First Impressions

Welcome to 2015

Welcome to the year 2015. It is a new year and time for new things. What the year will bring, only time will tell. Forget the prognosticators, though we feature quite a few of them at this time of the year. Only you matter to make things happen. Go out and make it happen.

The NFA election for the board of directors is still going on. See our collection of interviews and commentaries with candidates for the CTA/CPO positions on

In case you missed the news on Friday, Orc Group bought Tbricks. Tbricks was our MarketsWiki Page of the Day on Friday.

We have officially begun our 2015 JLN subscription drive. We are bringing back the policy of “Voluntary Pay.” The John Lothian Newsletter is again brought to you on a “voluntary pay” basis. If you find value in what we do, we ask you to contribute. If there are a bunch of you at a firm who are receiving it, we believe you find it valuable and will be sending you an invoice. Please click the button at the top of the newsletter to make a payment. Or, if you prefer an invoice for yourself and/or your company, please send an email to

Quote of the Day

“Our CEO just…disappeared.”

Sergey Grebenkin, software developer at the firm Blackfield Capital CJSC in the story, “Chaos Rules at Russian Hedge Fund as Boss Vanishes”.

Lead Stories

U.S. 30-Year Yield Is Lowest Since 2012 as Oil Damps Inflation
Daniel Kruger and Susanne Walker – Bloomberg
Treasuries rose, pushing the 30-year bond yield to the lowest level in more than two years, as global inflation slowed even as the Federal Reserve is on track to raise rates this year.
The difference between yields on two-year notes and 30-year bonds, known as the yield curve, narrowed to the least since January 2009 as crude oil fell below $50 a barrel in New York for the first time since April 2009. German inflation slowed to the weakest in more than five years in a sign that euro-area prices have started to decline. The chance of a Fed interest-rate increase by its September meeting was at 63 percent.

Chaos Rules at Russian Hedge Fund as Boss Vanishes; Blackfield Capital Had Ambitious Plans to Expand in U.S.
By Bradley Hope, WSJ
Blackfield Capital CJSC was one of Moscow’s hottest hedge funds, hosting glitzy parties and embarking on ambitious plans to expand to the U.S. The firm’s founder in 2013 even rented a Manhattan apartment for a record-setting price, according to a real-estate broker, and instructed his U.S. staff to buy a $300,000 sports car. Now, the founder is missing, allegedly along with all of the firm’s assets, according to former employees, in an international mystery that has captivated Moscow’s investment community.

Bond Market Waiting for Godot in Credible Contrarian Narrative
Lisa Abramowicz – Bloomberg
Most Wall Street analysts predicted a bear market for bonds in 2014 and got it wrong. Who’s to say they’ll get it right this year?
After all, today’s consensus forecast is similar to what it was a year ago: U.S. government-bond yields will finally start climbing as the Federal Reserve prepares to raise interest rates. Analysts predict benchmark 10-year yields will rise to 3.06 percent by year-end from 2.05 percent today.

U.S. Company-Bond Market Set for Flurry of Sales
Sridhar Natarajan – Bloomberg
The lull in the U.S. corporate-bond market is poised to end as companies return to finance acquisitions and roll over maturing debt amid forecasts for rising interest rates.
Investment-grade bond offerings may reach as much as $100 billion this month with supply probably dominated by financial issuers, according to a Bank of America Corp. report dated Dec. 29. Communications companies will provide another boost to borrowing as the industry’s maturities will peak in the first quarter for companies across the ratings spectrum, according to Bloomberg Intelligence analyst Erich Marriott.

Janus’ Gross Sees No Rate Increase Until Late 2015 ‘If at All’
Mary Childs – Bloomberg
Bill Gross, the former manager of the world’s largest bond fund, said the Federal Reserve won’t raise interest rates until late this year “if at all” as falling oil prices and a stronger U.S. dollar limit the central bank’s room to increase borrowing costs.

Top GFI staff seek exit clause if rival BGC bid succeeds
Philip Stafford, FT
More than 100 senior employees at GFI Group, the US interdealer broker, are seeking changes to their contracts that would allow them to leave the company if a hostile takeover bid by rival BGC Partners is successful.

E-Trading Disruptors Seek Untapped Liquidity in Corporate Bonds
Ivy Schmerken, WallStreet & Technology
Capital Markets Outlook 2015: Drawing on consumer tech examples like Spotify and Amazon, a new wave of fixed-income trading platforms is determined to help the buy side find liquidity in corporate bonds.

OCC enjoys second highest year for cleared contracts
Securities Lending Times
OCC cleared 4,333,019,384 contracts in 2014, a 4 percent increase from the 2013 volume of 4,170,855,768 contracts.
This total has made 2014 the second highest year for OCC cleared contract volume to date behind 2011’s record volume of 4.6 billion contracts.

