First Impressions

SDR 2.0: CME Group’s Jonathan Thursby Looks at the Future of Swap Data Repositories

Over the past 18 months, the OTC derivatives world began mandatory reporting into trade repositories. Now that we have had some time to work through the logistics, it is time for a rethink. Jonathan Thursby, president of global repository services at CME Group, says the CFTC and global regulators are looking at revisions to the rules, and he lays out his wish list for a new and improved framework.
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Quote of the Day

Having proven themselves unable to cobble together with colleagues a working fiscal policy or to construct a regulatory regime that incentivizes rather than discourages investment and job creation — in other words, failed at their own job — they simply find it convenient to create a bogeyman out of an entity that does its job efficiently

Dallas Federal Reserve President Richard Fisher regarding a push in Congress to audit the Fed, in the WSJ story “Federal Reserve’s Fisher to Congress: Butt out”

Lead Stories

In Bonds, One Man’s Big Sales Pitch
By Katy Burne, WSJ
Can one man drag corporate-bond trading into a new age, where others have failed? Meet Mehra “Cactus” Raazi, a former salesman from Goldman Sachs Group Inc., who has been working to do just that at fixed-income technology operator Tradeweb Markets LLC.

Pimco’s flagship fund decreases U.S. govt-related holdings in Jan
The Pimco Total Return Fund , the world’s largest bond fund, ended January with a decrease in U.S. government-related holdings and increased its holdings in mortgage securities, according to the Newport Beach, Calif.-based firm’s website on Tuesday.

Currency Warriors Get Boost at G-20 Meeting; Stimulus is Vital for Boosting Weak Global Economy, Leaders Say
By Ian Talley and Brian Blackstone, WSJ
The world’s top finance leaders on Tuesday in effect backed currency depreciation as a tool for promoting growth by signaling strong support for aggressive easy-money policies aimed at boosting the fragile global economy.

Fannie Mae and Freddie Mac: Wind-down or Reprieve?
Institutional Investor
These GSEs have checkered pasts and deep flaws. But they’re making money again – and housing is coming back, which makes betting on their demise risky.

Hedge Funds Exit Housing Securities as Prices Rise
Bloomberg Business
Hedge funds that profited on residential mortgage debt after the financial crisis such as Pine River Capital Management and Canyon Partners are trimming their bets as prices rise. Gorelick Brothers Capital is also exiting investments in both uninsured and government-backed home loan securities. The firm is seeking higher returns by raising a private equity fund to buy single-family rental houses, said Rael Gorelick, a co-founder of the firm.

Kuroda signals confidence on easing with no G20 backlash on yen, Government & Economy – The Business Times
Bank of Japan Governor Haruhiko Kuroda said Group of 20 nations didn’t criticize his monetary policy or discuss the yen’s weakening, signaling confidence to proceed with easing that has driven down the currency.

Japan’s national debt rises by 12 trillion yen despite low interest rates
The Asahi Shimbun
The overall debt was classified into: government bonds worth 874 trillion yen; loans of 55 trillion yen from banks and other financial institutions; and financing bills of 100 trillion yen issued to procure cash in preparation of foreign exchange interventions.

Central Banks

Federal Reserve Works to Cultivate Stronger Ties to GOP
As the Federal Reserve prepares to begin raising interest rates later this year, it is readying for what may be another big challenge in 2015: the shift to a Republican-controlled Congress.

Why is Rand Paul campaigning to ‘audit the Fed’?
CNN Money
Paul, a possible Republican presidential contender, has been campaigning to “Audit the Fed.” He wants a full review of the financial records of America’s central bank — and its decision making. The idea is gaining traction on the campaign trail. Paul has raised over $85,000 this week on a website called “Audit the Fed Money Bomb.” His goal is $150,000 by next week.

***DA: Where to go for an answer to that question?

Wake Up, America: It’s time to audit the Federal Reserve
Fox News
As a conservative I follow the constitution. In fact, I carry a copy of the constitution in my pocket. And I’m certainly not one of those squishy conservatives who believes the document is a living and breathing thing, up for occasional interpretation. There are few issues more clearly outlined in the constitution than Congress’ responsibility to coin and regulate the currency. That is very clearly stated in article 1 section 10

***DA: Look no further. Just pandering for votes; that’s all. But what does the Fed think of that?

Federal Reserve’s Fisher to Congress: Butt out
Do your job for once, Congress. Don’t try to do ours and screw everything up. So says Richard Fisher, the colorful president of the Dallas Federal Reserve who is retiring in March. Fisher delivered several parting shots in a speech in New York, not only blasting politicians as “sheep in wolves’ clothing” but calling the Fed too insular and badly in the need of a 21st century makeover.

***DA: And Fisher is as closely aligned with the Libertarian crowd as we are going to get.

ECB breathes sigh of relief over quantitative easing
On the eve of its historic decision to launch a quantitative easing programme last month, the European Central Bank faced a toxic mix of anxiety and disillusionment. Eurozone economic conditions had been deteriorating, with inflation and some measures of inflation expectations falling below the central bank’s target of just below 2 per cent. Tensions were simmering among central bankers and politicians, and investors were sceptical that the bank could deliver a big enough bond-buying programme to rid the currency union of the threat of stagnation.

Greek banks solvent at the moment: ECB’s Jazbec
Greece’s banks are not at risk of insolvency at the moment, European Central Bank Governing Council member Bostjan Jazbec told German daily Handelsblatt in an interview published on Wednesday.

