First Impressions

Data Dive: CFTC’s O’Malia says swaps analytics need work
JohnLothianNews.com

The CFTC is mandated to help police the futures arena and its much bigger relative, the swapsmarket. Collecting and monitoring data on the swaps market has been a vexing problem for the agency, but CFTC Commissioner Scott O’Malia said it will solve it.

“We have four different trade repositories, all of them accepting different data,” he said. “All of them have a different data architecture. So that means aggregating it is much difficult.”

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Quote of the Day

“We have this term called coordinated complacency to describe the world’s central banks right now,” Tepper said yesterday at the SkyBridge Alternatives Conference in Las Vegas. “The market is kind of dangerous in a way.”

David Tepper of Appaloosa Management in Bloomberg’s article “Tepper Says He’s Nervous About Markets as Fed Complacent.”

Lead Stories

BlackRock signals bond trading shake-up
Michael Mackenzie in New York – FT.com
BlackRock, the world’s largest asset manager, is teaming up with electronic trading hub Tradeweb in a shake-up for US bond and derivatives markets, supported by Wall Street banks.
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**JK – Very interesting news, especially in the wake of its deal with MarketAccess last year.

Challenges to Abenomics
Bluford Putnam and Samantha Azzarello – CME Group
A spotlight shines very brightly on Japan at the moment – and especially on Prime Minister Abe – not unexpected of course when an economic policy bears your name.
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**JK – More insights from Mr. Putnam and Ms. Azzarello.

NASDAQ OMX Launches SMARTS For Global FX Surveillance
The NASDAQ OMX Group, Inc., the world’s leading provider of market technology, today announced the launch of its SMARTS FX Trade Surveillance for global foreign exchange trading.
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**JK – A well-timed launch.

U.S. Judge Approves Sale of Ireland’s Soured-Loan Portfolios
WSJ.com
A U.S. bankruptcy judge signed off on the sale of some 15 billion euros ($20.6 billion) of soured loans on the books of what was once one of Ireland’s largest banks as the country digs out from the wreckage of its collapsed property market.
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JK – 15 billion euros is a lot of cabbage (and corned beef).

Interest Rates Sink Globally in Expectation of Stimulus
WSJ.com
Global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world’s largest economies out of their malaise.
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Loosening Of China Outbound Rules Still Raises Questions
Ned Levin and Prudence Ho – MoneyBeat – WSJ
Yuan band widening! Free trade zones! State-owned enterprise listings! While headlines point to a season of economic liberalization in China, every innovation seems to carry its share of caveats and unanswered questions.
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BlackRock’s Linker Demand Looks Past Europe’s Subdued Inflation
Eshe Nelson – Bloomberg
Italy’s inflation-linked government bonds are outperforming conventional securities by the most in three years as investors disregard subdued increases in consumer prices in their hunt for value in euro-region debt markets.
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**JK – Reaching for yield.

JPMorgan Leads U.S. Bonanza in Basel III Compliant Sales
Caroline Chen – Bloomberg
Banks are issuing lower-ranked bonds and preferred securities in the U.S. at the fastest pace since the financial crisis, capitalizing on yield-starved investors to satisfy regulatory requirements.
Financial institutions including JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) are meeting demands to raise more capital by selling $31.8 billion of subordinated debt and preferred shares this year, with $22.7 billion in March and April alone, according to data compiled by Bloomberg. The pace of issuance is the fastest since 2008.
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**JK – And more reaching for yield.

Tepper Says He’s Nervous About Markets as Fed Complacent
Kelly Bit, Saijel Kishan and Joshua Fineman – Bloomberg
David Tepper, founder of $20 billion hedge-fund firm Appaloosa Management LP, said he’s nervous about markets as the U.S. economy isn’t growing fast enough amid complacency by the Federal Reserve.
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The Boring (for Now) Market
MoneyBeat – WSJ
Boredom is anathema to a reporter, to be perfectly honest. We want action, and intrigue, and readers on the edge of their seats, wondering what’s going to happen next. That’s what sells papers, as they used to say. But we’ve got to just face the fact that right now, the market is simply boring.
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Why bond traders should watch World Cup
Ralph Atkins in London – FT.com
The football World Cup will provide a welcome distraction for financial markets if trading is listless when it kicks off in Brazil in just four weeks. At least the 32-nation competition will see real, fast-moving action. There is another good reason for watching: it could prove more insightful for bond dealers than imagined.
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Central Banks

