First Impressions

John Lothian News Launches New MarketsWikiEducation.com site and Brings A World of Opportunity to London
John Lothian News
John Lothian News is pleased to announce the launch of a new MarketsWiki Education site (www.marketswikieducation.com) and schedule for our FREE London MarketsWiki World of Opportunity Series.

The site aggregates and organizes market related educational webinars, PowerPoints, PDFs and videos, including event and educational videos produced by John Lothian News. JLN’s other wiki sites include MarketsWiki , a database of market knowledge, and MarketsReformWiki, an aggregation of financial market regulatory changes.

View the Special Report HERE: http://jlne.ws/1rzVEuc

The London event features some of the top professionals in the financial services space and will be held in CME Group’s London headquarters, One New Change near St. Paul’s, on October 14th at 4 PM, and October 15th at 2:30 PM and 4:30 PM. Each session is 90 minutes. The series The final session will be followed by a social event at a local establishment.

There is no cost to attend the series, but seating is on a first to register basis.
Sign up HERE: http://jlne.ws/ZfDVkY

Quote of the Day

“It isn’t a case where the buy-side has gone on strike. Deals are going to get done.”

Paul Hastings’s Farley in the story, “Banks’ $85 Billion Loan Pipeline Meets Investor Unease”.

Lead Stories

ECB jumps gun with ABS purchase programme
Louise Bowman – Euromoney Magazine
The European Central Bank’s announcement on Thursday that it would start a private sector purchase programme of both ABS and covered bonds was both widely anticipated and yet still quite shocking.
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***DA: ECB ramps up stimulus —

Bank of England Gov. Mark Carney Signals Spring Rate Rise
Paul Hannon – WSJ
The Bank of England will likely meet its inflation and jobs goals if it starts to raise its benchmark interest rate early next year, Gov. Mark Carney said Tuesday in his clearest statement yet on the probable timing of a first move toward unwinding crisis-era stimulus.
jlne.ws/1rzJ5yV

***DA: While the BoE powers down —

Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge
Victoria McGrane and Ryan Tracy – WSJ
The Federal Reserve plans to hit the biggest U.S. banks with a costly new requirement aimed at reducing the risk that some financial firms remain “too big to fail” nearly six years after the financial crisis erupted.
In testimony prepared for a Senate Banking Committee hearing Tuesday, Fed Governor Daniel Tarullo said the regulator intends to impose a capital surcharge that will require the biggest U.S. banks to maintain fatter cushions to protect against potential losses. The Fed’s version of the capital surcharge will be tougher than one agreed to by international regulators.
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***DA: And the Fed puts on the brakes via capital buffers.

It’s the demographics stupid
Daniel P. Collins – www.futuresmag.com
Back in January I posed a question regarding the health of our economy and the job market. Finally a new study has attempted to answer it.
jlne.ws/1rzNYIf

Banks’ $85 Billion Loan Pipeline Meets Investor Unease
Christine Idzelis – Bloomberg
The biggest investor retreat from the U.S. leveraged loan market since 2011 is taking place just as a flurry of mergers and acquisitions needs to get funded with non-investment grade debt.
Dealmakers are planning more than $85 billion in loans, including about $10 billion that’s now being marketed, according to data compiled by Bloomberg. Burger King Worldwide Inc. will seek a $6.75 billion term loan to buy Tim Hortons Inc., the largest financing of its kind since the collapse of Lehman Brothers Holdings Inc. in 2008, and Scientific Games Corp. is raising $1.74 billion for its purchase of Bally Technologies Inc.
jlne.ws/1oobpTR

Investors expect lower rates for longer than Fed itself: Fed study
Ann Saphir – Reuters
Investors expect the U.S. Federal Reserve to keep interest rates lower for longer, and to raise them more slowly, than the makers of U.S monetary policy themselves expect, according to research published Monday by the San Francisco Fed.
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***DA: I expect numerous false starts before the real normalization occurs, probably around the time I reach age 65. That would be 2032.

Failing Bank Resolution Spurs Rating Overhaul Plans From Moody’s
John Glover – Bloomberg
Changes to the way failing banks are either resolved or revived since the 2008 crisis are prompting Moody’s Investors Service to propose overhauling the way it rates lenders.
The plans include the introduction of “loss given failure,” which seeks to lay out the risks for various levels of creditors in a collapse, the New York-based firm said in a statement. The new approach also attempts to assess the potential government support for different debt securities that banks issue, it said.
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Central Banks

Draghi Plea for ABS Support Rebuffed by France, Germany
Birgit Jennen and Jeff Black – Bloomberg
Mario Draghi asked European governments to help him help them. The answer so far is “no.”
France and Germany, the euro area’s two largest economies, will say they’re not interested in providing state guarantees for the European Central Bank president’s asset-purchase program announced last week, according to a draft document obtained by Bloomberg News.
jlne.ws/1rURoLU

***DA: Go squat on someone else’s balance sheet.

Yellen’s Dials Defy Truman Plea for One-Handed Economist
Jeff Kearns – Bloomberg
Janet Yellen is adding more dials to her labor-market dashboard, and that’s making it harder for investors to tell where she will be steering monetary policy as Federal Reserve chair.
Yellen, who has been watching an array of eight labor-market gauges in addition to the unemployment rate, introduced more complexity in an Aug. 22 speech to the Fed’s annual symposium in Jackson Hole, Wyoming. There, she discussed an index developed by economists at the Federal Reserve Board in Washington that tracks 19 indicators.
jlne.ws/1rURCm7

***DA: The speedometer has been all the way to the right for the last few years, but the “check engine” light has been on the whole time.

