First Impressions

Exchange CEO Series – Singaporean shift: SGX’s Magnus Böcker says region is primed for growth
JohnLothianNews.com
SGX CEO Magnus Böcker has seen tremendous growth at his exchange over the past year and the Singapore market is poised to expand further in the coming year.

Bocker, who sat down with JLN editor-in-chief Jim Kharouf at the FIA Boca Conference this month, said SGX has increased its derivatives volume 40 percent in 2013 and is exploring a host of new partnerships and initiating new product launches.

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Quote of the Day

You don’t have enough bonds relative to demand for income.The supply-and-demand dynamic is quite profound today.

Rick Rieder, head of bond investing at BlackRock, as quoted in the WSJ article “Parsing Interest Rates’ Surprise Decline”

Lead Stories

Biggest ETF Flow From U.S. Debt Since ’10 on Growth Optimism
Cordell Eddings and Jessica Summers – Bloomberg
Investors of exchange-traded funds that buy U.S. government debt are signaling confidence that economic growth is taking root.
After pouring into the ETFs to start the year, investors pulled $10.3 billion in March, the biggest exodus since December 2010, data compiled by Bloomberg show.
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***DA: Funny how the same tea leaves can be read in different ways. Read on:

Parsing Interest Rates’ Surprise Decline
E.S. Browning – The Wall Street Journal
Something odd happened this year when the Federal Reserve started easing back on the policies that keep interest rates low. Interest rates moved lower.
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China Rate Swap Completes Biggest Quarterly Decline in Two Years
Bloomberg
China’s one-year interest-rate swaps declined by the most in more than two years this quarter on signs of a slowdown in the world’s second-largest economy.
An official Purchasing Managers’ Index is forecast to show manufacturing expanded in March at the slowest pace since June, according to the median estimate in a Bloomberg survey before data tomorrow.
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‘Lehman moment’ in China? Not quite, says BlackRock
CNBC
It is wrong to describe a recent corporate debt default in China as a ‘Lehman’ or ‘Bear Stearns’ moment, the Asia Pacific chairman for the world’s largest asset manager told CNBC on Monday.
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***DA: It is not a “moment” at all – China’s deceleration is happening in slow motion.

Asia Dollar Bond Sales Drop to 2010 Low on China Default Concern
Tanya Angerer – Bloomberg
Sales of dollar-denominated notes in Asia excluding Japan slid to the least this month for any March since 2010, as the first default in China’s onshore bond market fueled concern nonpayments may spread.
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***DA: Nonperforming loans are nothing new in China. It is the transparency of it all that is new.

Abe Bliss Broken as Foreigners Flee Topix in Biggest Drop
Yoshiaki Nohara, Yuko Takeo and Toshiro Hasegawa – Bloomberg
In just one quarter, the developed world’s biggest stock rally has given way to its worst slump. Japan’s Topix index, up 51 percent last year, fell 8.9 percent this quarter through March 28, almost twice as much as the next-worst market, Hong Kong.
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***DA: Pretty decent run if you ask me.

British Regulator to Increase Scrutiny of Controls on Benchmark Rates
NYTimes.com
The Financial Conduct Authority says it plans to review how investment banks control the flow of internal information on benchmark rates, potential conflicts of interests within financial institutions and internal controls on traders in relation to global benchmarks.
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Deutsche Bank Said to Mull Forgoing IPO Amid China Probes
Bloomberg
By Cathy Chan
Deutsche Bank AG is weighing whether to refrain from working on China General Nuclear Power Group’s initial public offering amid a probe into hiring practices in Asia, three people with knowledge of the matter said.
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High-Speed Traders Rip Investors Off, Michael Lewis Says
Nick Baker and Sam Mamudi – Bloomberg
The U.S. stock market is rigged when high-frequency traders with advanced computers make tens of billions of dollars by jumping in front of investors, according to author Michael Lewis, who spent the past year researching the topic for his new book “Flash Boys.”
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***DA: To paraphrase Otter, “They can’t do that to our investors; only we can do that to our investors.”

Central Banks

Europe’s central bankers talk too much and act too little
Wolfgang Münchau – Financial Times
It is five months since the sharp and persistent drop in eurozone inflation, and the gnomes in the European Central Bank’s governing council are talking and talking and talking. They say things such as: there are no technical or legal obstacles to negative interest rates or quantitative easing. But they do not act. Sometimes there is a mercifully quiet day when only one of them opens their mouth. But last week we had five speeches or interviews on a single day. They sounded dovish. Or did they?
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***DA: As a trader who grew up with announcements delivered in Greenspanese, my message to Europe is “welcome to my world.”