Job market debate rages at Fed, likely keeping rates on hold
Reuters
Economists within the Federal Reserve are struggling to size up the strength of the U.S. labor market but can’t even agree what yardstick to use.
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Euro-Zone Economy Shows Weaker-Than-Expected Expansion
WSJ.com
The euro zone’s economy expanded at a surprisingly weak pace last quarter despite a strong recovery in Germany, as other key countries in the region stalled or contracted.
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Bank of England Looks Into the Future
Alen Mattich – MoneyBeat – WSJ
The Bank of England may be winning the game of expectations management to judge by the market reaction to its latest quarterly inflation report.
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ECB Ready to Act Fast Against Stagnation, Low Inflation
WSJ.com
The European Central Bank is ready to loosen monetary policy further to prevent the euro zone from succumbing to an extended period of low inflation, its vice president said on Thursday.
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Euro-Area Growth Missing Forecast Keeps Pressure on ECB
Stefan Riecher – Bloomberg
The euro-area recovery failed to gather momentum last quarter, as France unexpectedly stalled and economies from Italy to the Netherlands shrank.
Growth of just 0.2 percent for the currency bloc, half as much as economists had forecast, adds pressure on the European Central Bank to deliver stimulus measures next month in its battle against weak inflation and anemic output. While German expansion doubled to 0.8 percent, that wasn’t enough to offset renewed weakness across the region, including a 0.7 percent drop in Portugal.
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RBA warns on easing lending standards
Elizabeth Redman | Business Spectator
MAKING it easier for home buyers to borrow more than they can reasonably service does “nobody a favour”, the Reserve Bank of Australia has warned.
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Russia Still Facing Hostile Bond Market After Breaking Drought
Vladimir Kuznetsov and Natasha Doff – Bloomberg
Russia’s return to the bond market after a six-week absence is unlikely to herald large-scale issuance even as the Ukraine crisis eases.
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Currencies

On the complexities of introducing ScotlandCoin
Izabella Kaminska | FT Alphaville
Alternative currencies are being issued left, right and centre these days. So what’s stopping Scotland issuing its own currency? Really? (Did you know there is a SpainCoin?) Truth is, Scottish institutions already issue their own currency.
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The downside to the Loonie’s new-found popularity
Delphine Strauss | FT Alphaville
Is reserve currency status really the “exorbitant privilege” it is so often called? To policymakers at the Bank of Canada – whose currency has only recently begun to appear in official reserves – the evidence appears mixed. Research published in the BoC’s Spring Review estimates that central banks’ holdings of securities denominated in Canadian dollars may total some $200bn.
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Pound Bulls Unfazed by Carney’s Tone Say Rally Isn’t Over
Neal Armstrong and David Goodman – Bloomberg
Pound bulls still have reason to be optimistic following the Bank of England’s attempts to temper interest-rate expectations, according to firms from Bank of New York Mellon to Mizuho Bank Ltd.
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Bitcoin to Be Treated As ‘Value-Added Electronic Record’ in Japan
IBT
Japan’s government will redesignate bitcoin as a form of “value-added electronic record” similar to credit card transactions, as part of a series of measures to monitor illegal deals made using the digital currency.
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Indexes & Index Products

ETF Manager F-Squared Investments Says Past Returns ‘Clearly Overstated’ In Marketing Materials
WSJ.com
F-Squared Investments Inc., a fast-growing manager of portfolios built around exchange-traded funds, said it had “clearly overstated” the past performance of its main strategy in marketing materials and misrepresented that its strategy tracked real money, according to a letter from F-Squared to clients.
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Hedge-Fund Heavy Bets on More Volatility Ahead
MoneyBeat – WSJ
John Bader, chairman and chief investment officer of Halcyon Asset Management LLC, said he sees the Chicago Board Options Exchange Volatility Index, known as the market’s fear gauge, moving higher in the weeks to come as geopolitical concerns spook traders.
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MSCI reclassifies stock indexes, adds Twitter to world index
Reuters
Equity index provider MSCI on Wednesday reclassified equities across a broad spectrum of markets as part of its semi-annual review, including the addition of Twitter to its all world index.
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Gold

Diving gold prices may not hit banks’ asset quality
Business Standard
The dip in the price of the yellow metal is not keeping bankers worried this time. Cautious lending, continuous monitoring and a lower loan-to-value (LTV) ratio appear to have made bankers more confident in managing the stress on their gold loan portfolio, despite the price volatility.
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Platinum hits 2-month high as strikers block SAfrican mines | Reuters
Platinum prices hit two-month highs on Wednesday as about 1,000 strikers gathered outside a platinum mine in South Africa to stop workers from breaking the longest and costliest bout of industrial action in the sector’s history.
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Why gold could struggle if CPI heats up
Patti Domm – CNBC
There’s nothing like a little inflation talk to bring out the gold bugs.
But analysts say even the prospect of slightly higher-than-expected U.S. inflation readings after Wednesday’s higher-than-expected April PPI won’t be much of a catalyst for prices, and could actually hold back gains.
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This Key Metric Could Be Holding Gold Prices in Check
James Catlin – The Motley Fool
When discussing inflation, money supply is often the focus. But there are actually two distinct monetary components that can influence inflation: changes in money supply, and the velocity of money, which is the average rate at which money changes hands in a given time period.
While the media has focused on the former, the latter has been largely ignored. This incomplete picture of monetary effects has left the public scratching their heads as to why inflation predicted at the hands of money growth has failed to materialize.
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