First Impressions

FinTech Chicago Gets Democratic

In case you missed it:
Today’s financial technology dialogue is often about a word you don’t usually associate with it – democracy – bringing software, data, reporting, testing and trading to the masses. And it’s not just one size for everyone – its customizable too. At the FinTech Exchange 2015 Chicago event, 13 firm executives spoke during its lightning round. So John Lothian News took the best of two hours of presentations and condensed it into three minutes. Here’s how some of those firms are democratizing and customizing technology for all of us.
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Quote of the Day

“Volume has been significant but not frenetic given the move in yields. It is still not clear to most market participants what is driving the intense sale [of European bonds].”

Jim Vogel, an interest-rate strategist at FTN Financial, in a note Thursday from the story, “You Call This a Bond Rout? Wait Until the Real Selling Starts”

Lead Stories

You Call This a Bond Rout? Wait Until the Real Selling Starts
By Lisa Abramowicz – Bloomberg
If you think the latest hiccup in world bond markets looks bad, wait until investors actually start selling their holdings.
Yes, German and U.S. bond yields have soared to their highest levels this year. And, yes, more than $626 billion of value has simply evaporated from an index of global sovereign bonds since the end of March.

Behind Bond Market’s Latest Tantrum
By Justin Lahart – WSJ
Government bonds are beating a hasty retreat. While the speed of recent moves is plenty disconcerting for investors, so too is the lack of a clear catalyst for the carnage.

EM most at risk from bond market ‘tantrums’
By Gene Frieda – Financial Times
The recent volatility in fixed income markets has once again highlighted a “global warming” in financial markets: the price response to new events and data has become much more extreme due to changes in market structure.

Lagarde’s Lecture to Yellen Means It’s Time for Everyone to Brush up on Dornbusch 101
By Tom Keene – Bloomberg
“The day when Rudi Dornbusch presented his 1976 overshooting paper was different. All the graphs were labeled that day and he seemed to have organized notes, not that he drew on them much. The excitement in the room was palpable, as the logic behind overshooting unfolded. You could see in the students’ faces that something special was happening.”
The above quote is from Kenneth S. Rogoff’s speech Dornbusch’s Overshooting Model After Twenty-Five Years, delivered at the 2001 Mundell-Fleming Lecture.

U.S. House, Senate Democrats push for alternative financial bill
By Sarah Lynch – Reuters
Democrats in the U.S. House of Representatives teamed up with their counterparts in the Senate on Wednesday to promote a banking regulatory relief bill they say is better than a broader version pushed by Republicans.

Deutsche Bank to Bond Investors: Wake Up and Smell the Fundamentals
By Tracy Alloway – Bloomberg
Pop quiz. Which corporate debt has performed better this year — the U.S. dollar-denominated bonds issued by Russian companies or investment-grade U.S. corporates?

Hong Kong Exchange Bets Chinese Traders Are Just as Good as High-Frequency Ones
By Eduard Gismatullin – Bloomberg
Hong Kong’s stock exchange is counting on hundreds of millions of mainland Chinese investors, traders and speculators to provide the liquidity that high-frequency traders supply in most other major markets.

Cramer: Greece is still the word
By Jim Cramer – OptionMonster
Do we focus on Greece too much? Does the media overplay its importance? Are the 11 million people in this small country really able to bring down a continent with 742 million people?

Dodd-Frank Law Comes Under Fire From Private Equity Executives – Private Equity Beat
By Ayesha Javed – WSJ
Regulation such as the Dodd-Frank Wall Street Reform and Consumer Protection Act came under scrutiny from private equity executives Tuesday evening during The Wall Street Journal Private Equity Analyst Conference in New York.

Bernanke Calls TARP Great Success, Praises FDR, Chides Dimon And Mellon
By Evan Simonoff – Financial Advisor
Calling TARP one of the most successful pieces of legislation ever passed by Congress, former Fed Chairman Ben Bernanke offered a number of far-reaching observations about both the recent financial crises and those of yesteryear.

TED spread suggests correction may be coming
By Michael A. Gayed – MarketWatch
In recent writings, I have been aggressively attacking the notion that we live in a world of little risk. As a matter of fact, I penned a column titled “America, You Can Do Better” for Marc Faber of the Gloom, Boom, and Doom Report in which I went after the complete disregard of all fundamental, technical, macro and quant analysis by the majority of the Street who worship at the alter of the Fed.

Treasury to Sell $106 Billion in Debt
The Treasury Department will auction $106 billion in new and reopened securities next week.

Central Banks

IMF warns U.S. Federal Reserve should delay rate hike until 2016
By David Chance – Reuters
The U.S. Federal Reserve should delay a rate hike until the first half of 2016 until there are signs of a pickup in wages and inflation, the International Monetary Fund said in its annual assessment of the economy on Thursday.

BOE Keeps Key Rate at Record Low as U.K. Recovery Doubts Persist
By Scott Hamilton and Jill Ward – Bloomberg
At the Bank of England, the more things change, the more they stay the same.
That’s how it must seem for officials as Governor Mark Carney trials a new structure for interest-rate meetings that will transform how they communicate policy. However much they change in style, BOE decisions remain dominated by issues that have lingered for years: a domestic recovery tinged with doubt and a Greek crisis overshadowing the euro area, Britain’s largest export market. The BOE held its key rate at a record low on Thursday, as unanimously predicted by economists.

