This week, NASDAQ OMX announced plans to launch NASDAQ OMX NLX, a new interest rate derivatives platform. Meantime, Federal Reserve chairman Ben Bernanke said Wednesday that the Fed is open to another round of bond purchases to lower long-term interest rates and boost growth if the job market doesn’t improve. And International Monetary Fund Chief Christine Lagarde said Europe needs to build both near-term crisis-fighting tools and to clarify how it plans greater economic union.

Conversation Starter

MSRB PUBLISHES REPORT ON MUNICIPAL VARIABLE RATE SECURITIES
INTEREST RATE AND TRADING DATA

Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) today published its third annual report summarizing interest rate, trading and other data on municipal variable rate securities reported to the MSRB between early 2009 and April 2012.

Included in the report is information on the size of the market for auction rate securities (ARS) and variable rate demand obligations (VRDO), liquidity facilities associated with VRDOs, trading volume, interest rates and number of rate resets. The report reflects a continued contraction in the size of the ARS and VRDO markets as well as a continued decline in new issuance and trading of municipal variable rate securities.

Data aggregated in the MSRB’s report is available for individual municipal securities on its Electronic Municipal Market Access (EMMA) website.

The report including the following highlights:

Between April 2011 and April 2012, the size of the ARS market decreased nearly 30 percent to $39 billion, while the size of the VRDO market decreased 12 percent to $283 billion.
   
In 2011, new issuance of VRDOs decreased to the lowest levels since 1989 when it reached $13.6 billion.

Liquidity facilities that support 20 percent or $53 billion VRDOs outstanding are set to expire by the end of 2012. Approximately 22,730 ARS interest rate resets were reported in 2011 compared to 28,250 rate resets in 2010.

See the full report here.

Lead Stories

NASDAQ OMX Plans to Launch NASDAQ OMX NLX, a New London Based Interest Rate Derivatives Platform
GlobeNewswire via Yahoo! Finance
New Electronic Trading Platform Will Offer a Comprehensive Suite of European Short-Term and Long-Term Listed Interest Rate Derivatives Products.
http://jlne.ws/NnG1Wk

IMF Chief: EU Must Pursue Short- and Long-Term Crisis Solutions in Parallel
Nasdaq
http://jlne.ws/KnGtzf

IMF Releases Paper on Boosting EU Growth
Nasdaq
http://jlne.ws/M9PAJa

Ben Bernanke: Bond buys an option if economy sours
ABC 7 Chicago
Chairman Ben Bernanke said Wednesday that the Federal Reserve is open to another round of bond purchases to lower long-term interest rates and boost growth if the job market doesn’t improve.
http://jlne.ws/L8pmkO

Bernanke Signals More Easing Likely if Job Growth Wanes
Bloomberg
Chairman Ben S. Bernanke is signaling the Federal Reserve will probably add to its record stimulus should the economy fail to make sufficient progress in creating jobs for 12.7 million unemployed Americans.
http://jlne.ws/NnIdx0

Paul Krugman on Ben Bernanke’s ‘Green Shoots’
The Online NewsHour
We start Wednesday’s post by returning to the First Parish Church in Harvard Square, were Krugman spoke with NPR’s Tom Ashbrook, host of the daily show On Point, which originates in Boston. Ashbrook’s question was about Fed head Ben Bernanke.
http://jlne.ws/M9LBvX

Federal Reserve extends ‘Operation Twist’ by $267 billion
CNNMoney.com via Yahoo! Finance
http://jlne.ws/LE49lm

Federal Reserve sees lower economic growth, higher unemployment and lower inflation for 2012
Fox News
The Federal Reserve has sharply lowered its outlook for U.S. economic growth and thinks the unemployment rate won’t fall much further this year.
http://jlne.ws/L7svRR

Federal Reserve extends ‘Twist’ program to drive rates lower
The Salt Lake Tribune
Federal Reserve extends ‘Twist’ program to drive rates lower By MARTIN CRUTSINGER The Associated Press Published Jun 20, 2012 10:52AM MDT Washington • The Federal Reserve is extending a program intended to further lower long-term interest rates, noting hiring has weakened, consumer spending is rising more slowly and the economy needs more support.
http://jlne.ws/MNuyec

The full text of the Federal Reserve’s statement after its meeting Wednesday
Associated Press via Yahoo! News
WASHINGTON – Below is the statement the U.S. Federal Reserve released Wednesday after its policy meeting:
http://jlne.ws/LFgiVH

Fed message: Economy unlikely to improve this year
The Observer-Dispatch
The economy we’ve got today is more or less the economy we’ve got for the rest of the year. That’s the message from the Federal Reserve, which has sharply reduced its forecast for U.S. growth. It sees unemployment barely budging in the rest of 2012.
http://jlne.ws/KBewsw

