| | | | | | | | March 23, 2016 | | | | | First Impressions | | |
2016 Exchange CEO Series: CME's Gill Looking For Customer Efficiencies PART 2 of 2
JohnLothianNews.com
With new capital requirements of banks and other institutions, John Lothian News sat down with CME Group's CEO Phupinder Gill at the FIA Boca Conference to talk about CME's new cleared swaptions service through its clearinghouse, and a repo futures contract.
CME is now well-focused on developing products that do two things - provide tradeable contracts and also reduce the overall costs constraints on market participants. In interest rates, the exchange is expanding beyond traditional futures and options products into the so-called repo market, or Treasury repurchase transactions space, which has struggled in recent months.
| | | | | | Quote of the day: | | | | | | “ | "For him to say he was surprised by the size of the position is clearly not good. It highlights, at best, historic control failures and is not good for confidence."
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| ” | Laurent Frings, co-head of European credit research at Aberdeen Asset Management Plc, in the story, "Credit Suisse CEO, Blindsided by Risk Buildup, Cuts Jobs"
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| | | | Lead Stories | | |
Credit Suisse CEO, Blindsided by Risk Buildup, Cuts Jobs
Jeffrey Voegeli and Richard Partington - Bloomberg
Credit Suisse Group AG Chief Executive Officer Tidjane Thiam, who said he was blindsided by a buildup of illiquid trading positions that will probably spark a first-quarter loss, pledged to make deeper cost cuts. The global markets unit, which houses securities trading, will lose money in the quarter as revenue drops as much as 45 percent from a year earlier, Credit Suisse said on Wednesday. Holdings of distressed debts, leveraged loans and securitized products triggered $258 million of writedowns in the period, with the CEO saying some of the positions were built up without his knowledge.
bloom.bg/1ZtGgCk
****SD: Looks like their effort to create a venture with the goal of stopping "rogue employees before they can harm the bank" can't come soon enough. Credit Suisse's press release here
Credit Suisse cuts show decline of the European bank trading floor
Reuters
Credit Suisse's announcement on Wednesday that it will lay off thousands more employees from its trading operations shows how much ground Europe's big banks are losing to U.S. rivals in financial market trading. The 2,000 job cuts at the Swiss bank follow 4,000 announced as recently as January, and come at the end of what Chief Executive Tidjane Thiam said was one of the worst first quarters for trading on record.
reut.rs/1ZtMQsB
Are Credit Default Swaps Worse than You Thought?
FTF News
A new white paper from the Office of Financial Research (OFR), a division of the U.S. Treasury Department, has found that when big banks conduct their stress tests they should be more aware of the dire consequences that indirect counterparties of credit default swaps (CDSes) can have. In fact, the new research suggests that the indirect results are nine times greater than the direct impacts of CDS counterparty problems.
goo.gl/Be7nsw
Junk Bond Traders Are Really Oil Traders Now as Markets Converge
Bloomberg
The fortunes of junk-bond traders have never been more closely linked to oil. The high-yield bond market has been rallying since Feb. 11, the exact day that oil reached a bottom. Prices on the bonds of speculative-grade energy companies are always linked to oil, but in recent weeks, credits outside that industry have also been moving with the commodity. The correlation of the returns of non-energy junk bonds with oil is at all-time highs, according to Deutsche Bank AG strategists. Usually there's little real relationship between the two. Non-energy junk bonds make up about 88 percent of the market, according to Bank of America Merrill Lynch index data.
bloom.bg/1S6ZzvI
What can be done about the global economic slow puncture?
Financial Times
The world economy is suffering from a slow puncture. Nominal economic activity  the value of gross domestic product, not just its volume  is persistently lower than expected. Despite huge amounts of monetary stimulus, both conventional and, increasingly, non-conventional, central banks are struggling not just to secure a healthy economic recovery but also a healthy inflation rate. In many countries and regions, inflation is simply too low.
goo.gl/8As8ej
U.S. Companies Leading M&A Surge Despite Treasury Action to Limit Transactional Options
Lexology
David Forst and Jim Fuller of Fenwick & West summarise numerous developments in the U.S. M&A tax landscape after a record year for dealmaking - driven by healthcare and technology industries - which puts 2015 on par with 2007 numbers, adjusted for inflation.
goo.gl/fqFhYb
****SD: From Business Insider yesterday: IPOs and merger activity collapsed to start 2016
RBS needs to cut further to hit targets
Financial Times
Hundreds of job cuts, more branch closures and a move to offload millions of pounds of pension expenses to employees are among the latest attempts by Royal Bank of Scotland to slash costs. Since RBS posted its eighth successive net annual loss last month  when Ross McEwan, chief executive, warned there would be more pain to come  the bank has stepped up its turnround efforts.
goo.gl/LrxL7x
****SD: But are there enough unemployed robots to fill their shoes?
Credit Suisse, the Jailed Banker and an Oligarch's Millions
Hugo Miller, Jeffrey Voegeli and Helena Bedwell - Bloomberg
For years, he was a member of the elite of Swiss bankers. Now, the former Credit Suisse wealth manager is in a prison hospital in Geneva, charged with fraud, misappropriation, and criminal mismanagement, facing as many as 10 years behind bars. The case reaches beyond the executive, who under Swiss law can't be identified in public. Credit Suisse now faces criminal accusations from three clients, alleging it played a role in the fraud.
bloom.bg/1ZtH4qQ
****SD: I find the story's readability heightened by not knowing the name of the main character; it allows for your imagination to really take hold.
