JLN Interest Rates

Top Interest Rate Headlines 03-12-2012: Deficit Rose In February, On Pace To Top $1T Again

2012-03-12T14:17:00.000-05:00

Deficit rose in February, on pace to top $1T again
Associated Press
The U.S. federal deficit was slightly smaller through the first five months of the budget year than the previous year. Still, the imbalance is on pace to exceed $1 trillion for the fourth straight year, which could be an issue in this year's presidential election.
http://jlne.ws/zpsrtB

Egypt Budget Deficit May Reach $25 Billion, Official Says
Bloomberg
Egypt’s Ministry of Finance expects the budget deficit for the fiscal year that ends in June to widen to 150 billion Egyptian pounds ($25 billion), higher than previously forecast, the state-run Middle East News Agency said.
http://jlne.ws/x8TXjT

Juncker Expects Spain to Reach Its 2013 Budget-Deficit Goal
Bloomberg
Spain will reach its goal of getting its budget deficit within the European Union’s limit next year, said Luxembourg Prime Minister Jean-Claude Juncker, who also heads the group of euro-area finance chiefs.
http://jlne.ws/xAGqc2

Bond holders seek court date with Greek banks and state
Athens News
Lawyers in Germany representing 110 Greek bond holders said on Monday they have formed a class action group and intend to sue banks and the Greek state following last week's Greek bond swap, which slashed more than 100 billion euros from Athens' debt.
http://jlne.ws/AFkxGk

Treasury 3-Year Notes Go At 0.456% High Yield
The Bond Buyer
The Treasury Department Monday auctioned $32 billion of three-year notes with a 3/8% coupon at a 0.456% yield, a price of 99.758927.
http://jlne.ws/AdsFFo

DTCC Prepares to Launch New Central Counterparty for Mortgage-Backed Securities Trading
Zecco
The Depository Trust & Clearing Corporation (DTCC) announced today that the Securities and Exchange Commission has approved its application to operate a new central counterparty (CCP) designed to reduce risk and costs in the $100-trillion-a-year market for U.S. mortgage-backed securities (MBS).
http://jlne.ws/wpwui9

Portugal Yield at 13% Says Greek Deal Not Unique
The Depository Trust & Clearing Corporation (DTCC) announced today that the Securities and Exchange Commission has approved its application to operate a new central counterparty (CCP) designed to reduce risk and costs in the $100-trillion-a-year market for U.S. mortgage-backed securities (MBS).
http://jlne.ws/zb6hqo

Meredith Whitney was right
CNN Money/Fortune
The more general point that Meredith Whitney was trying to make about public debt -- that municipal finances in this country were a mess that was only going to get messier -- was dead on.
http://jlne.ws/yfyL5r

NYSE Euronext and Bloomberg Deliver a Fully Integrated OMS for Fixed Income Clients
Press Release
NYSE Euronext's fixed income trading platform, NYSE Bonds, and Bloomberg Trade Order Management Solutions (TOMS) now offer sell-side fixed income dealers an integrated platform to access the U.S. corporate bond market. Dealers using Bloomberg TOMS, the leading order management platform for U.S. fixed income securities, can now trade on the NYSE Bonds marketplace via the Bloomberg Professional® service, which is used globally by more than 310,000 subscribers.
http://jlne.ws/AC5gka

Vietnam Central Bank to Cut Rates
The Wall Street Journal
Vietnam's central bank cut interest rates Monday in response to markedly lower inflation, in a well-flagged move that some analysts say could put some strain on weaker banks.
http://jlne.ws/zuPuZq

Wells Fargo May Lead Payouts After Fed Test
Bloomberg
Wells Fargo & Co. (WFC) and Citigroup Inc. (C) may join banks unleashing more than $9 billion in dividend increases and share buybacks if they get passing grades this week on the Federal Reserve’s annual stress test.
http://jlne.ws/AzUnGH

Portugal Gradually Shuffles Its Way Up Towards The Front Of The Debt Queue
CreditWriteDowns
Well, a weekend during which Greece seems to have been finally able to pass muster on its bond deal, while Mario Draghi has given the official “all clear” on the debt crisis seems to be as good a moment as any to have a look at where the country which many investors consider likely to be the next to enter the restructuring process is up to.
http://jlne.ws/w1EQOO

Credit Event Auction Primer
The credit markets have experienced a wave of continuous global innovation since the advent of credit default swaps. Indeed, single-name credit default swaps have continually been improving to make the product as useful and liquid as the market can make them.
http://jlne.ws/xa1Wzz

CFTC’s Division of Swap Dealer and Intermediary Oversight Provides Annual Report Guidance to Commodity Pool Operators

2012-03-12T09:21:00.000-05:00

Press Release

Washington, DC—The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight has issued its annual guidance letter to registered commodity pool operators (CPOs). The letter is intended to assist CPOs and their public accountants in complying with the Commission’s regulations on the preparation and filing of commodity pool financial reports, and to provide information regarding recent rule amendments.

The highlights contained in this year’s letter include:

    Recent amendments to Commission regulations pertaining to various reporting issues, including Forms PF, CPO-PQR, and CTA-PR;
    Guidance for CPOs with pool funds held at MF Global, Inc.;
    Annual report filing procedures and due dates;
    Special considerations that apply to filings made for Master/Feeder and Fund of Funds structures; and
    Various accounting and regulatory resources to assist in the preparation of the financial reports.

For more information on the CPO Annual Guidance Letter 2011, please see Related Link.

Copies of the letter may be obtained by contacting the Commission’s Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100.

Last Updated: March 12, 2012

Top Interest Rate Headlines 03-09-2012: CDS Payments Triggered As ISDA Declares Greek Credit Event

2012-03-09T14:59:00.014-06:00

ISDA declares Greek credit event, CDS payments triggered
http://jlne.ws/ydDfqq

The Greek Debt Swap Is Just One More Step, Not the Solution - Brookings Institution
CNN Money
It's good news that the Greek debt swap appears to have worked from a technical standpoint, but the debt reduction is hardly the end of the troubles for Greece.
http://jlne.ws/yMe0m2

Draghi Defends ECB Balance Sheet Expansion
WSJ.com
One thing we all know about Mario Draghi now: he reads the papers. The European Central Bank president used his monthly press conference to take issue with a recent Wall Street Journal article on the ECB’s balance sheet now exceeding three trillion euros after it pumped a total of one trillion euros in three-year loans into European banks.
http://jlne.ws/wmWkXK

Japan’s ‘competitive QE’ won’t work: Deutsche Bank
MarketWatch
The Bank of Japan surprised markets Tuesday by announcing it would buy another 10-trillion yen in bonds, pushing the yen to its lowest rate against the dollar since December.
http://jlne.ws/xXu9Rf

Treasury winds down stake in AIG
Futures
The U.S. Treasury Department is selling 206.9 million AIG shares for $29 apiece as it looks to wind down bailout programs from the 2008 financial crisis. In a statement released Thursday, the Treasury said it expects to earn about $6 billion from the sale and that AIG had agreed to buy roughly half of the offering.
http://jlne.ws/xtIvkQ

JPMorgan backs global clearing house for derivatives market
AUSTRALIA should allow a global clearing house to handle the country's $78 trillion over-the-counter derivative market but keep a grip on regulatory oversight, according to a senior executive at JPMorgan.
http://jlne.ws/yG9FkH

Goldman's Promised Land
Thomson Reuters
Some 2,000 miles away from the hustle and bustle of Wall Street, Goldman Sachs Group Inc. has found an unlikely second home: Mormon country.
http://jlne.ws/wazOh5

India's Central Bank Cuts Reserve Requirements for Banks
The New York Times
http://jlne.ws/wevTdq

RBI cuts reserve ratio to improve lending conditions
In a move meant to alleviate growing stress in its financial system, India’s central bank on Friday sharply reduced the amount of money banks have to hold in reserve less than a week ahead of a scheduled policy meeting.
http://jlne.ws/vZsibh

'Gray Market' Crops Up for New Issue of Greek Bonds
WSJ.com
Greece will give new bonds to private creditors under its proposed debt restructuring in exchange for old bonds. And while the new bonds don't exist yet, that hasn't stopped at least two dealers from trying to make a market in them.
http://jlne.ws/y83Qnx

Sarkozy says Greek problem solved
Chicago Tribune
French President Nicolas Sarkozy said on Friday that Greece's debt crisis had been solved after Athens won strong acceptance from private creditors for a bond swap deal.
http://jlne.ws/wowbGd

TEXT: Fitch cuts Greece's issuer default ratings to 'RD'
Reuters
Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'RD' ('Restricted Default') from 'C' following today's confirmation from the Greek government and eurozone officials that the exchange of Greek government bonds will proceed.
http://jlne.ws/yHqpT8

FRB: 2011 Chief FOIA Officer Report
Federal Reserve Report
The Secretary of the Board of Governors of the Federal Reserve System (Board) and Chief FOIA Officer, Jennifer J. Johnson, hereby submits the Chief FOIA Officer Report on behalf of the Board in accordance with the template provided by the Department of Justice
http://jlne.ws/xHXr5o

Gross Says Bond Contract Sanctity Diminished
Bloomberg
The “sanctity” of bondholders’ contracts has been diminished by Greece’s pushing through the biggest sovereign restructuring in history, according to Bill Gross of Pacific Investment Management Co.
http://jlne.ws/xarxp0

MF Global Still Set to Pay Bonuses
WSJ.com
Three top executives of MF Global Holdings Ltd. when it collapsed could get bonuses of as much as several hundred thousand dollars each under a plan by a trustee overseeing the securities firm's bankruptcy case, people familiar with the matter said.
http://jlne.ws/w44jWt

FOWi reveals 52% of new contracts fail to trade
FOWi
One in two new contracts launched on derivatives exchange last yera have failed to trade, a new report by FOW Intelligence has found.
http://jlne.ws/zhfRBp

ISDA EMEA Determinations Committee Accepts Question Related To A Potential Hellenic Republic Credit Event

2012-03-09T10:23:00.000-06:00

NEWS RELEASE
For Immediate Release
ISDA EMEA Determinations Committee
Accepts Question Related to a Potential Hellenic Republic Credit Event

LONDON, March 9, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA), as secretary to the Determinations Committees (the DCs), today announced that a question relating to a potential credit event with respect to the Hellenic Republic (Greece) has been submitted to, and subsequently accepted for consideration by, the EMEA Determinations Committee.

The ISDA EMEA Determinations Committee will meet at 1PM GMT on Friday, March 9 to discuss the question and to determine whether a credit event has occurred.

Further information regarding the question is available at www.isda.org/credit.

For Media Enquiries, Please Contact:
Lauren Dobbs, ISDA New York, +1 212 901 6019, ldobbs@isda.org
Rose Millburn, ISDA London, +44 203 088 3526, rmillburn@isda.org

About ISDA
Since 1985, ISDA has worked to make the global over-the-counter (OTC) derivatives markets safer and more efficient. Today, ISDA is one of the world’s largest global financial trade associations, with over 815 member institutions from 58 countries on six continents. These members include a broad range of OTC derivatives market participants: global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouses and other service providers. Information about ISDA and its activities is available on the Association's web site: www.isda.org.

ISDA is a registered trademark of the International Swaps and Derivatives Association, Inc.

March 8 , 2012: ECB sees slower growth, flags success of money flood [NEWSLETTER]

2012-03-08T10:52:00.003-06:00

Many eyes on Europe Thursday as the European Central Bank (ECB) kept interest rates at a record of low of one percent for a third month after completing two injections of cash which have flushed over a trillion euros of three-year money into the euro zone by the beginning of this month. The central bank issued a surprise warning on inflation.

