First Impressions

Data Dive: CFTC’s O’Malia says swaps analytics need work
JohnLothianNews.com
The CFTC is mandated to help police the futures arena and its much bigger relative, the swapsmarket. Collecting and monitoring data on the swaps market has been a vexing problem for the agency, but CFTC Commissioner Scott O’Malia said it will solve it.

“We have four different trade repositories, all of them accepting different data,” he said. “All of them have a different data architecture. So that means aggregating it is much difficult.”

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Quote of the Day

Liquidity premia were likely too low and liquidity risk very probably under-priced before the crisis. Market participants will need to recognise this change in market structure and adjust their balance sheets accordingly.

Bank of England Deputy Governor Jon Cunliffe, as quoted in the Reuters story “BoE’s Cunliffe tells banks to prepare for post too big to fail world”

Lead Stories

US calls on China to do more to overhaul exchange rate policy
Tom Mitchell in Beijing – FT.com
Jack Lew, US Treasury secretary, on Tuesday called on Beijing to “renew” a pledge to overhaul its exchange rate policy, in his first visit to the Chinese capital since the renminbi began to reverse its climb against the dollar earlier this year.
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Taiwan trading platform to sign yuan-exchange deal with Eurex by year-end
Reuters
Taiwan’s Gre Tai Securities Market will by the end of this year sign a deal with the Eurex Exchange to provide cross-border exchange services in Chinese yuan-denominated bonds, Gre Tai representatives said on Monday.
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Asia: Addicted to debt
Josh Noble in Hong Kong – FT.com
Can Asia overcome its addiction to debt? That is the question across the region as economies slow and borrowing costs rise. After more than a decade of often blistering growth, many fear that Asia’s golden era may be drawing to a close.
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***DA: Might as well face it.

Spain taps demand for ‘linker’ bonds
Elaine Moore and Robin Wigglesworth – FT.com
Spain is preparing to sell a bond linked to rising consumer costs for the first time as it seeks to expand government funding options in the wake of the eurozone crisis.
jlne.ws/1l8CFon

***DA: Inflation has been “just around the corner” for years. I guess there is a market for those who believe it.

Bank of China to list RMB bond on Luxembourg Stock Exchange
Bank of China will list its first offshore RMB “Schengen bond” on the Euro MTF market of the Luxembourg Stock Exchange, according to a press release published on Monday by Bank of China Luxembourg Branch.
jlne.ws/1ooaWVY

U.S. investor Jim Rogers pegs junk bonds as a short-sell candidate
Reuters
Junk bonds, which have done well this year, look like the most promising short trade the bond market has to offer, prominent investor Jim Rogers told Reuters in an interview on Monday.
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***DA: Count Rogers among those who think the search for yield has run its course. He’s not wrong, but he may be early.

Sub-Saharan Africa: A case for the defence
Euromoney magazine
Sub-Saharan Africa sovereigns, with mostly weak debt histories, have thrown caution to the wind in recent years, joining the ranks of international issuers, driven by a bid to access long-term dollar financing for infrastructure investments, to diversify sovereign borrowing sources and to establish benchmarks for corporates at a time of low rates.
jlne.ws/1l8CCZX

Greater fools, CoCo edition
David Keohane | FT Alphaville
We asked investors to rate their understanding of cocos relative to the rest of the market. Interestingly, hedge funds rated themselves the most knowledgeable, vs for example, pension funds. The survey showed investors are slightly guilty of hubris, with 90% of respondents rating themselves higher than the market. They cannot all be right. You’d almost suggest they’re not thinking straight.
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***DA: I once read a study where people claimed a 99 percent rate of certainty about an event or a fact in the study, but turned out to be wrong about 40 percent of the time.

Central Banks

Bundesbank Open to Significant ECB Stimulus in June if 2016 Inflation Forecasts Lowered
WSJ.com
Germany’s central bank is willing to back an array of stimulus measures from the European Central Bank next month, including a negative rate on bank deposits and purchases of packaged bank loans if needed to keep inflation from staying too low, a person familiar with the matter said.
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***DA: Negative interest rates, unlimited loans to commercials, but no large scale QE. We have standards, you know.

BoE’s Cunliffe tells banks to prepare for post too big to fail world
Reuters
Britain’s banks should start adjusting their balance sheets to a world where they are no longer “too big to fail”, Bank of England Deputy Governor Jon Cunliffe said on Tuesday.
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***DA: What’s the hurry? It’s only been SIX YEARS SINCE THE CRISIS!

Bank of Italy aims to channel more ECB funding to small firms
Reuters
The Bank of Italy aims to improve financing conditions for small businesses through new measures that would enable domestic banks to use their current account facilities to secure European Central Bank funding, banking sources said.
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***DA: Share the wealth.

