by 2013. Somaliland, a breakaway state in the northeast of Somalia, remains unrecognised internationally.
http://jlne.ws/wMNjgU
Irish Central Bank Slashes GDP Outlook
Nasdaq
http://jlne.ws/zvTYKj
SNB’s Jordan vows to continue radical intervention
http://jlne.ws/xBbmCC
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