Conversation Starter

MSRB PUBLISHES 2011 MUNICIPAL BOND FACT BOOK

Alexandria, VA – The Municipal Securities Rulemaking Board (MSRB) today released a new edition of its Fact Book, an annual source book that analyzes trading data, continuing disclosure submissions and other statistics for the $3.7 trillion municipal bond market. The 2011 Fact Book includes analysis on the 50 million trades that occurred in the municipal market over the last five years and provides key statistics unavailable elsewhere.

“The Fact Book supports the MSRB’s ongoing effort to educate the general public and municipal market participants about trading and disclosure activity related to municipal securities,” said MSRB Executive Director Lynnette Kelly. “The data we publish— and disseminate in real-time to the market—has brought a new level of transparency to this important capital market.”

The 2011 Fact Book covers topics ranging from trade distribution trends, most actively traded securities, daily average number of trades, and municipal market disclosures, among others. Just a few highlights include:

    Total par amount of municipal securities traded in 2011 decreased 12.6 percent to $3.28 trillion from the $3.75 trillion traded in 2010
    Trading activity of taxable securities decreased significantly last year following the expiration of Build America Bonds in 2010, totaling $291 billion and 752,677 trades compared to $504 billion and 1.15 million trades in 2010.
    Trades of $100,000 or less accounted for 8.3% of the par volume traded and 82.5% of all trades in 2011, while trades of more than $1 million accounted for 76.6% of par volume traded and 3.6% of trades---compared to 7.4% of par and 81.5% of trades in 2010 for trades of $100,000 or less, and 78.5% of par and 4.1% of trades for transactions of more than $1 million
    A revenue bond from the industrial development board of the Parish of East Baton Rouge was the most active security in 2011 in term of par amount traded with $19.5 billion
    A revenue bond from New York Liberty Development Corporation was the most active in terms of number of trades with 8,371 trades
    The number of continuing disclosure documents increased to 133,400 in 2011, up 3.2% from the 129,213 documents received in 2010

The MSRB’s market information transparency programs promote transparency and access to real-time, municipal market bond information. The MSRB makes this information available free of charge on its Electronic Municipal Market Access (EMMA) website. Daily and historical summaries of trade data based on security type, size, sector, maturity, source of repayment and coupon type are housed in EMMA’s Market Statistics section. The MSRB recently enhanced EMMA’s market statistics with additional graphical representations when viewing information related to overall municipal market trading activity, the amount traded by customers and dealers, and the volume of trades for any given date range.

Electronic copies of the Fact Book can be found on the Publications page of the MSRB's website here http://jlne.ws/xPlUDp

The Municipal Securities Rulemaking Board (MSRB) protects investors, issuers of municipal securities and entities whose credit stands behind municipal securities, and public pension plans by promoting a fair and efficient municipal market. The MSRB fulfills this mission by regulating securities firms, banks and municipal advisors that engage in municipal securities and advisory activities. To further protect market participants, the MSRB promotes disclosure and market transparency through its Electronic Municipal Market Access (EMMA) website, provides education and conducts extensive outreach. The MSRB has operated under Congressional mandate with oversight by the Securities and Exchange Commission since 1975.

Lead Stories

ECB sees slower growth, flags success of money flood
Reuters via Yahoo! News
FRANKFURT (Reuters) - The European Central Bank lowered its euro zone growth forecast after holding interest rates at record lows on Thursday, and said things would have been much worse without its dramatic action to pump a trillion euros into the banking system.
http://jlne.ws/Ap9MX7

Greek Debt Restructuring Expected To Put CDS Market To Test
It isn't yet known if Greece's debt restructuring will trigger payouts on insurance-like contracts called credit-default swaps covering the government's debt. But if it does, it will touch off the biggest-ever CDS auction for sovereign bonds and determine how much banks and others will have to pay to settle the swaps. Billions of dollars are at stake. The net amount of Greek CDS outstanding--after offsetting trades are cancelled out--is $3.2 billion. That is the maximum expected to change hands between CDS buyers and sellers, assuming every party that sold protection will have the cash to meet its obligations. If not, that sum could grow.
http://jlne.ws/ykr8mj

EU unveils plan to overhaul settling of trades
By Alex Barker in Brussels and Jeremy Grant in Paris - Financial Times
Tougher rules to prevent a breakdown of securities markets infrastructure have been unveiled by the European Commission, as regulators turn their sights on settlement risk.
http://jlne.ws/A3Uu1z

Greek bond swap prospects lifted by fresh pledges
Reuters via Yahoo! News
Major banks and pension funds threw their weight behind Greece's bond swap offer to private creditors on Wednesday, making it increasingly likely that the deal will pass and clear the way for a bailout package to avert an immediate default on its debt.
http://jlne.ws/AkvPPb

Greece inches closer to E206bn debt deal
By Richard Milne in London and Kerin Hope in Athens - Financial Times
Greece inched nearer to a successful E206bn debt restructuring after private sector bondholders representing almost 40 per cent of securities said they were backing the deal.
http://jlne.ws/ABQBi3

Greek Debt Restructuring Expected To Put CDS Market To Test
WSJ
It isn't yet known if Greece's debt restructuring will trigger payouts on insurance-like contracts called credit-default swaps covering the government's debt. But if it does, it will touch off the biggest-ever CDS auction for sovereign bonds and determine how much banks and others will have to pay to settle the swaps.
http://jlne.ws/ykr8mj

Fed Debt-Purchase Approach May Hurt Rather Than Help, RBC's Cloherty Says
Bloomberg
Fed officials are considering a program in which the central bank would buy long-term mortgage or Treasury bonds and effectively tie up the money by borrowing it back for short periods at low rates, the Wall Street Journal reported without citing sources.
http://jlne.ws/zOH7q9

Bank Rate Bomb Will Destroy the Smallest and Weakest
Forbes
U.S. community banks are not prepared for the possibility of a quick spike in rates when the ballooning federal deficit comes home to roost within the next few years. While all banks will suffer in a Greek-like interest rate environment, smaller banks and thrifts are least prepared for the economic doomsday scenario.
http://jlne.ws/zK7FBf

Former Morgan Stanley Smith Barney Trader's $1 Billion Position Causes $15 Million Loss
Forbes
In July 2009 an MSSB trader exploded past his position limits and built a $1 Billion position that unwound at a cost of $15 million in losses. So much for risk management. Worse, it took FINRA 2 1/2 years to merely settle the case. Imagine if the trader opted for a disciplinary hearing.
http://jlne.ws/yyIdSr

Federal Reserve under attack ... again
CNN Money
Here we go again. A Texas Republican congressman wants to revamp the Federal Reserve. And no, this time it's not Ron Paul. Rep. Kevin Brady plans to introduce a bill on Thursday morning that, if enacted, would strip the Fed of one of its key goals: getting the job market back on track.
http://jlne.ws/xQyP1L

US Treasury to Sell $6 Billion in AIG Common Stock
CNBC
The U.S. Treasury Department on Wednesday announced it is selling $6 billion of American International Group common stock and said it expected the company to purchase up to $3 billion of the offering.
http://jlne.ws/AAi7f5

Dodd-Frank Very Negative for Small Banks, Bove Says
Bloomberg
March 2 (Bloomberg) -- Richard Bove, an analyst at Rochdale Securities LLC, talks about the impact of the Dodd-Frank financial regulatory overhaul law on the U.S. banking industry.
http://jlne.ws/yd6IZF

Dodd-Frank Act Created `Undue Burdens,' Wilson Says
Bloomberg
March 2 (Bloomberg) -- Harry Wilson, a former adviser to President Barack Obama's Auto Task Force, talks about the impact of the Dodd-Frank Act on financial markets.
http://jlne.ws/zkYvTu

TARP's Big Bank Recipients Taking More Risks, Lending Less Than Non-TARP Banks, Report Finds
The Huffington Post
The big banks that critics claim caused the financial crisis may have gotten bailed out, but they apparently haven't learned their lesson.
http://jlne.ws/wmYfzh

ECB Keeps Interest Rates The Same: 1.0%
International Business Times
The European Central Bank held interest rates at 1.0 percent for the third month running on Thursday, pausing to assess the impact of a dramatic sweep of measures that has unsettled some at the bank.
http://jlne.ws/AkR6NT

Events

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

ISDA 27th Annual General Meeting
April 30 - May 2, 2012
Only ISDA Members Eligible To Attend
http://jlne.ws/yrvU5E

48th Annual Conference on Bank Structure and Competition
May 9 - May 11, 2012
Annual Conference On Bank Structure
http://jlne.ws/xwqkLK

Exchanges, Clearing Houses & MTFs

CME to Offer Swaps Users Cash Protection That Beats CFTC Rule
By Matthew Leising - Bloomberg
CME Group Inc. plans to allow swaps traders to keep collateral with a third party, offering stronger protections than U.S. regulators required after MF Global Holdings Ltd. failed to safeguard $1.6 billion in customer cash.
http://jlne.ws/zQaoWs

Firms & Banks

Newedge Announces Three Senior Appointments to Prime Clearing Services (PCS) Team
Newedge, a global leader in multi-asset brokerage and clearing, announced today three senior appointments in the Alternative Investment Solutions (AIS) division of its Prime Clearing Services team.
http://jlne.ws/xJa3N5

MF Global Parent Can Restrict Some Information, Judge Says
By Tiffany Kary - Bloomberg
MF Global Holdings Ltd (MFGLQ). won permission to implement rules that will restrict the sharing of confidential information while sharing some other information from Oct. 17 to Oct. 31 about its failed brokerage.
http://jlne.ws/zbFwLT

Cantor Fitzgerald & Co. Further Builds Prime Services Group
Cantor Fitzgerald & Co., a leading financial services firm, has further strengthened its Prime Services Group with the additions of John Fiore and Marc Young. Mr. Fiore, formerly of Bank of America, and Mr. Young, formerly of BNP Paribas, will serve as Managing Directors of Sales, responsible for business development and origination for hedge fund clients. Mr. Fiore will be located in New York and Mr. Young will be located in San Francisco.
http://jlne.ws/yznDJa

Fed economists: Yes, TARP may have increased moral hazard
Washington Post
Two Federal Reserve researchers have confirmed what many have long suspected: big banks that were bailed out by the government took on greater risk without increasing lending to businesses. In other words, after they were stabilized by an injection of government funds, the specific loans made by "too big to fail" became riskier, perhaps in an effort to recoup losses, but the total volume of ...
http://jlne.ws/Ap5Qnw

Bet on Bill Gross With New PIMCO ETF
http://jlne.ws/tMNY8O
NEW YORK (TheStreet) -- Last week, PIMCO launched the long-awaited, much anticipated Total Return Exchange Traded Fund, an exchange-traded fund version of the PIMCO Total Return Mutual Fund, the largest traditional mutual fund and one that's included in just about every 401(k) I've ever looked at for clients or prospective clients.
http://jlne.ws/x5Tf0t

Meet The REAL One Percent
Forbes
How rich is 1% rich? Pundits, progressives and populists use it to mean you make more than 99% of the people in your country. In the U.S. it means making at least $343,000 in adjusted gross income as reported on your tax return. But what if we applied the 1/99 ratio to wealth, not income, and instead of comparing yourself to other people you picked a bigger target, like an entire country?
http://jlne.ws/wmmpna

Monetary Policy FAQ: Explaining the Basics of the Dollar
Forbes
What is "the dollar" today? "The dollar" is the unit of market value used by the U.S. economy and also widely in world trade. However, unlike our other units of measure, the dollar has had no definition since President Nixon abrogated the Bretton Woods monetary arrangement in stages during 1971 - 1973.
http://jlne.ws/wGVK9s