Banks can sell all structured derivatives abroad: RBI
Business Standard
The Reserve Bank of India (RBI) on Monday said banks could offer structured derivatives through foreign branches even if these products weren’t allowed in India. The central bank, however, added these products could only be sold in established financial markets.
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Currencies

Euro Bonds Lose Sway in Blow to Draghi’s Stimulus Plan
Liz Capo McCormick and Lukanyo Mnyanda – Bloomberg
For the first time since 2009, the euro is strengthening even as the region’s benchmark bond yields lose ground to their counterparts in the U.S.
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***DA: The curse of higher credit quality in the periphery.

It’s not easy having loads of FX reserves
FT Alphaville
Via Reuters on Monday (H/T Marc Ostwald): A capital account deficit would be a good thing for China, the head of the central bank’s research unit said on Monday, because it could be used to offset the current account surplus and China would not need to accumulate foreign reserves continuously.
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***DA: This is a fantastic real-world example of macroeconomic theory. If you have the time it is worth a read. There is much more there than meets the eye.

Xetra/Börse Frankfurt: First Renminbi Bond Listed In The Regulated Market
The first bond denominated in Chinese renminbi was listed in the regulated market of the Frankfurt Stock Exchange today. This enables more than 230 trading participants in 18 countries to trade this bond on a transparent and efficient market.
jlne.ws/1l8CCZM

Emerging markets forex rally may yet fizzle
James Mackintosh – FT.com
It might come as a surprise that since the end of January – when Viktor Yanukovich was entering his dismal final days as Ukrainian president – the Russian rouble is not down by a half, a third or even 10 per cent. It is in fact slightly stronger against the dollar, in spite of massive capital outflows, western sanctions and a central bank forced to move to an emergency footing.
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Bitcoin Mining Company CoinTerra Enters Cloud Mining
Paul Vigna – MoneyBeat – WSJ
Amid rapid changes in the bitcoin mining industry, another bitcoin miner is going into the cloud. CoinTerra on Monday announced that it will begin offering cloud-based mining services to its customers, becoming the second big miner this month to make the move.
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Bitcoin Processor Raises $30 Million
Michael J. Casey – WSJ.com
Virgin Group Chairman Richard Branson and Yahoo Inc. co-founder Jerry Yang are part of an investor group that plowed $30 million into Bitpay, valuing the bitcoin-payments processor at about $160 million in the biggest venture-capital investment in the digital-currency industry.
jlne.ws/1l8CDwZ

Investment Professional Teams With Bitcoin Experts to Launch Coin Capital
The Economic Voice
Today Coin Capital Management, LLC announces the launch of Bitcoin-focused hedge fund Coin Capital Partners, LP, which will buy and hold the leading cryptocurrency in an institutional grade environment.
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Thomson Reuters Named Best Multibank And Independent Platform in Euromoney FX Poll For 12th Year In A Row
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Indexes & Index Products

LSE in talks to buy Russell to expand in U.S. stock indices
Reuters
The London Stock Exchange (LSE) is in talks to buy Seattle-based Russell Investments in a deal that would expand its stock index business in the United States, the world’s largest equities trading market.
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S&P Dow Jones Indices Launches Extensive Offering of Regional African Indices
PR Newswire
S&P Dow Jones Indices (SPDJI) announced today that it has launched the deepest and most extensive suite of African equity indices currently available to investors.
jlne.ws/1qzt29A

Qatar bourse says to list first exchange-traded funds
GulfNews.com
Qatar’s bourse plans to list its first exchange-traded funds (ETFs) this year and these will be much larger than ETFs listed elsewhere in the Gulf, the stock exchange said on Sunday.
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Vanguard To Expand Low-Cost ETF Lineup
CNW
Vanguard Investments Canada Inc. plans to broaden its family of low-cost exchange-traded funds (ETFs) to 21 with the addition of 5 ETFs. The firm has filed a preliminary prospectus with the Canadian securities regulators for three international equity ETFs and two international bond ETFs.
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Gold

Chinese Bid Values Mining Company PanAust at More Than $1 Billion
WSJ.com
China moved to cement its influence in tiny Laos, with a state-owned company offering more than $1 billion to buy a copper-and-gold mining company that produces close to a third of the developing Southeast Asian nation’s exports.
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A Gold Investing “Cheat Sheet” for 2014
Money Morning
With gold trading at roughly $1,300 an ounce, many investors are asking themselves if now is the time to buy gold. I think that’s the wrong question.
jlne.ws/1lsLMCd

In India, Platinum Demand Takes Off
WSJ.com
When 28-year-old Neha Mishra marries later this month, she will break a long-held Indian tradition by slipping on platinum jewelry rather than heavy, gold ornaments.
jlne.ws/1l8CJ7C

Gold rises on Ukraine tensions; physical demand weak
Reuters
Gold rose on Monday as heightened tensions in Ukraine spurred some safe-haven buying, but a lack of strong physical demand could weigh on prices, analysts said.
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