ECB Stands Ready to Provide More Stimulus
By Brian Blackstone and Todd Buell – WSJ
European Central Bank President Mario Draghi rejected concerns among investors that a recent rise in consumer prices could spur the bank to wind down its stimulus programs early, saying that the ECB’s bond buying program will proceed full throttle and could even be increased if needed.

Peter Pan inspires Japan monetary policy
By Patrick McGee and Robin Harding – Financial Times
Bank of Japan governor Haruhiko Kuroda has revealed the inspirational force behind the central bank’s unprecedented monetary stimulus: Peter Pan.

China Swaps Rise to Four-Week High on Interbank Market Opening
Yuan clearing and settlement banks based abroad that are permitted to trade bonds on the interbank market will be allowed to borrow through repurchase agreements, according to a People’s Bank of China statement on its website Wednesday.

Ibovespa Leads World Losses as Swaps Show Higher Interest Rates
By Denyse Godoy and Filipe Pacheco – Bloomberg
The Ibovespa led losses among global major benchmarks and swap rates indicated Brazil’s central bank will raise borrowing costs three more times this year, imperiling an economy forecast to contract the most since 1990.


Euro Pop: A Lesson in Crowd Mentality
By Adam Warner – Schaeffer’s Research
Remember all the way back earlier this week when we noted the popularity of a fund that tracked German stocks minus the currency risk? The thought was that Europe would keep rising thanks to their quantitative easing (QE), but that same QE made the euro itself unattractive.

Marco Polo New World launches MPFX – new direct FX market access platform
By Mike Fox – LeapRate
Marco Polo New World, a New York and London based provider to global brokers, high frequency trading firms, and other financial institutions is pleased to announce the launch of MPFX – their new platform that provides access to FX liquidity from both bank and non-bank sources.

Trading Futures FX Or Spot FX… What Are The Advantages/Disadvantages?
By Darrell Martin – Benzinga
Are there any advantages or disadvantages to trading futures forex (FX) or spot FX? You may prefer one over the other, but let’s look at what makes them different.

‘Parity is likely for the EUR/USD this year’ (Video)
By Jordi Martinez – FXStreet
Last week Jameel Ahmad, Chief Market Analyst at ForexTime (FXTM), visited our office in Barcelona and we conducted a special edition of our Conversations with Forex Experts with him.

Indexes & Index Products

There’s a Big Decision Looming for Chinese Stocks
By Belinda Cao Ye Xie – Bloomberg
A New York-based company is getting ready to make a call on China that will determine whether billions of dollars flow into the nation’s world-beating stock market.
The June 9 decision by MSCI Inc. on the possible inclusion of China’s locally traded shares in the index-provider’s equity benchmarks comes after a year of consultation with banks and funds. MSCI is faced with a situation where it’s getting harder to ignore the Chinese equity market, already the world’s second-largest with a total value of more than $9 trillion. Yet for most international investors, mainland-listed stocks remain out of reach due to limitations on their tradability.

S&P 500 Benchmarked Assets Reach $7.8 Trillion; $3.05 Trillion Invested in Products Indexed to S&P DJI Indices
Press release
S&P Dow Jones Indices (“S&P DJI”), one of the world’s leading index providers, announced today that is has published its annual survey of indexed assets. According to the survey, approximately $7.8 trillion is now benchmarked to the iconic S&P 500® with $2.16 trillion of that figure directly indexed via exchange traded funds (ETFs), mutual funds, and other investment product structures.

Full weight of MSCI’s A shares decision will depend on Beijing
By John Authers – Financial Review
It is not quite like waiting for white smoke over the Vatican but, for anyone investing in emerging markets, it comes close. Next Tuesday we will find out the results of the latest reshuffle of the MSCI Emerging Markets index and so will know whether Chinese A shares have been added.

FTSE Russell launches dividend-focused indices
By Taylee Lewis – InvestorDaily
The FTSE RAFI Equity Income Index Series will track high-dividend paying stocks that are screened to target sustainable income, an FTSE Russell statement said.

Westports replaces FGV in Bursa Malaysia KLCI
The Malaysian Insider
FTSE Russell and Bursa Malaysia Bhd have announced that Westports Holdings will replace Felda Global Ventures Holdings in the FTSE Bursa Malaysia KLCI, following the semi-annual review of the FTSE Bursa Malaysia Index Series today.


Why Most Pundits are Dead Wrong About China’s Gold
By Jim Rickards – Money Morning
One of the most persistent story lines among ‘gold bugs’ and market participants who foresee the collapse of the US dollar goes something like this… ?

Will Federal Reserve Be Caught Without Gold In ‘Repatriation Rush’?
By Mac Slavo – ETF Daily News
Gold accumulation is happening at a very astounding rate – and the repatriation of gold by foreign nations, and now states, is setting a tense deadline for the most massive currency war ever seen on a global scale.

World’s biggest gold ETF loses place in U.S. top 10
By Jan Harvey – Reuters
The world’s largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, is no longer one of the top 10 U.S.-listed ETFs by value, according to data from FactSet.
The value of the GLD fund, which issues securities backed by physical bullion, dwindled to $27.148 billion this week, data on its website showed, as its gold holdings fell to their lowest since mid-January at 709.9 tonnes.


Insight – Banks wary of doing FIFA business in wake of bribery scandal
By Brett Wolf and Douwe Miedema – Reuters
The disclosure that some of the world’s largest banks had been used as a conduit for bribes allegedly paid to football officials has prompted the banks to scrutinize their ties with FIFA, and could make it more difficult for the sport’s powerful governing body to move money around the world.

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