Global News

Brazil Cuts Benchmark Rate Greater-Than-Estimated 0.75% as Economy Slows
Bloomberg
Brazil's central bank surprised analysts by accelerating the pace of interest rate cuts, bringing borrowing costs below 10 percent for only the second time on record as it seeks to revive growth.
http://jlne.ws/AhBs7V

Australia Jobs Fall in Febuary, Unemployment Up
CNBC
Australian employment fell unexpectedly in February, nudging the jobless rate up a tick to 5.2 percent and sending the local dollar down a third of a U.S. cent as the market narrowed the odds for another cut in interest rates.
http://jlne.ws/ydallc

Bank of England Leaves Monetary Policy Unchanged
CNBC
The Bank of England left its monetary policy unchanged on Thursday, sticking with February's decision to do an extra 50 billion pounds of quantitative easing to support the economy through a period of fitful recovery.
http://jlne.ws/yA66F5

Bank of Canada Keeps 1% Policy Rate Amid Signs of Faster Growth, Inflation
Bloomberg
The Bank of Canada kept its main interest rate at 1 percent, extending the longest pause since the 1950s, and said there is less slack in the economy amid easing global tensions and faster domestic spending.
http://jlne.ws/zdsfnL

Chinese named IMF secretary
AFP via Yahoo! News
International Monetary Fund managing director Christine Lagarde tapped a Chinese IMF official Wednesday as the Fund's next secretary.
http://jlne.ws/AclX7N

Vietnam to cut interest rates: reports
AFP via Yahoo! News
Vietnam's central bank will slash two of its policy interest rates after inflation eased, state media reported Wednesday, as analysts called on the bank to exercise caution.
http://jlne.ws/vZVyvl

Bank of Korea Keeps Interest Rate for Ninth Month as Economic Growth Slows
Bloomberg
The Bank of Korea held off raising borrowing costs for a ninth straight month as policy makers balance the risks from Europe's debt crisis against rising oil costs that are pushing prices higher.
http://jlne.ws/yorB0n

Swiss central bank posts 13.5B francs profit
Associated Press via Yahoo! News
Switzerland's central bank says it has posted a higher-than-expected annual profit of 13.5 billion Swiss francs ($14.75 billion) for 2011.
http://jlne.ws/xeQsGJ

Bank president dies of self-inflicted gunshot wound
WTVM 9 Columbus
The head of the Central Bank of Georgia took his own life Tuesday only days after his bank failed. The bank in Ellaville was taken over by the FDIC, two weeks ago.
http://jlne.ws/ArWTQY

Kenya shilling firms after central bank holds rate
Reuters via Yahoo! News
NAIROBI (Reuters) - The Kenyan shilling firmed against the dollar on Wednesday after the central bank held its benchmark interest rate steady at 18 percent for the third month in a row. Policymakers cited a still-risky inflation outlook and concerns about the widening balance of payments for the decision to leave the rate unchanged.
http://jlne.ws/xvnY8s

Top Interest Rate Headlines 03-07-2012: Fed Weighs 'Sterilized' Bond Buying if It Acts

2012-03-07T16:48:00.000-06:00

Federal Reserve officials are considering a new type of bond-buying program designed to subdue worries about future inflation if they decide to take new steps to boost the economy in the months ahead.

Fed Weighs 'Sterilized' Bond Buying if It Acts
http://jlne.ws/wsqxDl

Consumer credit rises more than expected in January
http://jlne.ws/zEppjX

Moody's: Local Governments Are Likeliest Muni Defaulters
http://jlne.ws/zgerVT

Greek Debt Swap Gets More Support
http://jlne.ws/x9FNNe

Mortgage Applications Down as Refis Fall-MBA
http://jlne.ws/xPOeE0

Lightspeed Announces Promotion of Michael Sedek to Chief Retail Officer, Names Collin Carrico as CIO
http://jlne.ws/Apa8Kh

Fed! Bond Buying! These Words Spark Pavlovian Market Rally
http://jlne.ws/AyLm0O

Breeding The Culture of Greed: Behind Big Banking Bonuses In The UK
http://jlne.ws/yGKPrL

The euro crisis: The growth problem
http://jlne.ws/zCnx3b

Newedge Announces Three Senior Appointments To Prime Clearing Services (PCS) Team - High Frequency Trading Review
http://jlne.ws/yB7qP2

CME to Offer Swaps Users Cash Protection That Beats CFTC Rule
http://jlne.ws/zQaoWs

ADP estimates companies in US add 216,000 jobs
http://jlne.ws/A6IM3n

Top Interest Rate Headlines 03-06-12: ECB Balance Sheet Is 30 Percent Bigger Than Germany’s Economy After Lending Boom

2012-03-06T16:20:00.003-06:00

ECB Balance Sheet Is 30 Percent Bigger Than Germany’s Economy After Lending Boom
http://jlne.ws/A8LPcE

Finance Isn't as Amoral as It Seems (Part 2): Robert Shiller
Bloomberg
Many people assume there is something sleazy about the business of finance, or the people who practice it. This impression is probably behind the commonly voiced opinion that it is a shame so many young people today are going into finance-related occupations, when they could be doing something more high- minded in other fields.
http://jlne.ws/z4hjDq

Citigroup To Work With IBM On Watson Technologies In Banking
DOW JONES NEWSWIRES
Citigroup Inc. said it entered into an agreement with International Business Machines Corp. to explore the possible uses of its Watson supercomupter's technologies to improve personalized banking and data analysis.
http://jlne.ws/wsRKWe

Regulators consider Libor overhaul
By Brooke Masters and Caroline Binham in London - Financial Times
UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid claims that the benchmark for $350tn contracts worldwide may have been subject to manipulation.
http://jlne.ws/wFBxMB

MF Global trustee seeks to toss employee lawsuit
Reuters
The trustee liquidating fallen brokerage MF Global asked a judge to throw out a lawsuit from former company employees claiming to have been fired unfairly, saying a federal labor law does not apply to trustees.
http://jlne.ws/z4eKk5

London Banks Face Accusations Over Libor Fixing
By Jesse Westbrook - Bloomberg
U.K. regulators and banks met to discuss revisions to the setting of global interest rates after lenders faced allegations that they manipulated the benchmark for about $360 trillion of securities.
http://jlne.ws/yL63CT

J.P. Morgan Appoints Sandie O'Connor As Treasurer
FOX Business
J.P. Morgan Chase & Co. (JPM) Monday appointed Sandie O'Connor, head of prime services at the investment bank, as the company's new treasurer.
http://jlne.ws/zgSexs

Goldman Sachs posts $103 million Asia loss
Market Watch
Goldman Sachs Group Inc (GS) said in a filing to the U.S. stock exchange Tuesday that it had posted a net loss of $103 million in Asia for the year ended December 2011, hit by weak markets that took a toll on lending and investing, as well as a mark-to-market loss in its holdings of shares in Industrial & Commercial Bank of China Ltd.
http://jlne.ws/xpCr08

Barclays's Pension Fund Plans $554M Sale
Bloomberg
Barclays Plc (BARC) 's pension fund is planning to sell about 350 million pounds ($554 million) in private-equity assets, three people with knowledge of the matter said.
http://jlne.ws/wc6hec

Beijing's lessons for central banks
By Stephen S. Roach - Financial Times
Contrary to widespread concerns over an imminent hard landing, China will defy the naysayers. Even after premier Wen Jiabao’s latest warning over a moderate slowing of growth, it is doing a far better job in managing its economy than most give it credit. It even offers some lessons in macro policy strategy that the rest of the world should heed.
http://jlne.ws/ApRIEF

Sommers Is Deeply Concerned’ Over Lack of CFTC, SEC Coordination on Swaps
By Silla Brush - Bloomberg
The inability of U.S. regulators to agree on guidelines for the international reach of the Dodd- Frank Act may disrupt the $708 trillion global swaps market, said Jill E. Sommers, a Republican member of the Commodity Futures Trading Commission.
http://jlne.ws/zIBGkW

Volcker Rule Needs Extensive Revisions Amid Feedback, SEC's Gallagher Says
Bloomberg
U.S. regulators should "go back to the drawing board" and make extensive revisions to their proposed ban on banks' proprietary trading, Securities and Exchange Commission member Daniel Gallagher said today.
http://jlne.ws/AsWaRf

Bank's Tucker to head global clearing rules body
Reuters via Yahoo! News
Paul Tucker, a Bank of England deputy governor, was appointed on Monday to head a global rulemaking body for securities clearing, a sector at the heart of post-financial crisis reform. Tucker will replace William Dudley, president and chief executive of the Federal Reserve Bank of New York, as chairman of the Committee on Payment and Settlement Systems (CPSS)
http://jlne.ws/AnhQxb

Consulting Firm Report Shows Pension Plans Continue Modest 2012 Improvement

2012-03-06T12:17:00.002-06:00

Milliman Analysis: Pension Plans Continue Modest 2012 Improvement

Despite discount rates hitting an all-time low, corporate pensions improve funding by $20 billion

SEATTLE, March 6, 2012 /PRNewswire/ -- Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index, which consists of 100 of the nation's largest defined benefit pension plans. In February, these pensions experienced a $20 billion improvement in pension funding thanks to a $24 billion improvement in asset value that offset a $4 billion increase in the pension benefit obligation (PBO). The asset-driven improvement continues the modest rally that has so far characterized 2012.

"Slowly but steadily, these 100 pensions are chipping away at the pension funding deficit," said John Ehrhardt, co-author of the Milliman Pension Funding Study. "Interest rates are again at an all-time low, driving pension liabilities to an all-time high, but so far this year we've seen enough positive asset performance to move funding status in the right direction."

In February, the projected benefit obligation (PBO) for these pensions reached $1.689 trillion as interest rates slid back to 4.25%, a level last seen at the end of 2011. The overall asset value for these 100 pensions grew from $1.252 trillion to $1.276 trillion.

Looking forward, if these 100 pensions were to achieve an 8.0% median asset return and if the current discount rate of 4.25% were to be maintained throughout 2012 and 2013, these pensions would narrow the pension funding gap from 75.5% to 79.9% by the end of 2012 and to 85.4% by the end of 2013.

To view the complete study, go to http://ow.ly/4xFIt. To receive regular updates of Milliman's pension funding analysis, contact us at pensionfunding@milliman.com. And for more on pension funding, be sure to check back in late March when Milliman releases its 2012 Pension Funding Study.

About Milliman Milliman is among the world's largest providers of actuarial and related products and services. The firm has consulting practices in healthcare, property & casualty insurance, life insurance and financial services, and employee benefits. Founded in 1947, Milliman is an independent firm with offices in major cities around the globe. For further information, visit milliman.com.

About the Milliman 100 Pension Funding Index For the past 12 years, Milliman has conducted an annual study of the 100 largest defined benefit pension plans sponsored by U.S. public companies. The Milliman 100 Pension Funding Index projects the funded status for pension plans included in our study, reflecting the monthly impact of market returns and interest-rate changes on pension funded status, utilizing the actual reported asset values, liabilities, and asset allocations of the companies' pension plans.

The results of the Milliman 100 Pension Funding Index were based on the actual pension plan accounting information disclosed in the footnotes to the companies' annual reports for the preceding fiscal year and for previous fiscal years. In addition to providing the financial information on the funded status of U.S. qualified pension plans, the footnotes may also include figures for the companies' nonqualified and foreign plans, both of which are often unfunded or subject to funding standards different from those for U.S. qualified pension plans. The results do not represent the funded status of the companies' U.S. qualified pension plans under ERISA.

SOURCE Milliman, Inc.