PBOC Drains Funds as China Money Rate Declines for a Seventh Day
Lilian Karunungan – Bloomberg
China’s central bank is draining funds from the money market for the first time in a month as interbank rates fell for a seventh day, signaling cash is ample in the financial system.
jlne.ws/1tpV58n

Federal Reserve Signals Intent to Pressure Largest Banks to Slim Down
PETER EAVIS – Dealbook – NY Times
The Federal Reserve, mindful that some banks are still so big that their failure could weigh on the wider economy, said on Monday that it planned to increase the pressure on large financial firms to shrink.
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***DA: I know a lobbyist or two that might have something to say about that.

Assessing Expectations of Monetary Policy
Jens H.E. Christensen and Simon Kwan – Federal Reserve Bank San Francisco
An ongoing concern has been that the public might misconstrue the Fed’s forward guidance about future monetary policy and underappreciate the extent to which short-term interest rates may vary with future news about the economy. Evidence based on surveys, market expectations, and model estimates show that the public seems to expect a more accommodative policy than Federal Open Market Committee participants. The public also may be less uncertain about these forecasts than policymakers.
jlne.ws/1ooiN1z

Testimony By Federal Reserve Governor Daniel K. Tarullo – Dodd-Frank Implementation, Before The Committee On Banking, Housing, And Urban Affairs, U.S. Senate, Washington, D.C.
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Currencies

Carney Says Keeping Pound Incompatible With Sovereign Scotland
Jennifer Ryan – Bloomberg
Scotland will struggle to keep the pound if voters in next week’s referendum choose to leave the U.K., according to Bank of England Governor Mark Carney.
With the latest polls suggesting the result of the Sept. 18 vote is on a knife-edge, Carney was asked about the outcome today in Liverpool, England. Scottish First Minister Alex Salmond wants to retain the currency and the central bank should his Yes campaign prevail, an option the U.K. coalition government and opposition parties have ruled out.
jlne.ws/1oohWy5

Scotland Hedge Seen Offered by Credit Options at Cairn Capital
Abigail Moses – Bloomberg
Cairn Capital Ltd. said it favors options on European credit derivatives indexes to hedge the risk that Scotland will vote for independence from the U.K. next week.
Options, which give investors the right though not the obligation to buy or sell at a fixed price, offer cheaper insurance than the indexes themselves, according to the London-based asset manager, which oversees $20.4 billion. They profit should a Yes vote drive credit-default swap indexes higher while losing less money in the event of a No vote.
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***DA: Options as insurance – what a novel concept.

NFA to Implement New Retail FX Safeguards
Profit & Loss
The National Futures Association (NFA) has proposed amendments concerning the daily confirmation of funds covering liabilities to retail FX customers to the Commodity Futures Trading Commission
jlne.ws/1rzMfCM

EBay’s PayPal Unit to Start Accepting Bitcoin Payments
Spencer Soper and Olga Kharif – Bloomberg
EBay Inc. (EBAY)’s PayPal service will start accepting bitcoins, opening up the world’s second-biggest Internet payment network to virtual currency transactions.
jlne.ws/1tpSCux

Macro Horizons: U.K. Uncertainty Undermines Sterling
Alen Mattich – MoneyBeat – WSJ
Once again the U.K. is in focus. Sterling has slumped in the face of concerns about how the Scottish referendum will go – the latest polls suggest a narrow victory for the separatists. But that currency weakness is no bad thing in light of the U.K.’s big and worsening trade deficit.
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Indexes & Index Products

BlackRock ETP Landscape: Best August On Record
In the BlackRock ETP Landscape series of reports, the Industry Highlights provides commentary on the global Exchange Traded Products (ETPs) industry as of August 2014.
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Successful 3rd edition of ETF/ETP Roundtables
Some 40 members of the Swiss ETF community attended the ETF/ETP Roundtable, which was held in a new design for the third time. Attendees in the SIX ConventionPoint were market participants working in the field of asset management at banks along with institutional investors and financial journalists.
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Gold

Funds Continue To Exit Bullish Gold, Silver Positions In Latest CFTC Data
Kitco News (via Forbes)
Large speculators again cut their net-long gold and silver futures and options holdings on the Comex division of the New York Mercantile Exchange in the latest Commodity Futures Trading Commission data for the week ended Sept. 2, following the same action seen in the previous week’s report.
jlne.ws/1oojxno

Independent Scotland could claim part of £7.8bn gold reserves
RT
The distribution of the UK’s assets in the event of Scottish independence would be subject to negotiation between an independent Scottish Government and the continuing UK government, a spokesman for the United Kingdom Treasury said.
jlne.ws/1oojGHt

India prepares for shining return of gold demand
Avantika Chilkoti – Financial Times
Festival season is kicking off in India – a period in which gold sales traditionally spike in the world’s largest consumer market for the precious metal.
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