Central Banks

Draghi Girds for Risk of Deflation With His Finger on the Bond-Buying Button
Catherine Bosley – Bloomberg
Mario Draghi will this week get his first taste of one of the dominant challenges for the euro-area economy for 2015.
Consumer prices probably recorded the first annual decline in more than five years in December amid a slide in the cost of oil, aggravating concern at the European Central Bank that subdued inflation will become entrenched. With Italy in recession, French momentum lackluster and Germany struggling to leave a weak patch behind, policy makers are haggling over stimulus as governments drag their feet on economic reforms.

White House Expected to Nominate Community Banker to Federal Reserve
Kristina Peterson And Victoria McGrane – WSJ
President Barack Obama is expected to nominate a community banker to the Federal Reserve’s Board of Governors as soon as this week, according to several people familiar with the administration’s plans.
A White House official didn’t comment on the report and said Monday the administration had no personnel announcements. Mr. Obama’s plans were first reported by Politico.

HIGHLIGHTS-Recent remarks by U.S. Federal Reserve officials
Following are highlights from remarks on the economy and monetary policy delivered by Federal Reserve officials since the statement issued by the U.S. central bank’s Federal Open Market Committee on Dec. 17.

‘Patient’ Party Gives Way to Hangover — Ahead of the Tape
Spencer Jakab – WSJ
Investors got an early Christmas present from Janet Yellen and the Federal Reserve last month.
The positive reaction to the word “patient” in the central bank’s postmeeting statement helped send the Dow Jones Industrial Average nearly 1,000 points higher from shortly before the Fed chairwoman’s Dec. 17 news conference to Dec. 26. For some perspective, that equals two-thirds of the index’s appreciation for all of 2014.

Global Central Banking in 2015, a First Quarter Update for 25 Economies
Jon Hilsenrath – WSJ
The world’s central banks will navigate three defining cross-currents in 2015: A Federal Reserve that has grown more confident about the prospects for the U.S. economy; troubling doubts about growth in the world’s other large economies; and an oil price drop that will make it difficult to read which way inflation trends are moving.


Why 2014 Went Wrong for the Eurozone; Currency Bloc Was Supposed to Exit Debt Crisis, but Three Factors Held It Back
By Simon Nixon, WSJ
It was supposed to be the year the eurozone exited its debt crisis, when growth would return to the currency union bringing with it confidence and jobs. But 2014 didn’t work out that way. Although the economy emerged from its double-dip recession, likely growth of just 0.8% was even more feeble than the 1.2% forecast at the start of the year, while inflation fell alarmingly close to 0%, raising fresh questions about debt sustainability.

More scrutiny needed of retail forex trading platforms
Jonathan Ford, FT
Bets sold as way to dodge investment doldrums and get rich quick
The focus of most regulators in Europe and the US since the financial crisis has been on tightening the rules in professional markets. Whether the Libor scandal or the foreign-exchange rigging, fines and opprobrium have rained down mainly upon the heads of highly paid traders and their investment bank employers.

JPMorgan Settles Investor Foreign-Exchange Rigging Lawsuit
Bob Van Voris – Bloomberg
JPMorgan Chase & Co. (JPM) agreed to settle a lawsuit over its role as one of a number of banks that allegedly rigged prices in the $5 trillion-a-day foreign exchange market.
A group of institutional investors sued more than a dozen banks in Manhattan federal court in 2013, claiming top currency traders used closed-network chat rooms with names such as “The Cartel,” “The Bandits’ Club” and “The Mafia” to share confidential client information and manipulate the benchmark WM/Reuters rates.

Indexes & Index Products

Nasdaq buys US index provider for $225m
Nicole Bullock in New York and Philip Stafford in London, FT
Nasdaq is pushing further into indexing and the growing market for exchange traded funds with the purchase of Dorsey Wright, a US index provider and analytics group, as part of a strategy to diversify its business.

An Analysis Of Why Volatility Indexes Are Still Relevant
Mark Shore – Benzinga
Financial markets are about making decisions in moments of uncertainty.
The one certainty one can make is that no one has a crystal ball, nor can anyone predict with certainty what will occur in the future. Although seeking methods to manage portfolio volatility and tail risk may fall out of fashion from time to time based on market sentiment, it should always be utilized as part of the risk management process. Volatility indexes are instruments that may assist in the risk management process.


BitGold raises $3.5 million from Soros Brothers, Sandstorm Gold
A gold exchange company that borrows some technology from Bitcoin has raised $3.5 million for a series A financing from a group of investors that include PortVesta Holdings, Soros Brothers Investments, PowerOne Capital and Sandstorm Gold.

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