First Impressions

TT at 20: So a CEO Walks Into a Bar
Jim Kharouf – John Lothian News

Rick Lane, the new CEO of Trading Technologies, takes a seat at the bar to talk about a notable milestone – TT’s 20th Anniversary today.

The interesting thing about Lane and the bar is that they represent a major shift for the company and perhaps the industry.

The firm was founded in 1994 in Frankfurt by Gary Kemp and later run by the enigmatic industry pioneer and legendary trader Harris Brumfield from 2003 until he handed the reins to Lane in February. It is Lane’s turn to overhaul the company and its technology, and perhaps change the way trading software and networks are developed in this industry.

(For the rest of the article, visit the JLN blog at

Quote of the Day

The trend is like Chinese water torture for bond investors. Many positioned themselves for economic growth and therefore rising bond yields this year, but since January they have been watching yields fall.

Gianluca Salford, a fixed-income strategist at JPMorgan, in the FT story “Bond market investors hurt by pain trade”

Lead Stories

Bond market investors hurt by pain trade
Elaine Moore and Michael Mackenzie –
It was not supposed to be like this. Bond investors sailed into 2014 confident a global bond market sell-off would pick up pace as economic recovery got under way. This year, they said, would be the year the world got back to normal. Instead, the world’s largest bond markets are rallying – and benchmark yields have tumbled to levels not seen since 2013.

***DA: This trend will not end until the market begins to demand higher compensation for risk. So long as central banks keep the tacit backstop in place, prepare for low rates for the rest of the decade and beyond.

China Orders Interbank Lending Curbs to Quell Shadow Banking
Bloomberg News
The Chinese government ordered lenders to curb interbank borrowing in the latest effort to check growth in the informal shadow-banking industry that threatens to undermine the nation’s financial system.

***DA: I thought shadow banking was how we keep the growth illusion alive.

More Easy Money Won’t Fix Global Deflation, Will Worsen Inequality
Michael J. Casey – MoneyBeat – WSJ
Bond yields are – once again — plunging worldwide. The reason for this revived buying among fixed-income investors is that central banks are – once again – signaling their intent to ease monetary conditions in yet another bid to kick-start sluggish economies and forestall a downward spiral in prices, or deflation.

***DA: Reaganomics II: Return of the Trickle.

Russia dumps a fifth of its US Treasuries
Michael Mackenzie in New York –
Russia has offloaded a fifth of its holdings of US Treasury debt in March at a time of heightened speculation that its assets would be frozen as part of sanctions over the crisis in Ukraine.

***DA: They apparently found a buyer.

Tepper Warns ECB Is ‘Really, Really Behind the Curve’
Rob Copeland and Gregory Zuckerman – MoneyBeat – WSJ
It didn’t take long for David Tepper to get his I-told-you-so moment. Mr. Tepper, who runs the $20-billion Appaloosa Management LP, was just yesterday telling a gathering of wealthy hedge-fund managers and investors in Las Vegas that the European Central Bank was “really, really behind the curve.” The global economy, he warned, may worsen unless the European Central Bank takes aggressive action.

***DA: I think he meant to say “despite the coming aggressive action.”

Watchful China should do as Japan says not as it did
Gillian Tett –
If there is any country where bureaucrats, bankers and economists might want to learn from Japan’s mistakes right now, it is China. It would not be the first time.

Ecuador sees strong investor demand for sovereign bonds
Ecuador’s announcement that it plans to return to global financial markets following a 2008 default has been met with strong interest by sovereign bond investors, the South American nation’s ambassador to the United States said on Thursday.

Bond Rally Scotches Boring Market, As Picture Dims
MoneyBeat – WSJ
Did we say something about a boring market? The market was indeed boring, but that didn’t last long. Equities have been sliding the past two sessions, and bond yields have been sliding, too, hitting fresh 2014 lows as the market is starting to get the message that despite everything central banks are doing to juice the economy, economic growth simply isn’t taking off.

Stewardship of the Balance Sheet, Part 2: Why Interest Rate Risk Matters
David Renz – Wall Street & Technology
With the threat of rising rates on the horizon, banks are relying on existing “technologies” to avert the danger, such as duration risk, VaR and dynamic simulation, writes David Renz of SunGard’s Ambit Treasury Management solution.

***DA: The problem with systemic risk is it cannot be hedged in the aggregate. Someone must accept it onto their books. Get me AIG on the line.

No Fear? Bond Market Says Think Again
MoneyBeat – WSJ
Central bankers have signaled their determination to jolt the world’s biggest economies out of their malaise. That has acted as a green light for the world’s bond buyers, and some market watchers predicting bond yields have more room to fall.

Central Banks

Carney’s Hottest Topic Sets BOE Thinking on Housing Curbs
Emma Charlton and Jennifer Ryan – Bloomberg
Mark Carney has given himself one month to decide on what to do about the hottest topic in the U.K. economy: the housing boom.