Top Interest Rate Headlines 03-05-2012: Greece Ready To Strong Arm On Debt Swap

2012-03-05T15:37:00.000-06:00

MF Global Criminal Investigation Said to Slow After Quick Start
By Patricia Hurtado - Bloomberg
U.S. investigators of bankrupt MF Global Holdings Ltd. have yet to determine after four months of probing whether enough evidence exists to pursue a criminal case, a person with knowledge of the matter said.
http://jlne.ws/zxJwYf

Moody's cuts Greece to C from Ca
Reuters
Moody's Investors Service on Friday said it had cut Greece's local and foreign-currency bond ratings to C from Ca, bringing the country to its lowest possible level.
http://jlne.ws/wPbj4e

ECB liquidity is not a free lunch
by Gavyn Davies - Financial Times
The initials LTRO, barely ever discussed prior to last December, now form the most revered acronym in the financial markets. Before the first of the ECB’s two Longer Term Refinancing Operations in December, global equity markets lived in fear of widespread bankruptcies in the eurozone financial sector. Since LTRO I was completed on December 21, equities have not only become far less volatile, but have also risen by 11 per cent.
http://jlne.ws/yUGQAP

Citigroup Chairman Richard Parsons Will Step Down
Forbes
Citigroup announced today that its chairman Richard Parsons is stepping down. Parsons, who was on the Board since 1996, was named chairman of the nation's third largest bank in January 2009 just months after the financial crisis unfolded.
http://jlne.ws/y54rJo

ISDA Decision Partly Hinged On Lack Of Explicit Subordination
By Katy Burne Of DOW JONES NEWSWIRES
When a committee of derivatives experts said Thursday that Greece's restructuring hadn't yet triggered payouts on insurance-like contracts protecting the sovereign's bonds against losses, part of its decision turned on a rigidly legalistic definition of when "subordination" occurs.
http://jlne.ws/AxXwm2

Spain Is Turning Into An Economic Tragedy
Business Insider
The Greek PSI will be resolved one way or the other this week. Early reports suggest a weak start and the triggering of collective action clauses, and credit default swaps remain a distinct possibility.
http://jlne.ws/wtccHi

The Fed's Reagan recovery
The Economist
PAUL KRUGMAN has been hammering home the point that government spending and employment trends have been highly anomalous during the present American recovery (see this, this, this, this, and this). Real federal government spending has mostly tracked that in a typical recovery. State and local government spending have plummeted in recovery, however, where normally they rise strongly.
http://jlne.ws/wF0JbE

Fisher: Outlook Hardly Robust, Restrained by Politics
The Bond Buyer
While economic growth and job creation should improve this year, the outlook remains clouded as the government continues its “fiscal and regulatory misfeasance,” Federal Reserve Bank of Dallas President and CEO Richard W. Fisher said Monday.
http://jlne.ws/y2hqen

IMF’s Min Zhu on macro-prudential policy implementation
http://jlne.ws/xt8SDz

AIG sells $6 billion AIA shares to help repay US rescue
Futures
American International Group Inc., the insurer that received bailout after the collapse of Lehman Brothers Holdings Inc., is selling $6 billion of AIA Group Ltd. shares to help pay back the U.S. government.
http://jlne.ws/xnFTGl

MARKITSERV ANNOUNCES CCP GATEWAY FOR OTC FX CLEARING
Press Release
MarkitSERV, the most widely used electronic trade processing service for OTC derivative transactions, today unveiled its gateway for foreign exchange (FX) industry participants to route trades to central clearing counterparties (CCPs) worldwide. From a single point of access, executing brokers, clearing brokers and buy-side firms can match, legally confirm and route OTC FX transactions to the CCPs of their choice.
http://jlne.ws/xGBJFS

Greece Ready To Strong Arm On Debt Swap
Bloomberg
Greece expects bondholders to accept a one-time offer to write off about 100 billion euros ($140 billion) of Greek debt and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said.
http://jlne.ws/x5HCHh

Currency of Ideas: A silver lining in the price spike for black gold
Milkin Institute
Over the past few weeks, oil rose from about $92 a barrel to almost $110 a barrel, an increase of 17 percent. Nationwide, that brings prices at the pump for gasoline to about $4 a gallon, and nearly $5 a gallon in California. That's bad news. Even worse is that the reason gas prices have risen so much is geopolitical, due to tensions between Iran and the West, most notably with Israel, over Iran's nuclear program.
http://jlne.ws/yPYyPh

Top Interest Rate Headlines 03-02-2012: Tim Geithner: Financial Crisis Amnesia

2012-03-02T15:09:00.000-06:00

Tim Geithner: Financial Crisis Amnesia
WSJ.com
Four years ago, on an evening in March 2008, I received a call from the CEO of Bear Stearns informing me that they planned to file for bankruptcy in the morning. Bear Stearns was the smallest of the major Wall Street institutions, but it was deeply entwined in financial markets and had the perfect mix of vulnerabilities. It took on too much risk. It relied on billions of dollars of risky short-term financing. And it held thousands of derivative contracts with thousands of companies.
http://jlne.ws/w6Mi81

GFI Group Announces the Departure of James Higgins and Appointment of Richard Giles
Press Release
GFI Group Inc. (NYSE: "GFIG"), a leading provider of wholesale brokerage, electronic execution and trading support products for global financial markets, today announced the departure of James Higgins as Head of its North American Fixed Income brokerage operations. Mr. Higgins is leaving to pursue new business opportunities. GFI also announced that Richard Giles, Managing Director and North American Head of Commodities and Energy Brokerage, will assume additional duty as Head of GFI’s North American Fixed Income Brokerage, succeeding Mr. Higgins.
http://jlne.ws/A7DNS8

Sarah Bloom Raskin: Accommodative monetary policy and its effects on savers
Speech by Ms Sarah Bloom Raskin, Member of the Board of Governors of the Federal
Reserve System, at the Y’s Men and Y’s Women of Westport, Westport, Connecticut,
1 March 2012.
http://jlne.ws/yT9Bbl

Fed’s Bullard: Good Time to Wait and See - Real Time Economics
WSJ.com
St. Louis Federal Reserve Bank President James Bullard said Friday he’s hopeful of “moderate” economic expansion in the U.S. after better-than-expected data in recent months. The U.S. Federal Open Market Committee must be prepared to adjust the rate path it has provided “if necessary,” Bullard said in an interview with Canada’s Business News Network. Bullard isn’t currently a voting member of the rate-setting FOMC.
http://jlne.ws/x6hMEi

Dodd-Frank Debate Continues
NYSE Eurex
A recent Economist editorial critical of Dodd-Frank has drawn a heated response from the Act’s co-authors, as well as other Washington policymakers. In its Feb. 18 editorial, the Economist writes there is “an ever-more-apparent risk that the harm done by the massive cost and complexity of [Dodd-Frank’s] regulations, and the effects of its internal inconsistencies, will outweigh what good may come from it.”
http://jlne.ws/AslO9G

Morgan Stanley banker placed on leave after alleged stabbing
Chicago Tribune
Morgan Stanley has placed a senior investment banker on leave following his arrest this week on assault and hate crime charges for allegedly stabbing a taxi driver over a fare dispute.
http://jlne.ws/wwmADf

Fed’s Bullard: Good Time to Wait and See
WSJ.com
St. Louis Federal Reserve Bank President James Bullard said Friday he’s hopeful of “moderate” economic expansion in the U.S. after better-than-expected data in recent months.
http://jlne.ws/x6hMEi

Business cycles: Tracking the euro-zone economy in real time
The Economist
THE short-term outlook for the world economy seems to hinge on whether a resolution to Europe's debt crisis can be found. A resolution, in turn, will be difficult to come by if the euro zone falls back into recession. If output is shrinking and unemployment rising, then austerity measures are likely to make economic conditions worse while raising very little new revenue. The euro zone may fall ever deeper into a hole.
http://jlne.ws/xPB231

Fed Shrugged Off Warnings, Let Banks Pay Shareholders Billions
Pro Publica
In early November 2010, as the Federal Reserve began to weigh whether the nation’s biggest financial firms were healthy enough to return money to their shareholders, a top regulator bluntly warned: Don’t let them.
http://jlne.ws/yk7FDm

Fed Gives Guidance for Evaluating Whether Banking Orgs Eligible For Upgrades Of Supervisory Ratings

2012-03-02T14:22:00.002-06:00

Fed Guidance for evaluating whether banking orgs eligible for upgrades of supervisory ratings
Press Release
Release Date: March 2, 2012

For immediate release
The Federal Reserve Board on Friday issued guidance to ensure that supervisors apply consistent standards as they evaluate whether banking organizations with $10 billion or less in assets are eligible for upgrades of supervisory ratings.

The guidance is being issued to ensure that upgrades occur in a timely manner when the banking organizations have made the requisite progress in addressing any supervisory concerns that had prompted lower ratings. To be eligible for an upgrade, banks are expected to demonstrate, among other things, improvement in financial condition and risk management, as well as show that such improvement is likely to continue.

See guidance here.

March 1, 2012: Bernanke: Money Market Funds Still at Risk of Runs [NEWSLETTER]

2012-03-01T15:41:00.002-06:00

March 1, 2012

JLN Interest Rates - http://www.jlninterestrates.com

Conversation Starter
Credit Managers' Index for February Suggests Robust Future for the Economy

Columbia, Maryland: February 29, 2012—The Credit Managers’ Index (CMI) is now sitting at 55.8, rising a full percentage point above January’s reading. The index is at its highest since April 2011, a time when most indicators were pointing to a pretty solid year. It is worth noting that last year was also affected by an oil shock at about this point and a back-sliding economy in the months that followed. However, readings from this month are solid in key categories providing some confidence regarding what happens from this point.

“The mood of the country could best be described as cautious and perhaps a little encouraged as far as economic growth prospects are concerned,” said Chris Kuehl, PhD, economist for the National Association of Credit Management (NACM). The cautious part stems from the sudden spike in the price of oil and its impact on the price of gasoline. In the past, this kind of leap has been enough to send the economy hurtling into a recession, but thus far the consumer seems to be taking the hike in stride. This situation is not expected to last, Kuehl noted. If the threat of high prices is temporary, the consumer and the business community will heave a sigh of relief and will continue to focus on the good news that has dominated the start of the year. “There has been good news on the job front, better demand numbers, better growth numbers and better numbers in the CMI,” he said.

The sales number is one of the most watched and it reached a level not seen since last April (64.4). “Once there is positive movement in the general sales category, there is often improvement in the index of unfavorable factors as well,” said Kuehl. “An expansion in sales allows companies to catch up on their debt and improve their overall credit standing.” Dollar collections jumped as well, dramatically—from 56.8 to 63—and like the expansion in sales is a sign of improved business conditions. More positive movement came from the amount of credit extended, which rose slightly from 63.3 to 64.3. "This bump in overall business activity is a precursor to additional expansion," Kuehl added. The only decline for the month was in new credit applications, which fell from 61.9 to 59.5. It was not a big drop, but suggests that many of those that were looking to expand and needed credit have already made their move.

The index of favorable factors rose from 61.4 to 62.8, marking the best reading since February 2011. This is also the third month in a row that the favorable factors index has been over 60. The index of unfavorable factors has also shown improvement as it moved from 50.3 to 51.1. “The damage from the recession is still manifesting in the unfavorable categories, but at least the index has remained above 50 for the past four months, and the current reading is better than it has been since April of last year,” said Kuehl. “The theme here is that the CMI is about where it was in the spring of 2011, a period during which optimism was peaking. The problem in 2011 was that conditions deteriorated sharply after that peak and by the middle of the summer, the economy was back in the doldrums and the CMI was reversing course swiftly.” Last year, the shocks that sent the economy reeling included the hike in oil prices and the supply chain crisis precipitated by the disasters in Japan. Thus far, the 2012 economy has not been visited by a crisis of that magnitude, but the recent hike in oil is not welcome in reminding business of how fragile the recovery remains.

