First Impressions

Congratulations to our survey prizewinner
Sarah Rudolph
Last week we completed our annual survey, or rather our first annual survey in three years. We are grateful to all those who took the 30 seconds (or so) to answer the questions. Thanks for helping us out! The prize, which was a choice between an iPad Mini or a pair of Bose Quiet Comfort Noise-Canceling Headphones, went to Lynne Howard-Reed, director of marketing at the CBOE, who was chosen in a random drawing among all those who completed the survey. (She chose the iPad Mini.) She said it was the best survey she had ever taken – I’m guessing that is because it consisted of only 5 questions, or maybe she hasn’t taken any other surveys. Anyway, congratulations Lynne!

Quote of the Day

“The ECB has been very difficult to pin down. Nobody I’ve spoken to is willing to take a position, long or short, over these event risks.”

Peter Chatwell, a fixed-income strategist at Credit Agricole SA’s corporate and investment banking unit in London in the story, “European Bonds Stymied as Investors Ponder ECB’s Policy Options”.

Lead Stories

European Bonds Stymied as Investors Ponder ECB’s Policy Options
Neal Armstrong and Lucy Meakin – Bloomberg
European government bonds were little changed as investors pondered whether European Central Bank officials will introduce further stimulus measures at a policy meeting next week.
Spanish securities erased a decline as German inflation rose less than economists forecast this month. ECB President Mario Draghi was said to have told German lawmakers yesterday that an asset-buying program, or quantitative easing, isn’t imminent and is relatively unlikely for now.

Singapore overtakes London for offshore renminbi trading
Jeremy Grant in Singapore and Delphine Strauss in London –
Singapore has vaulted ahead of London as the world’s biggest offshore trading hub for the renminbi outside Hong Kong, as rapidly growing commercial ties between China and southeast Asia propel use of the Chinese currency.

Meet BofA’s Culprit: Structured Notes
Katy Burne – MoneyBeat – WSJ
Bank of America Corp. said it will revise its capital plans after disclosing an error in its calculations for certain debt securities. The culprit: so-called structured notes.

The Future of FX Trading: Humans Babysitting Machines
Chiara Albanese – MoneyBeat – WSJ
Computers can slice up currencies transactions and seek out good prices just like traders do. The big difference? They don’t use chat rooms, which you may remember have drawn regulatory scrutiny from regulators trying to uncover evidence of market manipulation.

Swings Squelched as Stocks to Bonds Calmest Since 2007
Sofia Horta e Costa and David Goodman – Bloomberg
Tension between Ukraine and Russia is escalating. The U.S. bull market has gone for on a year longer than average. Federal Reserve policy makers are scaling back its bond buying. Investors don’t care.
A risk measure that that uses options to forecast fluctuations in equities, currencies, commodities and bonds fell to its lowest level in almost seven years last week. Calm is blanketing investors after the MSCI All-Country World Index more than doubled from March 2009, 10-year Treasury yields climbed from an all-time low of 1.39 percent reached in 2012, and the euro traded in the narrowest range ever last week.

EU regulators unveil details of bank stress tests
Sam Fleming –
Regulators will assess the stability of the EU banking sector against a possible global debt market sell-off, an upward lurch in their funding costs, and deep dives in property and equity prices under stress tests unveiled on Tuesday.

Deutsche Bank Head of Forex to Retire
Katie Martin –
Deutsche Bank AG’s head of currencies is quitting the firm, a move that comes amid sweeping changes in the foreign-exchange industry. Kevin Rodgers will retire from the giant German lender in June, the bank said in a statement.

JPMorgan reduces repo credit extension that concerns regulators
JPMorgan, one of two large clearing banks in the tri-party repurchase agreement market, said on Monday that it had met targets to reduce risks of short-term loans of concern to the Federal Reserve Bank of New York and other regulators.

Markets beware a complacent bank industry
John Plender –
It seems to be an article of faith among banking commentators that financial crises are inevitable. Understandably so, perhaps, given that economic history has been punctuated by such crises back to antiquity.

GoldenTree Goes Bold in Buying Up Russian Corporate Bonds
Lisa Abramowicz – Bloomberg
Who’s afraid of Russian corporate bonds? Not GoldenTree Asset Management LP.
The $18 billion investment firm has been buying up the nation’s corporate bonds, saying the securities offer value after suffering a 5.4 percent selloff this year. Among its targets: securities of gas company OAO Gazprom, which now looks like “one of the best credits in the world,” Managing Partner Steve Tananbaum said in an interview with Bloomberg Television’s Stephanie Ruhle and Erik Schatzker yesterday.

Central Banks

Haircuts and beef bowls helping BOJ’s Kuroda win converts
Rising prices for budget haircuts and bowls of beef and rice are helping Bank of Japan Governor Haruhiko Kuroda win over doubters in his own ranks of his ambitious drive to cast off deflation.

French Central Bank Selects Giesecke & Devrient As Technology Partner For Banknote Processing
Authenticating, Counting, And Sorting Up To 120,000 Banknotes Per Hour: Banque De France Modernizes Its Cash Centers With G&D’s BPS M7 Banknote Processing System


FX dealers in London can trade trillions, without being registered
Three London-based traders suspended or fired as part of a global investigation into alleged collusion and price-rigging in the foreign exchange market were not registered by Britain’s financial market watchdog, revealing inconsistencies in the oversight of the world’s biggest marketplace, Reuters analysis of the Financial Conduct Authority’s filings has shown.

