First Impressions

Matthew Scharpf, Vice President Sell Side Business Development, Eurex – Trading with a Creative MindMatthew Scharpf, Vice President Sell Side Business Development, Eurex – Trading with a Creative Mind

“You’re filling your toolbox…You’re not going to need it today or tomorrow, but one day it’s good to have.”

Matthew Scharpf, vice president of sell side business development for Eurex, gives a unique look at systems in the financial industry and how we can connect new pieces together to create innovation. Using his guitar and knowledge of music, Scharpf explains how individual notes can be combined into chords and used in a variety of instances to create different songs. And even when it may seem like there are some limitations in songwriting, different tools and methods can help facilitate the creation of something new. Scharpf compares this system to the financial industry and tells his audience how this type of thinking also applies to their careers. There may be times when different parts of a system utilized with other tools can create something new and innovative. It’s just a matter of thinking outside the box.

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Quote of the Day

“Bonds rallied again as the market is nervous about the global economic outlook, which means the Federal Reserve may have to delay its rate increase.”

Jussi Hiljanen, head of fixed-income research at SEB AB in Stockholm in the story, “Bonds Worldwide Pull Out of Tailspin on Growth Concern”.

Lead Stories

Bonds Worldwide Pull Out of Tailspin on Growth Concern
Anchalee Worrachate and Wes Goodman – Bloomberg
Government bonds worldwide advanced this week as a surging dollar sparked warnings from Federal Reserve officials that the stronger currency may hamper the U.S. economic recovery.
The Bloomberg Global Developed Sovereign Bond Index headed for its first weekly gain this month, buoyed by speculation weak economic growth in Europe and Japan will spur policy makers there to maintain stimulative monetary policy. Yields attracted investors after climbing last week when Fed policy makers increased their estimate for how high they’ll raise interest rates next year.

Pimco ETF Probe Spotlights $270 Billion Market Vexing Regulators
Nabila Ahmed, Sridhar Natarajan and Sam Mamudi – Bloomberg
The U.S. regulatory probe into Bill Gross’s Pimco Total Return ETF (BOND) is highlighting an industry that supervisors say may pose an increasing risk to the stability of the bond market.

Gross to Join Janus After Record Redemptions at Pimco Flagship Fund
Devin Banerjee and Laura Marcinek – Bloomberg
Bill Gross, co-founder and chief investment officer of Pacific Investment Management Co., will join Janus Capital Group Inc.
Gross, who has presided over the world’s biggest bond fund for almost three decades, will start Sept. 29 at a new Janus office in Newport Beach, Calif., and will begin managing the Janus Global Unconstrained Bond Fund on Oct. 6, according to a statement from Janus.

Weak euro zone lending data underscores need for ECB stimulus
Eva Taylor – Reuters
Lending to euro zone households and companies contracted for the 28th month in a row in August, though at a slower pace, putting a keener spotlight on European Central Bank efforts to get credit flowing again.

Banks Face Pass-the-Parcel Debt Limit in Writedown Rule
Ben Moshinsky and Jim Brunsden – Bloomberg
The world’s largest banks face curbs on how much they can rely on selling debt to each other to meet a planned international standard on their ability to absorb losses in a crisis.
The Financial Stability Board reached a provisional deal last week on the plan for so-called total loss-absorbing capacity in a bid to take taxpayers off the hook when banks fail. The plan requires banks to have capital and other loss-absorbing securities, such as subordinated debt, equivalent to 16 percent to 20 percent of their risk-weighted assets by 2019, said three people familiar with the matter.

JPMorgan to HSBC Stall EU Euribor Case Amid Bias Probe
Gaspard Sebag – Bloomberg
JPMorgan Chase & Co. (JPM), HSBC Holdings Plc (HSBA) and Credit Agricole SA (ACA) delayed by months the European Union’s investigation into Euribor rigging amid scrutiny of possible EU bias, according to three people familiar with the case.
The trio gained more time to respond to the EU’s May antitrust complaint after demanding to see files necessary for their defense, said the people who asked not to be named because the issue is private. These requests have been taken more seriously since the EU’s ombudsman started inquiring into Credit Agricole’s bias allegations, two of the people said.

Quick View: FX industry gets organised
Philip Stafford – Financial Times
It’s the world’s biggest, most liquid and most accessible market and is closely watched by governments and central banks alike. Yet now the foreign exchange market also feels the need for a lobby group to look out for its interests.

Pimco Favorites From Swaps to Peso Take Hit on Gross Resignation
Sridhar Natarajan and Christine Idzelis – Bloomberg
Bill Gross’s departure from Pacific Investment Management Co. is sparking a selloff in markets from credit derivatives to the Mexican peso as traders contemplate the potential fallout from the sudden exit of the world’s biggest bond trader.

Central Banks

These secret tapes reveal the troubling relationship between the Federal Reserve and Goldman Sachs
Jake Bernstein – Quartz
Barely a year removed from the devastation of the 2008 financial crisis, the president of the Federal Reserve Bank of New York faced a crossroads. Congress had set its sights on reform. The biggest banks in the nation had shown that their failure could threaten the entire financial system. Lawmakers wanted new safeguards.
The Federal Reserve, and, by dint of its location off Wall Street, the New York Fed, was the logical choice to head the effort. Except it had failed miserably in catching the meltdown.