BoE’s Bailey says no let-up over bank capital levels
Huw Jones – Reuters
Banks still need to be persuaded that well-capitalised lenders are important to economic growth, Bank of England Deputy Governor Andrew Bailey said on Monday, but Britain’s regulators will keep up the pressure to boost capital levels.
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Investors yield to bonds’ charms
Shelly K. Schwartz – CNBC
It seems bond investors are no better at predicting market direction than their stock-picking counterparts. Anticipating a sudden spike in interest rates, investors began dumping their fixed-income funds last year after the U.S. Federal Reserve announced it would begin tapering its economic stimulus program this January. But so far, at least, rates remain near record lows.
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Draghi Sifts Data on Slack as Inflation Cements Rate Vow
Jana Randow and Emma Charlton – Bloomberg
Mario Draghi can study an array of data this week to help him track his latest policy metric: economic slack.
Inflation figures today showed prices rising at the slowest pace in more than four years.
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Banks Seen Failing ECB Test May Need Fast Action: Nouy
Jeff Black and Jim Brunsden – Bloomberg
Euro-area lenders shown to have serious shortfalls in capital may be told by domestic regulators to increase equity even before the European Central Bank’s Comprehensive Assessment is finished, ECB Supervisory Board Chair Daniele Nouy said.
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Why The Fed Rejected Citigroup’s Capital Plan
Forbes
The biggest surprise in the Federal Reserve’s Comprehensive Capital Analysis and Review results announcement this Wednesday, March 26, was the regulator’s decision to reject Citigroup’s capital plan for 2014. As a consequence, the globally diversified banking group earned the ignominy of being the only bank holding company to have its capital plan rejected on two of the four occasions the tests have been conducted.
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The Fed is Beginning to Freak Out About Bubbles
Graham Summers – The Market Oracle
As we noted earlier this week, the Fed is growing increasingly concerned of a bubble forming in the financial markets. Previously we noted that Janet Yellen was concerned about another bubble forming.
Now St Louis Fed President James Bullard is saying the same thing.
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Fed’s George Wants End to Zero Rates, Does Not Say When
MoneyNews
A top Federal Reserve official who has often warned of the risks of keeping U.S. interest rates too low for too long said she wants to see how winding down the Fed’s massive bond-buying stimulus goes before setting out any path for rate hikes.
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Currencies

Swiss Antitrust Regulator Probes Eight Banks Over Alleged FX-Rigging
Elena Logutenkova and Jeffrey Voegeli – Bloomberg
The Swiss Competition Commission said it’s investigating UBS AG, Credit Suisse Group AG and six more banks as the probe into the alleged manipulation of foreign-exchange rates deepens. The authorities are examining whether firms colluded to fix foreign-exchange rates, the Bern-based watchdog, also known as Weko, said in a statement today.
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Pound Set for Longest Quarterly-Gain Run Since 2007
Anchalee Worrachate – Bloomberg
The pound is set for a fourth quarter of gains versus the dollar, the longest streak in more than six years, before reports this week that analysts forecast will add to evidence the recovery is strengthening.
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Diverging Fortunes Hit Asian Currencies
Anjani Trivedi – The Wall Street Journal
The fortunes of Asia’s currencies diverged in the past quarter as China’s yuan fell the furthest since a U.S. dollar peg was scrapped in 2005, while India’s rupee and Indonesia’s rupiah registered their best gains in years.
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Indexes & Index Products

U.S. Stock-Index Futures Climb Before Yellen’s Speech
Namitha Jagadeesh – Bloomberg
U.S. stock-index futures climbed, with the Standard & Poor’s 500 Index poised for a fifth straight quarterly gain, as investors awaited a speech by Federal Reserve Chair Janet Yellen.
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Gold

Gold Trades Near Lowest in Six Weeks on Stimulus Outlook
Nicholas Larkin – Bloomberg
Gold traded near a six-week low in New York as investors weighed the case for the Federal Reserve to continue reducing stimulus against speculation the first monthly decline this year will increase physical demand.
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Gold futures set for quarterly gain of nearly 8%
Myra P. Saefong and Shawn Langlois – MarketWatch
Gold futures wavered on Monday in an attempt to rebound from the prior week’s decline as a slew of economic reports were expected to make for some volatile sessions throughout the week.
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Gold Sales by Japanese Retailer Jump Before Tax Change
Jae Hur and Ichiro Suzuki – Bloomberg
Gold sales by Tanaka Kikinzoku Jewelry K.K., Japan’s biggest bullion retailer, increased fivefold in March as investors accelerated purchases before the nation’s consumption tax rises tomorrow.
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Can short-term gold traders start buying?
Mark Hulbert – MarketWatch
While bullion’s intermediate-term prospects may very well be better than they are for just the next few weeks — and may even have improved recently as gold dropped $100 an ounce to below the psychologically important $1300 level — its short-term prospects don’t appear very attractive.
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