Strong Euro? Blame the Rejig of FX Reserves
Chiara Albanese – MoneyBeat – WSJ
Despite complaints from France and regular reminders that the ECB is watching nervously, the euro keeps on flying high. One reason, among several, could lie in central banks, and how they build up and rejig their foreign-currency reserves.

“The most important thing going on in global markets”
The Reformed Broker
“I want to be long vol on the consensus that Chinese leadership is prescient, omniscient,” said the CIO. “I’m unsatisfied with Wall Street’s facile explanations for the Yuan devaluation.”

Doyen, LLC Joins Nadex as Market Maker
The North American Derivatives Exchange (Nadex), a regulated online binary options exchange in the United States, today announced that Doyen, LLC (Doyen) has been designated as an exchange market maker to make markets across a number of listed contracts. Doyen will make markets on some of the most heavily traded forex pairs including AUD/USD, GBP/USD, EUR/JPY, EUR/USD and USD/JPY, for intraday, daily and weekly contracts, with additional contracts to be added over a period of time. With an additional market maker, Nadex expects tighter spreads and increased liquidity on this popular asset class.

MIT Students Plan Campus-Wide Bitcoin Distribution
Press Release (MIT)
Two MIT students have raised half a million dollars for a project to distribute $100 in bitcoin to every undergraduate student at MIT this fall.
Jeremy Rubin, a sophomore studying computer science at MIT, and Dan Elitzer, founder and President of the MIT Bitcoin Club and a first-year in the MBA program at MIT Sloan, have undertaken an ambitious project aimed at creating an ecosystem for digital currencies at MIT. Plans for the MIT Bitcoin Project involve a range of activities, including working with professors and researchers across the Institute to study how students use the bitcoin they receive, as well as spurring academic and entrepreneurial activity within the university in this burgeoning field.

BitBeat: Bitcoin Miners Get Relief From KnCMiner – MoneyBeat – WSJ
Bitcoin miners have been caught in a digital Catch-22 lately. Mining has evolved from the early days, when you could do it with a regular desktop PC. Now you need powerful, dedicated machines, commonly called mining rigs. But thanks to the “arms race” demanding more expensive, energy-consuming machines and the plunging price of bitcoin, miners placing orders for rigs are finding that by the time their machines arrive, the price has dropped to the point where there’s no money to be made from mining.

Mt. Gox Bidders in Deal Aimed at Halting Liquidation
Michael J. Casey – MoneyBeat – WSJ
The consortium of U.S. investors seeking to buy and revive Mt. Gox has pulled another unexpected tactical move aimed at blocking liquidation of the failed bitcoin exchange and instead getting a rehabilitation plan accepted by the Japanese bankruptcy court.

The bold designs that deter banknote forgers
Andy Sharman –
Malcolm Knight holds a banknote up to the window. As the light hits the paper, a shiny oval of blue lightbulbs on the face of the note suddenly disappears, revealing – as if by magic – a cluster of lighthouses. “It’s very hard for a counterfeiter to rise to that challenge,” he says.

Indexes & Index Products

NYSE Arca and NYSE MKT Announce Trading and Liquidity Enhancements for ETPs
NYSE Arca and NYSE MKT today announced a set of enhancements designed to increase liquidity and market quality in Exchange Traded Products (ETPs), while advancing the listing and trading experience of the ETP community.

Dash Departs Bloomberg Indexes
Max Bowie – Waters Technology
Srikant Dash has left his role as global head of indexes at Bloomberg, Inside Market Data has learned.

FTSE Group Develops Ground-Breaking Global Ex Fossil Fuels Index Series

What Have They Done to My Index Fund?
Adam Zoll — Morningstar
Question: When reading fund reports I sometimes find references to float-adjusted, spliced, or composite indexes. What do these terms mean?
Answer: On the surface, the way most index mutual funds and exchange-traded funds work isn’t all that complicated. They simply seek to track the performance of a given index by owning the same constituents in the same proportion as the index. Often this is done using market-cap weighting, meaning that the percentage of the portfolio allocated to each security is in proportion to its size relative to the other holdings.


Deutsche Bank resigns gold, silver fix seat with no buyer
Clara Denina – Reuters
Deutsche Bank has resigned its seat on the London precious metal fixes without finding a buyer, a spokesman for the lender said on Tuesday, leaving four banks to set the global gold price benchmark under increasing regulatory scrutiny.

Gold producing rivals attack each other as merger talks end
James Wilson, Mining Correspondent –
Merger talks between Barrick Gold and Newmont Mining have collapsed amid sharp criticism from each of the other’s attitude to attempts to combine the world’s two largest gold producers by output.

China Holds The Keys To The Gold Market
Seeking Alpha
Last year China’s private-sector demand for gold reached a record level of 1,132 tonnes, and according to the World Gold Council (WGC), the Asian nation could easily dominate the gold market once again, as they predict demand growing 20 percent by 2017.
This updated projection from the WGC confirms what I’ve written about previously: China’s love for the precious metal remains robust.

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