There was not a great deal of movement in unfavorable factors, but for the most part the movement was positive. The sense is that most of the companies that were in financial distress a year ago have fallen into two broad categories. They either succumbed to the pressures of the recession and went out of business (as suggested by the increased rate of bankruptcies this past year) or they pulled themselves together and have started to make progress. “There has been very little real shift in the numbers since this time last year, but the good news is that four of the six unfavorable factors are now over 50 and that is an improvement over last month when there were only three indicators trending in expansion territory,” said Kuehl.

The online CMI report for February 2012 contains the full commentary, complete with tables and graphs. CMI archives may also be viewed online.

**CN: The NACM's economic report hits a 10-month high with positive movement in sales and dollar collections.

Federal Reserve to Offer Viewings Of Bernanke George Washington University School of Business Lectures

In late March, Federal Reserve Chairman Ben S. Bernanke will teach a series of four classes on “The Federal Reserve and Its Role in Today’s Economy.” The Minneapolis Fed will open its doors for evening viewings of the lectures, followed by a dialogue on their content.

The classes, which begin March 20, are part of a course offered to undergraduates at the George Washington University School of Business. Viewings at the Minneapolis Fed will be held in the evening on the same day as the lectures, and after the video visitors will be able to ask questions and discuss content with Minneapolis Fed economists and staff.

This marks the first time the Minneapolis Fed has offered such a program, and seating is limited. If you are interested in attending, you must register for the event. Viewings at the Minneapolis Fed will be held on March 20, 22, 27 and 29.

Register here.

-- Christine Nielsen

Lead Stories

Bernanke: Money Market Funds Still at Risk of Runs
WSJ.com
The nearly $3 trillion money market mutual fund industry remains at risk in times of panic, Federal Reserve Chairman Ben Bernanke warned Thursday, echoing calls from other federal regulators to address risks from the industry.
http://jlne.ws/xUUW4b

Bernanke Says Economic Recovery Still Spotty
The Epoch Times
Federal Reserve Chairman Ben Bernanke warned that economic growth and job growth will remain sluggish for years.
http://jlne.ws/yw9fcH

Bernanke says Fed likely to keep rates low well into 2014
Boston Globe
WASHINGTON - Federal Reserve chairman Ben Bernanke affirmed yesterday that interest rates are likely to stay low at least through late 2014 without offering any indication that further monetary easing is under consideration.
http://jlne.ws/zjbO7O

Bernanke's prepared testimony to House panel
Reuters via Yahoo! Finance
Below is the text of Federal Reserve Chairman Ben Bernanke's prepared testimony on U.S. monetary policy and the economy to the House Financial Services Committee on Wednesday.
http://jlne.ws/zLSGip

Bernanke Says Dodd-Frank's Volcker Rule Won't Be Ready by July 21 Deadline
Bloomberg
Federal Reserve Chairman Ben S. Bernanke said the central bank and other regulators won't meet a July deadline to complete work on the so-called Volcker rule limiting proprietary trading at banks.
http://jlne.ws/zXJxzp

US Economy Is Growing Moderately: Fed's Beige Book
CNBC
The Federal Reserve said the U.S. economy expanded moderately in January through mid-February as hiring picked up a bit across several districts. The U.S. central bank's Beige Book released on Wednesday had much the same cautiously upbeat tone as the previous report and pointed to some improvement even in the battered housing sector.
http://jlne.ws/yM61VK

Fink Says Savers Need to Become Investors in 'New World'
Bloomberg
BlackRock Inc. (BLK) 's Laurence D. Fink said savers need to become more aggressive investors as returns on bank accounts and Treasuries shrink and people grow older.
http://jlne.ws/zuw8Y5

JPMorgan Says Credit, Swaps Among Trading-Revenue Leaders
BusinessWeek
JPMorgan Chase & Co. said interest- rate swaps and credit are among the biggest sources of revenue in its trading businesses, as it broke with most U.S. rivals by releasing a breakdown typically kept secret.
http://jlne.ws/wD195e

Former Fed chief urges support for Volcker Rule
Associated Press via Yahoo! News
Former Federal Reserve Chairman Paul Volcker on Wednesday urged critics of a proposed U.S. rule limiting speculative trading by banks to get behind the measure, saying that opposition to it is not in their interest.
http://jlne.ws/x88ukp

Housing secretary says FHA faces big risks
Reuters via Yahoo! News
WASHINGTON (Reuters) - The Federal Housing Administration faces "considerable risks" to its finances and the Obama administration will continue to scale back the agency's presence in the mortgage market, the top U.S. housing official said on Tuesday.
http://jlne.ws/w4oXho

Did the G20 Punt on Expanding the IMF Bailout Fund?
CNBC
U.S. futures were weaker, with European stocks mostly down. Over the weekend, the Group of 20 (G20) finance finisters punted on expanding the International Monetary Fund's own bailout fund, insisting Europe expand its own fund first.
http://jlne.ws/zIfeMh

CME Subpoenaed By Federal Grand Jury, CFTC in Probes of MF Global Collapse
Bloomberg
CME Group Inc. (CME) , the world's largest futures exchange, said it received a subpoena from a federal grand jury investigating the October collapse of MF Global Holdings Ltd.
http://jlne.ws/zLfpYy

Pandit Fast Money With Hedge Funds Proves Citigroup Dead End With Spinoffs
Bloomberg
Vikram Pandit knows one way to make big money in hedge funds: sell them.
http://jlne.ws/ymyjIP

NAR Collaborates with U.S. Treasury on Short Sale 'Help for Homeowners'
RISMedia Real Estate News
A new National Association of REALTORS collaboration with the U.S. Department of the Treasury will help REALTORS better assist homeowners who are struggling to sell their homes in a short sale. sponsored by the Treasury Department, will learn insights to help.
http://jlne.ws/AzPCS2

China Had $1.15 Trillion of U.S. Treasuries in December, Revised Data Show
Bloomberg
China, the largest U.S. creditor, held $1.15 trillion in U.S. Treasuries in December, revised figures issued by the Treasury Department show.
http://jlne.ws/wcg3li

Fannie Mae Seeks $4.6 Billion in Aid After 4Q Loss
CNBC
Fannie Mae , the biggest source of money for U.S. home loans, said on Wednesday it would seek $4.6 billion in additional federal aid after reporting a fourth-quarter loss.
http://jlne.ws/yWN6Z6

Rating agency says Greece in 'selective default'
AFP via Yahoo! News
Ratings firm Standard & Poor's on Monday declared Greece in "selective default" after banks agreed to write off more than half of their Greek debt holdings in a second EU bailout of the country.
http://jlne.ws/yZkEkZ

IMF Staff Backs Currency Intervention as a Policy Tool in Emerging Markets
Bloomberg
Currency intervention is a valid instrument for central banks of emerging markets to use alongside interest rates, the International Monetary Fund staff said in a report.
http://jlne.ws/w22W63

NASCAR: An Almost Perfect Analogy For Explaining The Fed Funds Rate
Business Insider
Monetary policy is a complex topic. But, it's important and it affects everyone.
http://jlne.ws/xJllOY

**CN: An ideal analogy, perhaps, for those who have great friends who are NASCAR team owners.

Disquiet within ECB laid bare after cash injection
Reuters via Yahoo! News
FRANKFURT (Reuters) - Some European Central Bank policymakers are alarmed that a dramatic loosening of lending policy stemming from a 1-trillion-euro wave of cash unleashed into the financial system will fuel imbalances in the euro zone and stoke inflationary pressures.
http://jlne.ws/w6jzZ1

ECB Loans Won't Boost Overall Bank Lending
Bloomberg
Feb. 29 (Bloomberg) -- Julian Callow, head of international economics at Barclays Capital, discusses European Central Bank monetary policy, bank lending and inflation. He speaks with Owen Thomas, Linzie Janis and Linda Yueh on Bloomberg Television's "Countdown."
http://jlne.ws/wcb2VC

EIB Said to Share Central Bank's Exemption From Greek Writedowns
BusinessWeek
The European Investment Bank, owned by the 27-member bloc, is getting exemptions from Greek debt writedowns in the same way as the euro area's central bank, according to two regional officials familiar with the matter.
http://jlne.ws/wkdfry

Greek Default Insurance Doesn’t Need to Pay Out After Bailout, ISDA Says
By Abigail Moses - Bloomberg
Default insurance on Greek debt won’t be paid out, the International Swaps & Derivatives Association said after it was asked to rule whether part of the nation’s $170 billion bailout was a credit event.
http://jlne.ws/x9K130

Prop-Trading Firms Said to Face Dodd-Frank Registration as Swap Dealers
Bloomberg
The U.S. Commodity Futures Trading Commission may require companies that trade swaps on their own behalf to register with the agency as dealers as the regulator considers ways of limiting their capital requirements, according to three people briefed on the regulation.
http://jlne.ws/AyxhEZ

Volcker urges more reform beyond trading curbs
Reuters via Yahoo! News
ABU DHABI (Reuters) - Former U.S. Federal Reserve chairman Paul Volcker, who lent his name to historic restrictions on banks' financial market trading, says regulators should not back down in imposing the curbs and that additional reforms to markets are necessary.
http://jlne.ws/wxQk0U

FDIC: Bank earnings hit five-year high in 2011
Houston Chronicle
FDIC: Bank earnings hit five-year high in 2011 Associated Press Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
http://jlne.ws/wrV8qj

St. Louis Fed Releases Econ Ed Mobile App for the iPad/iPhone
http://jlne.ws/zg7ijk

Events

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

ISDA 27th Annual General Meeting
April 30 - May 2, 2012
Only ISDA Members Eligible To Attend
http://jlne.ws/yrvU5E

48th Annual Conference on Bank Structure and Competition
May 9 - May 11, 2012
Annual Conference On Bank Structure
http://jlne.ws/xwqkLK

Exchanges, Clearing Houses & MTFs

BGC Partners To Ramp Up Investment In ELX Futures Exchange
Nasdaq
http://jlne.ws/xvpyRu

CME Group reveals subpoenas in MF Global probe
Reuters via Yahoo! News
CHICAGO (Reuters) - CME Group Inc received two subpoenas, including one for a criminal probe, in the immediate aftermath of the collapse of futures broker MF Global Holdings Ltd, the giant exchange operator said on Tuesday.
http://jlne.ws/yUy2nY

CME Says No Error in Treasury Futures Trading as Bernanke Spoke
By Matthew Leising - Bloomberg
CME Group Inc., the world’s largest futures exchange, said there is no indication of erroneous trading in 10-year Treasury futures contracts today after Federal Reserve Chairman Ben S. Bernanke spoke.
http://jlne.ws/wGnQIY

Huge Treasury Futures Sale Hits Metals, Currency Markets
By Jacob Bunge Of DOW JONES NEWSWIRES
A cascade of massive trades rolled through the Treasury futures market Wednesday morning, sparking debate among traders as to whether the selling was an error or a big investor selling out of a massive position.
http://jlne.ws/AqtSiY

Firms & Banks

Jamie Dimon: JPMorgan is still too small
CNN Money
JPMorgan CEO Jamie Dimon says his bank, the U.S.'s largest, may still be too small to succeed.
http://jlne.ws/yHTwo9

Fannie Mae, BofA At Odds Over Who Dumped Whom
Forbes
Pair disagree over who opted to let a mortgage-selling contract expire.
http://jlne.ws/zGDQD7