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| Central Banks | Yellen Will Meet 2% Inflation Goal Judging by Treasury Yields
Bloomberg
The Treasury market is signaling inflation expectations are rising, and one metric shows traders anticipate price increases will reach Federal Reserve Chair Janet Yellen's 2 percent target. The difference between yields on one-year U.S. government securities and same-maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, climbed to as high as 2.11 percentage points Tuesday. That was the highest in two years.
bloom.bg/1ZtJsOg
Fed Chair Yellen has a mini revolt on her hands as dissenters emerge
CNBC
Fed Chair Janet Yellen has something of a mini revolt on her hands. Four of the 17 members of the Federal Open Market Committee have now publicly indicated their disagreement with the dovish guidance in last week's policy statement and in comments from Fed Chair Janet Yellen at her press conference.
cnb.cx/1ZtIRMx
Helicopter Money Takes Flight as Latest Drastic Monetary Idea
Bloomberg
After more than 600 interest-rate cuts and $12 trillion of asset purchases failed to move the inflation needle enough, central banks may need to head even deeper into uncharted territory. The way to get the world out of its disinflationary rut could lie in them directly financing government stimulus -- a strategy known as deploying "helicopter money" after a 1969 proposal from Nobel laureate Milton Friedman.
bloom.bg/1ZtIgdR
Bullard Sees Case for April Hike as Inflation Set to Pick Up
Bloomberg
Federal Reserve Bank of St. Louis President James Bullard said policy makers should consider raising interest rates at their next meeting amid a broadly unchanged economic outlook and prospects of inflation and unemployment exceeding targets.
bloom.bg/1ZtJpSL
Malaysia central bank says to act against 1MDB over $1.8 billion foreign funds
Reuters
Malaysia's central bank said on Wednesday it would pursue administrative action against 1Malaysia Development Bhd (1MDB), after the troubled state fund missed a deadline to submit documents on its finances abroad. 1MDB, whose advisory board is chaired by Malaysian Prime Minister Najib Razak, has been the subject of investigations over the last year by authorities in Malaysia, Switzerland and the United States following accusations of financial mismanagement and graft. 1MDB has denied the allegations.
reut.rs/1WJBxdZ
Central Bank bond buying is no panacea
FXStreet
Analysts at Brown Brothers Harriman explained one can fully agree that the buying of corporate bonds, which only the BOJ of the major central banks have included under its asset purchase program, is not ideal and is no panacea, without dismissing the effort as ineffective or incredible as in lacking credibility.
goo.gl/U6ntg8
| | | | Currencies | Fed rate hike expectations jolting currencies
CNBC
The dollar is flexing its muscles again, now that Fed officials are suggesting a rate hike may come sooner rather than later.
The dollar firmed as commodities sold off, sending the dollar index up 0.5 percent to just above 96. Platinum plunged more than 3.5 percent in its worse sell-off since January, while gold lost about 2 percent to $1,223 per troy ounce.
cnb.cx/1SicKMS
Central Banks' Impact: Credit, Not Currencies
WSJ
Central-bank watchers seeing decreasing sway on markets from attempts to stimulate economies might be looking in the wrong place. They should check out the credit markets.
on.wsj.com/1Sid0eO
Is Bitcoin Really Frictionless?
Liberty Street Economics
Bitcoin is the most popular virtual currency yet developed. Proponents assert that bitcoin can remove frictions involved in payment and settlement systems by eliminating the need for the financial intermediaries that exist in traditional currencies. In this blog post, we show that while bitcoin transfers themselves are relatively frictionless for the user, there are significant frictions when bitcoins trade in exchange markets resulting in meaningful and persistent price differences across bitcoin exchanges. These exchange-related frictions reduce the incentive of market participants to use bitcoin as a payments alternative.
nyfed.org/1ZtIxxk
The Geopolitics Risks Impacting Currencies (VIDEO)
Bloomberg
The euro fell against most majors, after at least 31 people were killed in explosions in Brussels and Belgium raised the terror-alert level to the highest. The yen appreciated fuelling demand for the currency as a refuge.