Federal Reserve renews program to spur growth amid concerns about economy
Washington Post
The Federal Reserve said Wednesday that the economy was slowing significantly but took only modest action to stimulate growth, underscoring how little is being done across Washington to address the nation’s unemployment crisis.
http://jlne.ws/LHSogV

The European Central Bank Needs More Power
New York Times
The European Central Bank should gain the power to shut down insolvent banks, limit skyrocketing central bank credit, and make it clear to the euro zone that help from Frankfurt cannot go on forever.
http://jlne.ws/Kn7gLS

Coeure says ECB to discuss rate cut – FT
Reuters via Yahoo! News
FRANKFURT – The European Central Bank is expected to discuss interest rate cuts at its next meeting, an ECB policymaker was quoted as saying on Wednesday, but although reducing rates from an all-time low of 1 percent was possible, it would not be a cure-all.
http://jlne.ws/Kn7jaw

Monetary Policy Is about Money, not Interest Rates
Forbes
I’m increasingly convinced that our monetary policy problems and, consequently, our prolonged recession are due to the widespread misconception that the Fed conducts monetary policy by adjusting interest rates: Anticipation is high that the Federal Reserve will announce some new step Wednesday to try to rejuvenate the U.S. economy and boost investor confidence.
http://jlne.ws/My7rX1

FSA may act over interest rate swaps
Reuters via Yahoo! News
LONDON – Contracts bought by UK businesses to insure against unexpected hikes in interest rates raise concerns that may need addressing, Britain’s markets regulator said on Wednesday. Fearing another case of mis-selling, Britain’s parliamentary treasury select committee has asked the Financial Services Authority to probe the sale of interest rate swap.
http://jlne.ws/MNycVy

Volcker’s Fed Would Not Ease
Wall Street Journal Blogs
A tougher Fed Chairman would back up his call for Congress to act, rather than acquiesce to the market calls for another stimulus program.
http://jlne.ws/L7sCNi

Bernanke Says Volcker Rule Would Have Influenced JPMorgan Loss
Bloomberg
Federal Reserve Chairman Ben S. Bernanke said the Volcker Rule may have been able to influence the outcome of JPMorgan Chase & Co.’s $2 billion trading loss.
http://jlne.ws/NUN4qK

Pimco Says ECB Likely to Resume Bond Buying Program
Bloomberg
Loading player, please wait… June 20 — Andrew Bosomworth, a money manager at Pacific Investment Management Co., talks about the prospect of the European Central Bank resuming its bond-buying program. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.”
http://jlne.ws/NUR1LT

U.S. Treasury’s Geithner postpones trip to India
Reuters via Yahoo! Finance
WASHINGTON – U.S. Treasury Secretary Timothy Geithner has postponed his scheduled trip to India because the finance minister there is expected to resign and become a presidential candidate.
http://jlne.ws/My5tpm

World’s Riskiest Debt In Pictures
Forbes
A look at some of the safest to the scariest sovereign bonds in the world as measured by their risk of default. The following country’s bonds credit default swaps are good gauges on the markets perception of risk. Greece, of course, is off the charts.
http://jlne.ws/KBjLIF

Events

Bond China Congress
September 4-5, 2012, Shanghai, China
http://jlne.ws/KXsmS0

CTA Expo Chicago
September 13, 2012
http://jlne.ws/LmhfFu

Economic News

Manufacturing growth slows, labor market struggling
Reuters via Yahoo! News
WASHINGTON – Manufacturing grew in June at its slowest pace in 11 months and hiring in the sector slowed as overseas demand for U.S. products waned, an industry survey showed on Thursday.
http://jlne.ws/L8oLPZ

Jobless claims show U.S. labor market struggling
Chicago Tribune
4-week average at a 6-month high The number of Americans filing new claims for unemployment benefits was little changed last week, according to government data on Thursday that suggested the labor market was struggling to regain momentum.
http://jlne.ws/LE5c4H

U.S. builders start more single-family homes
The Washington Times
WASHINGTON — U.S. builders started work on more single-family homes in May and requested the most permits to build homes and apartments in three and a half years.