MF Global Collapse Prompts Clash Over Collateral
By Silla Brush and Phil Mattingly - Bloomberg
CME Group Inc. (CME) sparred with the Vanguard Group Inc. and other derivatives buyers over whether U.S. regulators should extend collateral-protection rules designed for the swaps market to the futures industry following the collapse of MF Global Holdings Ltd.
http://jlne.ws/zfxxDy

Former top Citigroup executive Terri Dial dies
Reuters via Yahoo! News
Terri Dial, a former senior executive of some of the world's largest banks and one of the leaders of Citigroup's post-crisis restructuring, has died. Dial, 62, died Tuesday of pancreatic cancer, according to media reports.
http://jlne.ws/wNac4A

JPMorgan says may face SEC action on mortgage bonds
Reuters via Yahoo! News
JPMorgan Chase & Co said it may face federal enforcement actions stemming from two investigations into mortgage-backed securities that went bad in the financial crisis. The largest U.S. bank, in a regulatory filing on Wednesday, said Securities and Exchange Commission staff told the company in January that they may recommend the commission bring cases against the company.
http://jlne.ws/zCqMcV

We Wouldn't Have Done Anything Differently: Ex-Bear CEO
CNBC
Faced with the same set of circumstances again, former Bear Stearns CEO Alan Schwartz said he probably wouldn't have done anything different as the firm cascaded toward bankruptcy.
http://jlne.ws/xzTjGh

Regulators

Fed's Pianalto comfortable with policy stance
Market Watch
WASHINGTON (MarketWatch) -- Cleveland Federal Reserve Bank President Sandra Pianalto said Thursday that she is comfortable with the current stance of monetary policy.
http://jlne.ws/yxt6Pl

Federal Reserve Bank of NY Acquires Midtown Office for $207.5M
CoStar Group
The Federal Reserve Bank of New York has acquired its approximately 560,000-square-foot, Midtown Manhattan office building at 33 Maiden Ln. for $207.5 million, or about $371 per square foot, from Merit US Real Estate Fund III, a closed-end German fund managed by Invesco Real Estate in cooperation with Hannover Leasing.
http://jlne.ws/wKdNsd

Fed's Plosser: 2014 wording does not mean much
Market Watch
WASHINGTON (MarketWatch) - The Federal Reserve's statement that it plans to hold rates steady until late 2014 if economic conditions evolve as expected doesn't mean very much, said Charles Plosser, the president of the Philadelphia Federal Reserve Bank. "At the end of the day, we will change policy when the economy tells us to change policy," Plosser said in an interview on CNBC.
http://jlne.ws/yWaTkb

Fed's Fisher: US Has Structural Problem In Banking System
FOX Business
Federal Reserve Bank of Dallas President Richard Fisher said Wednesday that the U.S. has a structural problem in its banking system, with a handful of big banks controlling much of the industry.
http://jlne.ws/wtwZMX

Global News

Bundesbank at odds with ECB over loans
By Patrick Jenkins and Mary Watkins in London and James Wilson in Frankfurt - Financial Times
The head of Germany’s Bundesbank has launched a powerful attack on Mario Draghi, president of the European Central Bank, in a sign of mounting concern in Europe’s biggest economy at measures being taken to try to contain the eurozone financial crisis.
http://jlne.ws/yAj4Nn

Tombini Says Brazil Policy Can Stimulate Growth With Inflation at Target
Bloomberg
Brazil is adopting a policy mix that has a dual goal of fueling economic growth at the same time as it brings inflation back to target, central bank President Alexandre Tombini said.
http://jlne.ws/y2TOtX

BoE's Weale sees additional up-side risks to inflation
ShareCast
LONDON (SHARECAST) - In a speech delivered last night at Cass Business School, Martin Weale - External Member of the Monetary Policy Committee (MPC) discussed several factors affecting private consumption which, together, represent a downside risk to the medium-term growth projections included in the latest Inflation Report.
http://jlne.ws/xvEyT3

Sri Lanka's Biggest Policy Overhaul Since Civil War Risks Inflation Bump
Bloomberg
http://jlne.ws/y77tTV

Uganda pursues easing policy with another rate cut
Reuters via Yahoo! News
KAMPALA (Reuters) - Uganda's central bank trimmed its key lending rate by one percentage point for the second month in a row on Thursday, saying the downward trend in inflation would accelerate through the year.
http://jlne.ws/AtuONI

Vietnam Ready to Force Bank Mergers as Bad Loans Hurt Growth
BusinessWeek
Vietnam's central bank said it's ready to force mergers among weak lenders and keep monetary policy "tight" yet flexible as it grapples with a credit crunch that has forced thousands of companies out of business.
http://jlne.ws/xYzZZB

Philippines Cuts Interest Rate For Second Time This Year
RTT News
The Philippine central bank lowered its policy interest rates by a quarter point as benign inflation helped policymakers to initiate a second easing this year and to support economic activity and reinforce confidence.
http://jlne.ws/zJJGHh

Bank of Canada not seen hiking rates until Q2 2013: Reuters poll
Reuters via Yahoo! News
TORONTO (Reuters) - Sluggish domestic growth and uncertainty about the global economy will likely keep the Bank of Canada from raising rates until the second quarter of 2013, according to a Reuters survey.
http://jlne.ws/xcC7kK

Cyprus bank Marfin takes big Greek writedown hit
Associated Press via Yahoo! News
Cyprus' Marfin Popular Bank said Wednesday it is in strategic talks with several investors after posting a huge loss of euro2.5 billion ($3.36 billion) for 2011, mainly due to a 60 percent writedown on its Greek government bond holdings.
http://jlne.ws/xlD2ax

China central bank may cut interest rates
UPI
BEIJING, Feb. 27 (UPI) -- China's central bank may cut interest rates in the second half of this year due to easing domestic inflation, economists told the China Daily.
http://jlne.ws/Ar3LFJ

Dubai bank cuts off business with Iranian lenders
Associated Press via Yahoo! News
A Dubai Islamic bank with ties to the emirate's ruling family said Wednesday it stopped doing business with Iranian banks in December, shortly before the United States approved new sanctions targeting the country's financial system.
http://jlne.ws/wcP6AQ

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Top Interest Rate Headlines 02-29-2012: Huge Treasurys Futures Trade Roils Markets

2012-02-29T17:20:00.000-06:00

Huge Treasurys Futures Trade Roils Markets
http://jlne.ws/zxABkF

MSRB Adds New Improvements to EMMA
http://jlne.ws/wBCMwZ

Proprietary-Trading Firms Said to Face Dodd-Frank Swap Dealer Regulations
http://jlne.ws/AyxhEZ

Bernanke: 'Volcker Rule' Won't Be Set by July
http://jlne.ws/yyFvto

Speech: A Progress Report on Our Monetary Policy Framework (February 29, 2012) - Philadelphia Fed
http://jlne.ws/yP0kac

Fed’s Fisher: Mexico Besting U.S. in Many Areas
http://jlne.ws/Ak0y2Y

Fannie Mae to Seek $4.6 Billion More in Aid
http://jlne.ws/AirdQv

Coming tomorrow: Banking Outlook Conference highlights. Join the discussion starting at 8 am
http://ow.ly/9mHfo

Greece must take charge and change: EU's Hahn
http://jlne.ws/y8pTbf

Student Loan Debt Hits Home for Bernanke
http://jlne.ws/yVPsJP

Bernanke: Progress cutting unemployment could fade
http://jlne.ws/yu4o7x

U.S. targets Dubai bank over Iran dealings
http://jlne.ws/AkpzzL

Second cheap money round hard to resist for Europe banks
http://jlne.ws/xb9XYm

Bernanke: Monetary Stance Meets Fed Goals
http://jlne.ws/ABb8P6

Fourth-quarter U.S. GDP growth revised up to 3%
http://jlne.ws/AaTrrC

Fed's Bernanke: Semiannual Monetary Policy Report to the Congress

2012-02-29T09:53:00.000-06:00

Fed's Bernanke: Semiannual Monetary Policy Report to the Congress

Chairman Ben S. Bernanke
Semiannual Monetary Policy Report to the Congress
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
February 29, 2012

Chairman Bachus, Ranking Member Frank, and other members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress. I will begin with a discussion of current economic conditions and the outlook and then turn to monetary policy.

The Economic Outlook
The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards. After minimal gains in the first half of last year, real gross domestic product (GDP) increased at a 2-1/4 percent annual rate in the second half.1 The limited information available for 2012 is consistent with growth proceeding, in coming quarters, at a pace close to or somewhat above the pace that was registered during the second half of last year.

We have seen some positive developments in the labor market. Private payroll employment has increased by 165,000 jobs per month on average since the middle of last year, and nearly 260,000 new private-sector jobs were added in January. The job gains in recent months have been relatively widespread across industries. In the public sector, by contrast, layoffs by state and local governments have continued. The unemployment rate hovered around 9 percent for much of last year but has moved down appreciably since September, reaching 8.3 percent in January. New claims for unemployment insurance benefits have also moderated.

The decline in the unemployment rate over the past year has been somewhat more rapid than might have been expected, given that the economy appears to have been growing during that time frame at or below its longer-term trend; continued improvement in the job market is likely to require stronger growth in final demand and production. Notwithstanding the better recent data, the job market remains far from normal: The unemployment rate remains elevated, long-term unemployment is still near record levels, and the number of persons working part time for economic reasons is very high.2

Household spending advanced moderately in the second half of last year, boosted by a fourth-quarter surge in motor vehicle purchases that was facilitated by an easing of constraints on supply related to the earthquake in Japan. However, the fundamentals that support spending continue to be weak: Real household income and wealth were flat in 2011, and access to credit remained restricted for many potential borrowers. Consumer sentiment, which dropped sharply last summer, has since rebounded but remains relatively low.

In the housing sector, affordability has increased dramatically as a result of the decline in house prices and historically low interest rates on conventional mortgages. Unfortunately, many potential buyers lack the down payment and credit history required to qualify for loans; others are reluctant to buy a house now because of concerns about their income, employment prospects, and the future path of home prices. On the supply side of the market, about 30 percent of recent home sales have consisted of foreclosed or distressed properties, and home vacancy rates remain high, putting downward pressure on house prices. More-positive signs include a pickup in construction in the multifamily sector and recent increases in homebuilder sentiment.

Manufacturing production has increased 15 percent since the trough of the recession and has posted solid gains since the middle of last year, supported by the recovery in motor vehicle supply chains and ongoing increases in business investment and exports. Real business spending for equipment and software rose at an annual rate of about 12 percent over the second half of 2011, a bit faster than in the first half of the year. But real export growth, while remaining solid, slowed somewhat over the same period as foreign economic activity decelerated, particularly in Europe.

The members of the Board and the presidents of the Federal Reserve Banks recently projected that economic activity in 2012 will expand at or somewhat above the pace registered in the second half of last year. Specifically, their projections for growth in real GDP this year, provided in conjunction with the January meeting of the Federal Open Market Committee (FOMC), have a central tendency of 2.2 to 2.7 percent.3 These forecasts were considerably lower than the projections they made last June.4 A number of factors have played a role in this reassessment. First, the annual revisions to the national income and product accounts released last summer indicated that the recovery had been somewhat slower than previously estimated. In addition, fiscal and financial strains in Europe have weighed on financial conditions and global economic growth, and problems in U.S. housing and mortgage markets have continued to hold down not only construction and related industries, but also household wealth and confidence. Looking beyond 2012, FOMC participants expect that economic activity will pick up gradually as these headwinds fade, supported by a continuation of the highly accommodative stance for monetary policy.