Swiss government borrows at record low rate
Switzerland borrowed money for 10 years at a cheaper rate than any government on record on Wednesday, as the eurozone’s neighbours continue to feel the impact of the region’s looser monetary policy. The Swiss government sold SFr122.6m ($131.9m) of 10-year debt at a yield of just 0.011 per cent, meaning investors accepted barely any income for the long term bond.

In Denmark, Depositors to Pay Interest to Bank
In Denmark, banks are flipping the tenets of the industry on their head. After the Danish central bank recently slashed its benchmark interest rate to well below zero, several of the country’s lenders have followed with highly unusual moves of their own. On Friday, FIH Erhvervsbank announced plans to charge retail customers to hold money in their deposit accounts, the first Danish bank to do so.

PBOC Enlarges Liquidity Tool to Avoid China Holiday Cash Squeeze
Bloomberg Business
hina granted small banks nationwide access to a short-term lending tool to help them cope with liquidity strains, especially during the Feb. 18-24 lunar new year holidays when Chinese withdraw cash to give as gifts.


Tale of Two FX Probes: Lawsky Digs as Justice Signals End
by David McLaughlin, Greg Farrell- Bloomberg
New York’s top financial regulator has broadened his investigation into currency manipulation, even as U.S. prosecutors push to wrap up their own probe by seeking to extract guilty pleas from banks, people familiar with the matter said.

Opinion: Is an accidental currency war breaking out?
By MohamedA. El-Erian, MarketWatch
Six and a half years after the global financial crisis, central banks in emerging and developed economies alike are continuing to pursue unprecedentedly activist — and unpredictable — monetary policy. How much road remains in this extraordinary journey?

Banco do Brasil Bondholders Burned as Executives Poached
Bloomberg Business
President Dilma Rousseff’s decision to transplant two state-bank executives to Petroleo Brasileiro SA didn’t sit well with the oil company’s investors. Banco do Brasil SA bondholders aren’t fans of the move either. The lender’s $2.5 billion of notes have tumbled 9.7 percent to a record low 76.913 cents on the dollar since Feb. 6. That’s the day Rousseff named Chief Executive Officer Aldemir Bendine and Chief Financial Officer Ivan Monteiro to the same positions at Petrobras, which is at the center of the country’s biggest-ever corruption scandal.

Goldman Sachs Asks How Yellen Can Raise Rates Amid Currency Wars
Bloomberg Business
Janet Yellen may have to fight in the global currency war, whether she wants to or not. The dollar is on a tear, rising to the highest in more than a decade, in part because of the Federal Reserve’s plans to raise interest rates this year. Money is flowing to the U.S., where the economy looks pretty good as Europe battles deflation and oil-dependent developing nations sputter as commodities slump.

Strong dollar, low oil remain net positives -Fed’s Fisher
Short-term currency moves should not drive the Federal Reserve’s policy decisions and, for now, the strong dollar and low global oil prices are a net positive for the U.S. economy, Dallas Fed President Richard Fisher said on Wednesday.

A look at who loses with a U.S. dollar rally
Having looked at some of them winners from a U.S. dollar rally in a previous article, I thought it might be illuminating to see who the losers might be. After all, investing is like a ball game: offense (picking stock winners) gets the glory, but defense (avoiding big losses) wins the game.

Indexes & Index Products

Draper Talks ETF Index Construction
ETF Trends
Invesco PowerShares Managing Director Dan Draper discussed exchange traded fund construction and the advantages of looking beyond cap-weighted indexes with ETF Trends Publisher Tom Lydon at the Inside ETFs conference in Hollywood, Fla.

S&P Indices – Summary of Changes
Press Release
Teledyne Technologies Set to Join the S&P MidCap 400; Popeyes Louisiana Kitchen, Iridium Communications to Join the S&P SmallCap 600

A Gentler View of Leveraged ETFs
ETF Trends
Leveraged exchange traded funds have not been strangers to controversy with some executives going so far as to imply these geared ETFs could lead to the demise of financial markets. That assessment is long on hyperbole, but it underscores the negative light with which these volatile products are often viewed.

Hedged Germany ETFs Love ECB QE
ETF Trends
Scores of exchange traded funds reacted favorably to the European Central Bank’s January announcement that it will purchase 60 billion euros worth of government and agency bonds through September 2016.


What does 2015 have in store for gold?
The Edge Markets
After falling to as low as US$1,140.54 an ounce on Nov 5 last year, gold prices are starting to see a recovery. The precious metal hit a five-month high of US$1,307.80 on Jan 22 before retreating to US$1,278.85 on Jan 27 on the back of profit-taking. Gold prices have been on the rise due to uncertainties in the global market, say industry observers. Seen as a safe haven, the precious metal is traditionally favoured during times of rising inflation.

Eric Sprott: Expect Physical Gold Backing of Currencies Within Next Decade
During a time of currency volatility and returning strength in precious metals, Eric Sprott, Chairman of Sprott Inc. was kind enough to share a few comments.

In Canada too, clamor for the banks to get out of the governing business
What’s left of Canada’s Social Credit movement has brought a lawsuit challenging the operation of the country’s monetary and banking systems, and apparently the powers that be are having a hard time getting the lawsuit dismissed. The lawsuit argues that the Canadian central bank’s enabling act authorizes the bank to create and lend money without interest to government agencies, bypassing the commercial banking system and all the income and advantages commercial banks extract from the central bank at the public’s expense, and that the central bank should start financing the government that way.

‘Metal of the future’ will be produced in Siberia
Russia & India Report
Siberian scientists have produced Russia’s first sample of a strategically important metal – beryllium. Production technology remains classified, however, RIR has managed to unearth a few details.

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