Exchanges, Clearing Houses & MTFs

ION Trading to Provide Connectivity to Eris Exchange
PR Newswire via Yahoo! Finance
http://jlne.ws/MEYVXP

Firms & Banks

JPMorgan Poised to Make 157% on MF Global’s LME Shares
By Agnieszka Troszkiewicz – Bloomberg
JPMorgan Chase & Co. (JPM) (JPM), the largest U.S. bank, is poised to more than double the value of its investment in London Metal Exchange shares bought seven months ago from the U.K. unit of bankrupt MF Global Holdings Ltd.
http://jlne.ws/L7szAU

JPMorgan Among Banks That May Face Global Swap Rules
Bloomberg
JPMorgan Chase & Co. , Goldman Sachs Group Inc. and other U.S. banks would be subject to Dodd-Frank Act swaps rules in their overseas offices under guidance that may be proposed by the Commodity Futures Trading Commission.
http://jlne.ws/Lmc9Jp

Trading Surge in Index Behind JPMorgan Loss Signaling Unwind
Bloomberg
Trading in the credit derivatives index that contributed to JPMorgan Chase & Co. (JPM)’s losses in its London chief investment office soared to a record yesterday in a sign that the biggest U.S. bank may be unwinding its position, according to data cited by Credit Suisse Group AG.
http://jlne.ws/L7szkC

HSBC Names Thomas Crystal Head of U.S. High-Yield Sales
By Katy Burne – Dow Jones
HSBC Securities (USA) has appointed Thomas Crystal to be its U.S. head of high-yield credit sales, a newly created role. He started this week in New York and reports to Cary Goodwin, head of U.S. credit sales.
http://jlne.ws/L7sAop

Global News

Japan, Swiss set up tax deals with U.S. Treasury
Reuters via Yahoo! News
WASHINGTON/ZURICH – The U.S. Treasury Department said on Thursday it had reached agreements with Switzerland and Japan to crack down on tax evasion by Americans, a move meant to help banks in those countries comply with upcoming U.S. tax regulations.
http://jlne.ws/NUPMwf

China Steps Said to Grow Bond Market, Add Issuer Scrutiny
Bloomberg
China is allowing more companies to trade bonds and increasing scrutiny over issuers as the government seeks to ensure that the expansion of its nascent debt market isn’t derailed by defaults.
http://jlne.ws/LE9RUc

Spain full-blown bailout ‘all but inevitable’
AFP via Yahoo! News
A full-blown bailout for Spain is all but inevitable as it has lost control of its debt crisis, analysts say, despite Madrid’s insistence that it does not need rescuing.
http://jlne.ws/L7sygy

Namibia’s economy to grow 4.2 percent this year
Reuters via Yahoo! News
JOHANNESBURG – The global downturn could put the brakes on Namibia’s economy, but analysts remain optimistic on the country’s ability to shrug off external shocks given increased consumer spending and the government’s loose fiscal policy.
http://jlne.ws/NZc3ug

Cambodia Central Bank Deputy Governor: To Raise 2012 GDP Growth View From 7.0%
Nasdaq
http://jlne.ws/Mwemlj

Czech Central Bank Governor Sees Disinflationary Risk – Newspaper
Nasdaq
http://jlne.ws/Mwetxh

ECB’s Kranjec says no need for Slovenian bank aid for now
Reuters via Yahoo! News
LJUBLJANA – European Central Bank Governing Council member Marko Kranjec did not rule out on Tuesday that Slovenia may have to ask for international aid to prop up its banking sector, but he said there was no need to do so at the moment.
http://jlne.ws/NdD4Ea

Swedish government, central bank should do more to boost growth: think tank
Reuters via Yahoo! News
STOCKHOLM – Sweden’s economy is losing momentum and is unlikely to improve until next year, according to a leading think tank, which called on the government to stimulate growth and urged the central bank to cut interest rates.
http://jlne.ws/L8vM3a

Norges Bank Holds Key Rate Amid Global Concerns
FOX Business
Norway’s central bank left its key interest rate unchanged Wednesday saying turbulence and weak growth prospects abroad persist while acknowledging that the Norwegian economy has performed better than expected recently.
http://jlne.ws/Kn7gLZ

Taiwan leaves key interest rate unchanged
Associated Press via Yahoo! News
Taiwan’s central bank is keeping its key interest rate unchanged for a fourth straight quarter as it tries to balance a local property bubble and a worsening global economy.
http://jlne.ws/Mya0YT

Polish central banker: July CPI may lead to rate cut
Reuters via Yahoo! News
WARSAW – Polish policymaker Elzbieta Chojna-Duch told Reuters she would consider pushing for a rate cut depending on what the central bank’s July inflation forecasts show. She believes the economy is slowing and there is no threat of inflation translating into higher wage demands.
http://jlne.ws/MwdaOR

BoE Mulled QE Expansion At Latest Meeting
FOX Business
Four members of the Bank of England’s Monetary Policy Committee voted in favor of an increase in the bank’s asset purchase program, while the committee unanimously agreed on keeping interest rates at a record low of 0.5%, minutes from the latest meeting in early June showed Wednesday.
http://jlne.ws/MwdpJN

Bank of England closer to agreeing on stimulus
Associated Press via Yahoo! News
The Bank of England’s Monetary Policy Committee came within one vote of backing more monetary stimulus for the economy at its meeting earlier this month, reinforcing expectations that a fresh injection could come in July.
http://jlne.ws/Mm3fvQ