With output growth in 2012 projected to remain close to its longer-run trend, participants did not anticipate further substantial declines in the unemployment rate over the course of this year. Looking beyond this year, FOMC participants expect the unemployment rate to continue to edge down only slowly toward levels consistent with the Committee's statutory mandate. In light of the somewhat different signals received recently from the labor market than from indicators of final demand and production, however, it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery.

At our January meeting, participants agreed that strains in global financial markets posed significant downside risks to the economic outlook. Investors' concerns about fiscal deficits and the levels of government debt in a number of European countries have led to substantial increases in sovereign borrowing costs, stresses in the European banking system, and associated reductions in the availability of credit and economic activity in the euro area. To help prevent strains in Europe from spilling over to the U.S. economy, the Federal Reserve in November agreed to extend and to modify the terms of its swap lines with other major central banks, and it continues to monitor the European exposures of U.S. financial institutions.

A number of constructive policy actions have been taken of late in Europe, including the European Central Bank's program to extend three-year collateralized loans to European financial institutions. Most recently, European policymakers agreed on a new package of measures for Greece, which combines additional official-sector loans with a sizable reduction of Greek debt held by the private sector. However, critical fiscal and financial challenges remain for the euro zone, the resolution of which will require concerted action on the part of European authorities. Further steps will also be required to boost growth and competitiveness in a number of countries. We are in frequent contact with our counterparts in Europe and will continue to follow the situation closely.

As I discussed in my July testimony, inflation picked up during the early part of 2011.5 A surge in the prices of oil and other commodities, along with supply disruptions associated with the disaster in Japan that put upward pressure on motor vehicle prices, pushed overall inflation to an annual rate of more than 3 percent over the first half of last year.6 As we had expected, however, these factors proved transitory, and inflation moderated to an annual rate of 1-1/2 percent during the second half of the year--close to its average pace in the preceding two years. In the projections made in January, the Committee anticipated that, over coming quarters, inflation will run at or below the 2 percent level we judge most consistent with our statutory mandate. Specifically, the central tendency of participants' forecasts for inflation in 2012 ranged from 1.4 to 1.8 percent, about unchanged from the projections made last June.7 Looking farther ahead, participants expected the subdued level of inflation to persist beyond this year. Since these projections were made, gasoline prices have moved up, primarily reflecting higher global oil prices--a development that is likely to push up inflation temporarily while reducing consumers' purchasing power. We will continue to monitor energy markets carefully. Longer-term inflation expectations, as measured by surveys and financial market indicators, appear consistent with the view that inflation will remain subdued.

Monetary Policy
Against this backdrop of restrained growth, persistent downside risks to the outlook for real activity, and moderating inflation, the Committee took several steps to provide additional monetary accommodation during the second half of 2011 and early 2012. These steps included changes to the forward rate guidance included in the Committee's post-meeting statements and adjustments to the Federal Reserve's holdings of Treasury and agency securities.

The target range for the federal funds rate remains at 0 to 1/4 percent, and the forward guidance language in the FOMC policy statement provides an indication of how long the Committee expects that target range to be appropriate. In August, the Committee clarified the forward guidance language, noting that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--were likely to warrant exceptionally low levels for the federal funds rate at least through the middle of 2013. By providing a longer time horizon than had previously been expected by the public, the statement tended to put downward pressure on longer-term interest rates. At the January 2012 FOMC meeting, the Committee amended the forward guidance further, extending the horizon over which it expects economic conditions to warrant exceptionally low levels of the federal funds rate to at least through late 2014.

In addition to the adjustments made to the forward guidance, the Committee modified its policies regarding the Federal Reserve's holdings of securities. In September, the Committee put in place a maturity extension program that combines purchases of longer-term Treasury securities with sales of shorter-term Treasury securities. The objective of this program is to lengthen the average maturity of our securities holdings without generating a significant change in the size of our balance sheet. Removing longer-term securities from the market should put downward pressure on longer-term interest rates and help make financial market conditions more supportive of economic growth than they otherwise would have been. To help support conditions in mortgage markets, the Committee also decided at its September meeting to reinvest principal received from its holdings of agency debt and agency mortgage-backed securities (MBS) in agency MBS, rather than continuing to reinvest those proceeds in longer-term Treasury securities as had been the practice since August 2010. The Committee reviews the size and composition of its securities holdings regularly and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in the context of price stability.

Before concluding, I would like to say a few words about the statement of longer-run goals and policy strategy that the FOMC issued at the conclusion of its January meeting. The statement reaffirms our commitment to our statutory objectives, given to us by the Congress, of price stability and maximum employment. Its purpose is to provide additional transparency and increase the effectiveness of monetary policy. The statement does not imply a change in how the Committee conducts policy.

Transparency is enhanced by providing greater specificity about our objectives. Because the inflation rate over the longer run is determined primarily by monetary policy, it is feasible and appropriate for the Committee to set a numerical goal for that key variable. The FOMC judges that an inflation rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with its statutory mandate. While maximum employment stands on an equal footing with price stability as an objective of monetary policy, the maximum level of employment in an economy is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market; it is therefore not feasible for any central bank to specify a fixed goal for the longer-run level of employment. However, the Committee can estimate the level of maximum employment and use that estimate to inform policy decisions. In our most recent projections in January, for example, FOMC participants' estimates of the longer-run, normal rate of unemployment had a central tendency of 5.2 to 6.0 percent.8 As I noted a moment ago, the level of maximum employment in an economy is subject to change; for instance, it can be affected by shifts in the structure of the economy and by a range of economic policies. If at some stage the Committee estimated that the maximum level of employment had increased, for example, we would adjust monetary policy accordingly.

The dual objectives of price stability and maximum employment are generally complementary. Indeed, at present, with the unemployment rate elevated and the inflation outlook subdued, the Committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives. However, in cases where these objectives are not complementary, the Committee follows a balanced approach in promoting them, taking into account the magnitudes of the deviations of inflation and employment from levels judged to be consistent with the dual mandate, as well as the potentially different time horizons over which employment and inflation are projected to return to such levels.

Thank you. I would be pleased to take your questions.

Top Interest Rate Headlines 02-28-12: Deutsche Bank Says Waugh to Step Down as CEO for Americas

2012-02-28T17:08:00.000-06:00

Deutsche Bank Says Waugh to Step Down as CEO for Americas
BusinessWeek
Deutsche Bank AG, Germany's biggest lender, said Seth Waugh has decided to step down as chief executive officer for the Americas, without giving a reason.
http://jlne.ws/y8iD0B

HSBC says it may face criminal charges for transactions
Reuters via Yahoo! News
(Reuters) - HSBC Holdings Plc said on Monday it will likely face criminal or civil charges from an expanding investigation into its ties to allegedly illegal money transactions, including some tied to Iran.
http://jlne.ws/xqZcxP

Barclays faces block on tax schemes
By Megan Murphy, Patrick Jenkins and Vanessa Houlder - Financial Times
Barclays has been blocked from implementing two highly abusive tax schemes that could have cost the Treasury £500m, despite the banks commitment to a new code of practice in which it pledged not to engage in tax avoidance.
http://jlne.ws/yiJ5qV

Whodunit at MF Global
WSJ
Almost four months after the bankruptcy of futures giant MF Global, clients still haven't been made whole and still haven't been told what happened to $1.6 billion of their money. Nor has anyone been charged with civil or criminal offenses. But a Journal report casts new doubt on the Congressional testimony of former CEO Jon Corzine.
http://jlne.ws/xShQLP

Banks may take on settlement houses at own game
Reuters via Yahoo! News
Banks are looking to break into the last bastion of Europe's securities market, the settling of trades, to meet growing pressure from regulators for safer trading backed with collateral.
http://jlne.ws/yYi1Ce

RBS to Move Australian Fixed-Income Trading to Singapore, U.K.
BusinessWeek
Royal Bank of Scotland Group Plc plans to relocate its Australian fixed-income and currency trading business to Singapore and London, according to an e- mailed response to questions from Bloomberg News.
http://jlne.ws/wQYHiZ

Santander takes control of Polands Kredyt
By Victor Mallet in Madrid and Jan Cienski in Warsaw - Financial Times
Santander of Spain, the eurozones biggest bank by market capitalisation, will take control of Polands Kredyt Bank from KBC of Belgium following a long-awaited deal announced on Tuesday.
http://jlne.ws/xG5ZTB

Market Participant Asks ISDA If Greek CDS Have Been Triggered
By Katy Burne Of DOW JONES NEWSWIRES
An unidentified market participant has asked a committee of the International Swaps and Derivatives Association to rule on whether the passage of legislation approving collective-action clauses for Greek debt should trigger payouts on credit-default swaps tied to Greek sovereign bonds.
http://jlne.ws/zfQzaN

ISDA Accepts Question Related To A Potential Hellenic Republic Credit Event

2012-02-28T14:46:00.002-06:00

NEWS RELEASE
For Immediate Release

ISDA Determinations Committee:

Accepts Question Related to a Potential Hellenic Republic Credit Event

LONDON, February 28, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA), as secretary to the Determinations Committees (the DCs), today announced that a question relating to a potential credit event with respect to the Hellenic Republic has been submitted to, and subsequently accepted for consideration by, the EMEA Determinations Committee.

In accordance with the Determinations Committee Rules, a meeting will be held at 11AM GMT on Thursday, March 1 to determine whether a credit event has occurred.

Further information regarding the question is available at www.isda.org/credit.

For Media Enquiries, Please Contact:

Lauren Dobbs, ISDA New York, +1 212 901 6019, ldobbs@isda.org

Claire Freer, ISDA London, +44 203 088 3578, cfreer@isda.org

About ISDA

Since 1985, ISDA has worked to make the global over-the-counter (OTC) derivatives markets safer and more efficient. Today, ISDA is one of the world’s largest global financial trade associations, with over 815 member institutions from 58 countries on six continents. These members include a broad range of OTC derivatives market participants: global, international and regional banks, asset managers, energy and commodities firms, government and supranational entities, insurers and diversified financial institutions, corporations, law firms, exchanges, clearinghouses and other service providers. Information about ISDA and its activities is available on the Association's web site: www.isda.org.

ISDA® is a registered trademark of the International Swaps and Derivatives Association, Inc.

