Lead Stories
U.S. Bonds Cheapest Since ’90 Versus Bunds Counter Buffett
Bloomberg
The longest decline in Treasuries this year has left U.S. government debt the cheapest since March 2011 when measured by real yields and the best relative value compared with German bunds in more than two decades.
http://jlne.ws/10hbujS
Why QE, low interest rates and volatility are an explosive mix for the markets
Simone Foxman, Quartz
Critics of quantitative easing (QE)—whereby central banks push down interest rates and buy up safe assets to stimulate flagging economies—have long worried about the possible unintended consequences. The point of QE is to push down the yields on safe assets like government bonds so that investors put their money in riskier assets where it can do more economic work; the worry is that too much money in risky assets could blow up in investors’ faces.
http://jlne.ws/14pd5EC
The Fed: Firefighter or Arsonist?
U.S. News
Since the financial meltdown in 2008, the Federal Reserve’s range of powers have expanded, as have the kinds of financial institutions it monitors and regulates.
http://jlne.ws/10hdpVC
Ebbing Deficit Likely to Keep Rates Low When Fed Tapers
Bloomberg
Federal Reserve policy makers say they want to avoid a sudden increase in interest rates when the time comes to start unwinding record monetary easing. A shrinking federal budget deficit is likely to help them meet that goal.
http://jlne.ws/10hcmoK
$2.6 Trillion In Money Markets May Slow Interest Rate Increase
Seeking Alpha
One of the big fears investors have is what will happen to the stock markets when interest rates begin to increase. That is a legitimate fear, but there are factors that may slow and/or lessen the eventual increase in interest rates that may provide a buffer for the stock market.
http://jlne.ws/10hcTaj
JPMorgan, Barclays Boost Forecasts on Junk-Bond Returns for 2013
Bloomberg
JPMorgan Chase & Co. (JPM) and Barclays Plc are lifting their forecasts for U.S. junk-bond returns as this year’s rally exceeds the expectations of top-rated credit strategists.
http://jlne.ws/10hbyjQ
Gross to Buffett Omens Disregarded as Sales Soar: Credit Markets
Bloomberg
Sales of corporate bonds in the U.S. are surging toward the busiest May ever as borrowers race to the market before demand dries up with Bill Gross and Warren Buffett cautioning against buying debt at all-time low yields.
http://jlne.ws/10hbTmq
The Too Big To Fail: Federal Reserve Bank At 100 Years Of Age
Forbes
As the markets reach new highs, and scandal dominates the nation’s capitol, I am compelled to
examine the still unresolved challenges about whether our 100 year old central bank– the Federal Reserve– will be capable of warding off another potential systemic financial crisis like the one that almost toppled the economy in 2008.
http://jlne.ws/10hdtov
Instead of Low Rates, Let’s Have Bigger Deficits
Bloomberg
Ben Bernanke, the chairman of the Federal Reserve, recently expressed concern that investors were taking too much risk. To some investors, this was heavy with irony — most of the risk-taking can be attributed to the policies that Bernanke has pursued during his tenure.
http://jlne.ws/10hd9pS
Fed’s Fisher wants to slow pace of MBS purchases
MarketWatch
The Federal Reserve can only slow the pace of its mortgage-backed securities, as a sudden stop would be “too violent” for the market, said Richard Fisher, the president of the Dallas Federal Reserve Bank on Monday.
http://jlne.ws/10hdyIM
Economic News
US economy has improved ‘quite a lot’: Chicago Fed
LiveMint
Federal Reserve Bank of Chicago president Charles Evans said the US economy has improved “quite a lot” as the central bank maintains record stimulus.
http://jlne.ws/10hdDvZ
U.S. 10-Year Yield at Almost 2-Month High Before Bernanke Talk
Bloomberg
Treasury 10-year note yields traded at almost a two-month high before Federal Reserve Chairman Ben S. Bernanke discusses the economic outlook in congressional testimony this week.
http://jlne.ws/10hbpge
Regulators
CFTC Said to Review 1 Million E-Mails in ISDAfix Investigation
Bloomberg
Commodity Futures Trading Commission investigators are poring over 1 million e-mails and instant messages as part of their price-manipulation probe of a swaps benchmark that helps determine interest rates on everything from annuities to bonds linked to skyscrapers.
http://jlne.ws/10hc2X9
Default Swaps on Junior Bank Debt Fall on ISDA Rule Speculation
Bloomberg
The cost of credit-default swaps insuring subordinated European bank debt fell to the lowest in three years amid speculation changes to rules governing the securities will devalue existing contracts.
http://jlne.ws/10hcyUX
Global News
Amari Says Further Slide in Yen May Have Negative Effects
Bloomberg
Japan’s Economy Minister Akira Amari said a further slide in the yen would have negative effects after the currency’s 21 percent drop in the past six months, and signaled concern at the prospect of higher bond yields.
http://jlne.ws/10hcc0N
Brazil Swap Rates Rise on Tombini Inflation Stance; Real Slips
Bloomberg
Brazil’s swap rates rose, reversing an earlier drop, as speculation the central bank will step up the pace of borrowing-cost increases overshadowed a report showing analysts reduced their 2013 growth forecasts.
http://jlne.ws/10hcjt5
Aust bond prices lower
The West Australian
Australian bond futures are lower in the wake of improved US confidence data late last week, but spent the local session trading in a narrow range.
http://jlne.ws/10hbbWv
Italian Bonds Rise for Fourth Day as Industrial Orders Increase
Bloomberg
Italy’s bonds rose for a fourth day as a government report showed the nation’s industrial orders increased more than economists predicted, adding to optimism the region’s economy is recovering.
http://jlne.ws/10hcu7V