bloom.bg/1WJBTBo
Mexico's Peso Is Looking Tame After a Very Bumpy Start to 2016
Bloomberg
Options traders' expectations for swings in the Mexican peso fell to a two-month low, signaling the success of policy makers' move to sell dollars directly to banks at their discretion and end a rules-based intervention program.
bloom.bg/1ZtH6PA
| | | | Indexes & Index Products | Flows to Volatility ETFs Becoming Deluge as S&P Rally Hedged
Bloomberg
The longer the rebound in the Standard & Poor's 500 Index lasts, the more traders are piling into hedges that pay out if it comes crashing down. Take the TVIX, an exchange-traded note betting on an increase in the Chicago Board Options Exchange Volatility Index, which absorbed $160 million on Monday, the most ever for a single day and almost twice the security's previous record. A leveraged ETF returning twice the performance of the VIX has also seen all-time inflows, even with the fear gauge below 15 for five straight days, the longest such streak since August.
bloom.bg/1S6lZ04
Morningstar's Annual Global Asset Flows Report Shows 2015 Inflows One-Third Lower than in 2014
Press Release
Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today published its fourth annual Global Asset Flows Report examining worldwide 2015 mutual fund and exchange-traded product (ETP) asset flows. At $949 billion, total flows in 2015 were notably lower than the $1.4 trillion that flowed into funds globally in 2014. The U.S. fund industry had new asset flows of $263 billion, down from $580 billion in 2014. Asia showed the strongest organic growth rate, 18.6 percent, among the regions analyzed by Morningstar.
goo.gl/0JSlEz
Vanguard Tackles the Pitfalls of Muni Indexing
Morningstar
In August 2015, Vanguard launched the market's first tax-exempt index open-end mutual fund, which also featured an exchange-traded fund share class. Prior to the launch, there were only a handful of broad-based muni index ETF options available to investors and no open-end index mutual funds; many managers cited the muni market's diverse and fragmented nature as challenges to successful indexing.
goo.gl/X85NhM
Long-term thinking could become focus for a new index fund
Reuters
S&P Dow Jones Indices is negotiating with asset managers to license its new index, which it says represents companies that focus on the long term rather than the current quarter.
The Long-Term Value Creation Global Index .SPLTVCUN could be the basis for one or more mutual funds, exchange-traded funds or structured products, Vinit Srivastava, S&P's senior director of equity strategy, said in an interview last week.
reut.rs/1Rg5wtO
Do Index Funds Beat 'Smart Beta'?
TheStreet
Smart-beta funds fall somewhere between index and active management because they are rules-based. That does not make them better performers, said Francis Kinniry, a principal in Vanguard Investment Group.
goo.gl/Yj2U08
| | | | Gold | Put Some Gold In Your Portfolio, It's A Great Way To Diversify
Forbes
Gold is never going to be currency again. Unless civilization collapses through some semi-extinction event, gold will never be functional money.
It's a dream for many and in a way it is sad that we will never again have silver and gold in our wallets, because gold coins are lovely. I had the extreme pleasure of finding a gold coin a week or so ago in the Thames river in London and there is nothing like holding a gold coin in your hand. It's especially enjoyable when you dig it out of a muddy river bed.
onforb.es/1Sicb5P
Could Soc Gen's Bearish Gold Calls Be Coming True
Forbes
French Bank Societe Generale has been bearish on gold since the start of the year, despite the metal's 15% gains. With gold down this Wednesday, hitting a three-week low, could the bank be right?
onforb.es/1Sicduz
Technician: Gold heading toward $1,450Âhere's why
CNBC
Gold is about to surge to multiyear highs, according to one megabull.
On CNBC's "Futures Now" on Tuesday, Orips Research CEO and Chief Market Technician Zev Spiro said that a break above key resistance earlier this month could send bullion catapulting as high as $1,450, a level the market hasn't seen since May 2013.
cnb.cx/1Sici12
Gold Is Waiting for the Next Fed Interest Rate Hike
TheStreet
Gold's marking time. I know there are many who will probably jump on this and say that the rally is over, and the bearish Goldman call is about to come true. It's not. Gold is simply marking time. There is not going to be a renewed decline. It's going to hang around here.
goo.gl/Hux9GP
World's richest Hindu temple wants gold rather than cash under scheme
Reuters
The world's richest Hindu temple is asking to be repaid in gold for longer-term deposits it makes under the Indian government's monetization scheme in order to make the plan more attractive to the temples that are sitting on thousands of tonnes of the metal.
reut.rs/1SicxcA
Gold futures drop to lowest settlement in almost a month
MarketWatch
Gold futures logged their lowest settlement in about a month on Wednesday, as gains in the U.S. dollar dampened the value of holding the precious metal.
Recent comments from some Federal Reserve officials, hinting at an interest-rate increase as early as April, helped nudged the dollar higher and weighed on dollar-priced commodities.
on.mktw.net/1Sic2zb
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