FED Reject Allegations Segarra
Elena Holodny – Business Insider
The New York Fed released a statement rejecting all the allegations made about “the integrity of its supervision of financial institutions” in light of the recently released secret audio recordings of the NY Fed.
Via these recordings, the former Federal Reserve employee Carmen Segarra alleges that the NY Fed was too soft on big banks, including most notably Goldman Sachs.

Fed’s Fisher says rates may rise ‘sooner rather than later’
The U.S. Federal Reserve may start raising rates around the spring of 2015, at the earlier end of market expectations, Richard Fisher, president of the Federal Reserve Bank of Dallas said on Thursday.

BOE’s Shafik Sees Eurozone a Significant Risk to U.K. Recovery
Jason Douglas – MoneyBeat – WSJ
Weak growth in the neighboring eurozone presents “a significant risk” to the U.K. economy, a top Bank of England official was quoted as saying Thursday.

BOE Inching Towards Raising U.K. Interest Rates, Says Carney
Jason Douglas – MoneyBeat – WSJ
The Bank of England is inching closer to raising interest rates in the U.K. but future increases in borrowing costs are likely to be gradual and limited, BOE Gov. Mark Carney said Thursday, in a sign the central bank remains on course to raise rates early next year despite evidence of an economic slowdown elsewhere in Europe.

Draghi May Discover Weaker Euro Doesn’t Buy Enough Recovery
Simon Kennedy – Bloomberg
Mario Draghi may find a falling currency can’t buy much of an economic recovery.
The euro has dropped toward a two-year low against the dollar since the European Central Bank president boosted stimulus earlier this month. Economics textbooks say that should lift Europe’s struggling growth rate by boosting exports and speed inflation by raising import prices. Such effects will be more welcome if falling commodities deal a disinflationary blow.


Kazakhstan considers dollar bond comeback
Financial News
Kazakhstan is preparing to tap the international bond market for the first time in more than a decade, following in the footsteps of a number of other sovereign issuers from frontier markets that have issued debt in recent months, responding to investors’ ferocious hunger for yield.

Mrs Watanabe jumps on yen-selling bandwagon as tide turns
Kentaro Sugiyama – CNBC
Japan’s legions of retail foreign-exchange traders, popularly known as Mrs Watanabe, are turning into sellers of yen.

CFTC’s Global Markets Advisory Committee to Meet October 9, 2014
The meeting will focus on issues related to clearing Non-Deliverable Forwards (NDFs) and the digital currency bitcoin. The meeting will consist of two panels. The first panel will discuss whether a clearing mandate is appropriate for NDFs, with a particular focus on how such a mandate would impact foreign exchange contracts. The second panel will discuss CFTC’s jurisdiction with respect to derivatives contracts that reference the digital currency bitcoin.

Indexes & Index Products

Indexes Suffer Worst Day Since July
The Associated Press (via NY Times)
A stumble by Apple helped set off a rout in the stock market on Thursday, its worst day in nearly two months.
The selling started early and picked up strength in the afternoon. By the close of trading, all 30 of the big companies in the Dow Jones industrial average and the 10 industry sectors in the Standard & Poor’s 500-stock index lost ground.

China A-shares close to joining global benchmarks, FTSE says
Chris Vellacott – Reuters
Index provider FTSE is moving closer towards accepting China A-shares in its benchmarks after the country failed on only two of nine criteria in a qualification test, a senior analyst at the firm said.


Falling Out of Love With Gold
Mohamed A. El-Erian – Bloomberg
Gold has let down its loyal investors during the past year, declining by about 8 percent. It has failed to benefit, as one might expect, from a series of geopolitical crises and concerns that stocks are overvalued. It has even failed to keep up with government bonds, usually the other recipient of flight-to-quality trades. Moreover, it has responded weakly to the excitement in India — its biggest physical retail market — – over the prospects for economic reforms under newly elected Prime Minister Narendra Modi.

Gold demand will increase, sayd World Gold Council
The Times of India
The World Gold Council is confident that 2014 would end on a robust note in gold demand in India, contrary to the initial drop in the first half.
“This year’s first-half has been a little challenging. The jewellery demand in terms of volume from January to June (first six months of 2014) as compared to the same period last year is lowered by 14 per cent. But this is a short-term trend,” World Gold Council Director Jewellery for India Vipin Sharma told PTI in an exclusive interview.

You’ll never guess what this ATM sells
Katie Holliday – CNBC
Vending machines usually conjure thoughts of food and drinks, but one firm is tapping consumers’ love for something much more expensive: gold. Two Smart Gold ATMs – vending machines that dispense a range of 24 karat gold items – were launched in Singapore this week at the Marina Bay Sands Hotel and Resorts World Sentosa, luxury venues that attract wealthy Singaporeans and a plethora of tourists.

Cheapest way to buy Royal Mint gold? Not from the Royal Mint
Richard Dyson – The Telegraph
For years the Royal Mint has sold collectible coins commemmorating special events direct to the public.
But “bullion” coins made for investment purposes – such as Sovereigns, Britannias or Lunars (introduced last year) – have until now been available only through dealers.

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