***DA: The best cure for high prices is high prices.

Goldman Sachs Sees Large-Scale ECB Bond Buying of Limited Effect
Eshe Nelson – Bloomberg
The European Central Bank is unlikely to begin large-scale asset purchases to stimulate inflation and such a plan would have limited effect as nations’ borrowing costs are already low, according to Goldman Sachs Group Inc. (GS)
“We doubt that a large-scale asset-purchase program would have a meaningful impact on yields,” Goldman Sachs analysts, including London-based chief European economist Huw Pill, wrote in a client report. “With rates at such low levels, it is unclear how attractive euro-area government yields will look for investors.”

Euro Five-Year Swap Rich Versus Butterfly on ECB Cut Speculation
Liz Capo McCormick and Anchalee Worrachate – Bloomberg
Five-year euro interest-rate swaps are outperforming surrounding maturities as the debt proves to be the focal point of rising investor expectations for further European Central Bank stimulus.

Bank of England Appoints Former White House Adviser
The U.K. on Thursday appointed former White House adviser Kristin Forbes to the Bank of England’s Monetary Policy Committee, the latest in a string of international appointments for Britain’s 320-year-old central bank.

Why the Bank of England Doesn’t Fear House Prices
Alen Mattich – MoneyBeat – WSJ
It seems that everybody is worried that British house prices are becoming a bubble. Except perhaps for the Bank of England.

At Last, Recovery Heads Where the Fed Wants It
The Federal Reserve finally seems to be getting what it wants. Two indicators of economic health that the Fed and its chairwoman, Janet L. Yellen, have identified as keys to a stronger recovery — modestly higher inflation and a more robust job market — finally seem to be moving in the right direction, according to new data released by the government on Thursday.

***DA: But capacity utilization ticked down to 78.6 from 79.2. That is bad news if the goal is to stoke aggregate demand.

Japan Privately Questioning ECB’s Currency Rhetoric
Takahashi Nakamichi – MoneyBeat – WSJ
Japanese officials are privately voicing their frustration at Europe’s attempts to talk the euro down against other currencies, a move some of them see as hypocritical.

***DA: Some of are not so private in our questioning.


Currency Cold War is starting to heat up
Delphine Strauss –
The last round of “currency wars” ended a year ago in an uneasy truce, when G20 finance ministers agreed not to target their exchange rates for competitive purposes. Fears of a round of competitive devaluations evaporated soon afterwards.

***DA: Starting???

Nasdaq Breaks New Ground with FX Surveillance Module
James Rundle – WatersTechnology
Nasdaq OMX has announced the release of a surveillance platform specifically designed to monitor trading activity in foreign-exchange (FX) markets, named Smarts FX Trade Surveillance.

FX volumes fall on Thomson Reuters, EBS in April
Daily spot foreign exchange trading volumes on Thomson Reuters fell to the lowest since December last month while those on rival platform EBS were down by almost half.

RBI spotted buying dollars to halt rupee gains: Traders
The Economic Times
The Reserve Bank of India was seen buying dollars via state-run banks starting around 58.70 rupee levels after the rupee earlier hit its strongest against the dollar in 11 months, three traders said.

Bitcoin Foundation hit by resignations over new director
As the most prominent trade group pushing adoption of the electronic currency Bitcoin begins its annual conference on Friday, it is being roiled by controversy.

Jeremy Allaire’s Circle Unveils First Product
Paul Vigna – MoneyBeat – WSJ
Jeremy Allaire has been playing coy with the bitcoin community for months. His Circle Internet Financial has been ranging around, raising money and making plans. But until Friday, nobody knew exactly what it would do.

BitBeat: BitReserve Vows Bitcoin-Like Costs, No Bitcoin-Like Risk
MoneyBeat – WSJ
If individuals and businesses could use a bitcoin-based infrastructure to make and receive payments denominated in dollars, euros, or yen with zero fees and without bitcoin’s notorious exchange rate risk, would they take it?

Indexes & Index Products

Europe money market funds shed assets
Christopher Thompson –
European money market funds have shed a fifth of their assets since the height of the eurozone debt crisis, as signs of economic recovery have persuaded yield-hungry investors to put their money into riskier assets.

SG offers hedge fund strategies in new LSE-listed ETN
Richard Jory –
SG is offering professional and sophisticated retail investors in the UK an ETN that goes long stocks in the FTSE 100 and 250, and short the two indexes. Hinde Capital is the strategy manager for a product that is collateralised in a similar way to an ETF


Paulson & Co. Opens Positions in Verizon, CBS; Stands Pat on Gold
Paul Rekoff – MoneyBeat – WSJ
John Paulson‘s Paulson & Co. hedge fund has taken new positions in Verizon Communications and CBS Corp. but stood pat on its extensive gold holdings in the first quarter, according to a securities filing Thursday.

Jefferies investment banking co-head to join client board
Vivek Ahuja – Financial News
Jefferies’ joint head of European investment banking is to join the board of a Russian gold producer, one of the bank’s London-listed broking clients.

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