Top Interest Rate Headlines 02-27-2012: Fed Releases Bank Plans To Fix Mortgage Servicing

2012-02-27T15:37:00.000-06:00

Fed releases bank plans to fix mortgage servicing
MarketWatch
The Federal Reserve on Monday released action plans for correcting mortgage servicing delinquencies developed by nine large financial institutions after being sanctioned last year. The action plans are required by major banks that were sanctioned by the Fed last year for "negligence" in residential mortgage loan servicing and foreclosure processes.
http://jlne.ws/wX3PD5

NFA takes emergency enforcement action against Texas firm J Hansen Investments LLC and its principal, Jonathan Hansen
Press Release
National Futures Association (NFA) announced today that it has taken an emergency enforcement action against J Hansen Investments LLC (JHI) and its principal, Jonathan Hansen (Hansen). J Hansen Investments is an NFA Member commodity pool operator located in Houston, Texas and Hansen is also an NFA Associate.
http://jlne.ws/wVUCta

Federal Court in Illinois Orders Former Futures Trader David Sklena to Pay over $6.6 Million for Cheating Customers
Press Release
The U.S. Commodity Futures Trading Commission (CFTC) today announced that it obtained a federal court order requiring former Chicago Board of Trade (CBOT) floor trader and registered floor broker David Sklena of Skokie, Ill., to pay a disgorgement and civil monetary penalty of $6,608,750 for aiding and abetting another trader’s scheme to cheat customers who placed orders in Five-Year Treasury Note futures contracts.
http://jlne.ws/wSYubK

Draghi’s Unlimited Loans Are No Panacea
Bloomberg
European Central Bank President Mario Draghi’s success in quelling a bond-market rout across the euro region’s periphery masks a failure by the region’s banks to bolster their capital.
http://jlne.ws/yvc93f

Standard & Poor's Puts EFSF On Downgrade Watch—AGAIN
Business Insider
Standard & Poor's just placed the European Financial Stability Facility—the eurozone bailout fund—on creditwatch negative.
http://jlne.ws/wJgkhQ

A Buffett Heir, but Who?
WSJ.com
Warren Buffett on Saturday sought to reassure Berkshire Hathaway Inc. shareholders girding for an inevitable but anxiety-provoking leadership transition, stating that an unnamed individual has been chosen to eventually succeed him as the conglomerate's chief executive.
http://jlne.ws/yxpBGG

Volcker Punishes Small Bonds in Liquidity Trap: Credit Markets
SFGate - Bloomberg
Tougher regulations on risk-taking by banks and the growth of exchange-traded funds that buy the most actively traded junk bonds are penalizing smaller borrowers seeking capital.
http://jlne.ws/zosF4a

ECB Loan Program Eyed for Take-Up Size
WSJ.com
The European Central Bank is back in the spotlight this week as it prepares to launch the second round of its program to support the euro-zone banking system with the offer of unlimited three-year funds, even as concern lingers that it risks monetary instability if repeated too often.
http://jlne.ws/x3UMjs

Zoellick Sees China Heeding Suggestions
WSJ.com
A report by the World Bank and a prominent Chinese think tank recommends sweeping changes in the Chinese economy, including reducing the power of state-owned enterprises and breaking up monopolies, but doesn't examine the role of the institution that will have the biggest say in such changes: the Chinese Communist Party.
http://jlne.ws/whmfh2

Corporate Bond Issuance Can’t Match Demand, Citigroup Says
Bloomberg
There aren’t enough corporate bonds available to satisfy investor demand because the amount of securities that have matured this year is outstripping new issuance, according to analysts at Citigroup Inc. (C) in London.
http://jlne.ws/wfC3NS

G20 will be more involved only after the Eurozone increases
Ashraflaidi
G20 will be more involved only after the Eurozone increases financial firewall; Italian and German bond auctions; Eurozone M3 grew and Italian business confidence declined; ECB deposits remain elevated. Market turns to pending home sales and Dallas FED manufacturing. Remaining Premium trades are shorts in ES (Emini S&P500), AUDNZD & longs in gold & EURGBP. Longs in US crude and EURUSD were all done.
http://jlne.ws/wmnXc1

Central Bank of Hungary governor offers to donate salary
http://jlne.ws/wAwYrD

Banks to guzzle another 500 billion euros from ECB
Reuters
Banks will guzzle another half a trillion euros of cheap three-year loans offered by the European Central Bank on Wednesday, according to a Reuters poll of money market traders, who said the opportunity would be the last of its kind.
http://jlne.ws/AAOfck

Remarks by Treasury Secretary Tim Geithner at the G-20 Meeting of Finance Ministers and Central Bank Governors

2012-02-27T10:49:00.000-06:00

Remarks by Treasury Secretary Tim Geithner at the G-20 Meeting of Finance Ministers and Central Bank Governors
2/26/2012

As Prepared for Delivery

MEXICO CITY - The risks to the global economy have diminished since the G-20 last met in Cannes, but we still face significant economic challenges. The U.S. economy is gradually getting stronger. Europe has acted to significantly reduce the risk of a catastrophic financial crisis. And even with weakness in European growth, we are seeing encouraging signs of resilience in many emerging economies.

The discussion of ministers and governors this weekend focused primarily on three key issues:

Europe and the global economic outlook;
Iran and oil markets; and
Financial reform.

Our colleagues in Europe gave us an update on their plans going forward to address the European financial crisis. We are encouraged by the progress that they have made over the last few months. A durable solution requires both a sustained period of economic reform and a substantial financial firewall to support those reforms. European policy makers recognize the magnitude of the challenges ahead and will be reviewing additional steps in the weeks ahead.

The G-20 is committed to making sure that the IMF has the resources it needs to help its members deal with the risks from Europe. There is broad agreement that the IMF cannot substitute for the absence of a stronger European firewall and that the IMF cannot move forward without more clarity on Europe’s own plans.

Beyond Europe, the steps many emerging economies took last summer and fall have helped support global growth. While the right mix of policies will differ across countries, policy generally should be directed at reinforcing economic expansion.

Reorienting the economies of countries with large external surpluses toward domestic demand and greater exchange rate flexibility remain critical to a sustainable global recovery. Since China resumed exchange-rate reform in June of 2010, the renminbi has appreciated by around 12 percent against the dollar after taking into account China’s higher level of inflation. That’s welcome progress, and we believe it is in China’s interest and in the interest of the global economy for their exchange rate to continue to appreciate.

Other emerging economies in Asia with external surpluses also need to increase their exchange rate flexibility and adopt policies that support domestic sources of growth.

On Iran and oil, I had a series of encouraging conversations with countries planning to significantly reduce imports from Iran. We are seeing very effective cooperation from our partners on the financial front to help ensure that their banks cease transactions with the Central Bank of Iran and that Iranian banks find it harder than ever to facilitate Iran’s illicit nuclear activities or to help Iran evade sanctions.

We are working together to help ensure there are alternative sources of oil from major producers to help offset reductions in exports from Iran, and here too, I am encouraged.

We reviewed the global effort to strengthen safeguards against future risks in the financial system. We have made important progress on tougher capital standards. We’re seeing broad convergence on strategies for oversight and transparency in derivatives markets. There is very extensive consultation between the Federal Reserve, the FDIC, and their counterparts in other countries about how to manage crises and deal with the possible failure of large financial institutions.

This is an important year for financial reform in the United States, where we expect to have the major foundations of our reform in place by the end of 2012. Of course, it’s very important to us that we have a level playing field internationally. As we and others go forward in implementing our financial reforms we will be mindful of cross boarder impacts and committed to managing them carefully.

Let me conclude with a few points on the U.S. economy.

The U.S. economy is gradually getting stronger. Despite substantial headwinds, our economy has grown at an average annual rate of 2 1/2 percent over the last two and a half years. And we have seen encouraging signs of strength in recent indicators.

This recovery has been supported by a shift toward a more balanced pattern of growth in the United States, with stronger growth in private investment and exports. Productivity is up. Private savings is substantially higher than it was before the crisis, and our fiscal deficits are now falling. The U.S. current account deficit is now around 3 percent of GDP – down from a peak of around 6 percent before the crisis. The financial sector is much stronger.

Even with this progress, however, the damage inflicted by the crisis will still take some time to repair. Unemployment, while falling, is still very high. And the housing market remains weak.

Our focus now is on reforms that will help create a stronger foundation for future growth and broaden economic opportunity. Our strategy is to combine investments and reforms in education, innovation, and infrastructure with tax reforms and savings to restore long-term fiscal sustainability.

Thank you to our gracious hosts, President Calderon, Minister Meade and Governor Carstens and their teams, for hosting us this weekend.

###

Top Interest Rate Headlines 02-24-2012: Bankers Urge G20 Growth Strategy, Euro-Zone Risks Remain

2012-02-24T16:50:00.000-06:00

Bankers Urge G20 Growth Strategy, Euro-Zone Risks Remain
International bankers called on Group of 20 finance leaders on Friday to step up their efforts to promote economic growth, warning that spillover risks from the euro zone remain.
http://jlne.ws/zd2AiU

Dudley: Low interest rates help pay the national debt
The Federal Reserve takes a lot of heat from critics for keeping interest rates low. But there's an upside that most people overlook: Low interest rates save the government money.
http://jlne.ws/xn0y0i

Remarks at Panel Discussion on Fiscal Challenges - Federal Reserve Bank of New York
William C. Dudley, President and Chief Executive Officer
Remarks at Panel Discussion at 2012 U.S. Monetary Policy Forum, New York City
It is a pleasure to have the opportunity to speak here today on a panel with Charles Plosser of the Federal Reserve Bank of Philadelphia, and Juergen Stark, formerly of the European Central Bank. Our topic today is fiscal policy—for central bankers always dangerous waters to swim in. I will focus my remarks on the United States as others are better qualified to comment on the situation in Europe and elsewhere.
http://jlne.ws/yW7M5O

Measuring Housing's Drag on the Economy
Here’s a reminder about a problem that still doesn’t get the attention that it deserves: Housing has blown a giant smoking hole in the middle of our economy, and the consequences continue to impede the pace of recovery. A new paper presented Friday at a monetary policy conference in New York puts some interesting new numbers on the scope of the problem.
http://jlne.ws/yXbIu4

AP Poll Shows That Americans Prefer Spending Cuts To Tax Increases On Rich
More Americans are in favour of their government cutting down on its spending to balance the national budget rather than trying to do so by increasing the tax rate for the wealthy, revealed an Associated Press-GfK poll on Friday, as Republican and Democratic politicians continue to debate over the merits of either move.
http://jlne.ws/x5kzAo

Comments on “Housing, Monetary Policy, and the Recovery” by Michael Feroli, Ethan Harris, Amir Sufi, and Kenneth West
http://jlne.ws/ypTfRy

Japan shuts money manager after funds go missing
Japan's financial regulator has ordered money manager AIJ Investment Advisors Co. to halt operations for a month after the Tokyo firm was not able to account for nearly $2.3 billion in pension-fund assets, The Wall Street Journal reported on Friday. Japanese Financial Services Minister Shozaburo Jimi said that the case has prompted regulators to examine the operations of all 263 investment-management firms in Japan, the newspaper reported.
http://jlne.ws/AiLwnP

This weekend: A Group of 20 nations (G20) meeting of finance ministers and central bank governors in Mexico City.
http://jlne.ws/wai8yE

Greece Issues Formal Offer for Debt Writedown
Greece on Friday launched its official offer for a massive bond swap designed to knock euro107 billion ($142 billion) off its debt held by banks and other private investors.
http://jlne.ws/AcqGbD

New Mortgage Names Rise as Oligopoly Reconfigures
Much of the business ceded by B of A has been absorbed by Wells Fargo. Still, smaller lenders are making inroads as the giants scramble the playing field by shuttering origination channels, or exiting the business altogether.
http://jlne.ws/y5FStj

Graph: Median Sales Price for New Houses Sold in the United States
http://jlne.ws/yx5wXc

Investors eye GDP warrants dubiously
Market participants are attributing little value to warrants referencing Greek GDP included in the private sector involvement, while speculating the illiquidity of the instruments may secure favourable accounting for the new Greek bonds.
http://jlne.ws/ykbN5l

Deposit Flows Show Money Leaking to Germany
Money is leaking out of banks in southern Europe as customers scoop deposits out of Greece, Spain and Italy to move cash to less indebted nations such as Germany.
http://jlne.ws/yD36B3

ISDA Publishes IRS Swaps Compression Progress Report
http://jlne.ws/z1EHYy

Knight Capital Hires Former MF Global mortgage credit sales and trading experts
http://jlne.ws/xeaThK

Why the Federal Reserve can't fix housing
Housing is still one of the biggest drags on U.S. economic growth, but don't look to the Federal Reserve for help. The central bank may have few tools left to fix it.
http://jlne.ws/Athf1H

AIG Reports Fourth Quarter 2011 Net Income of $19.8 Billion

2012-02-24T12:28:00.000-06:00

Fourth Quarter 2011 After-Tax Operating Income of $1.6 Billion

Fourth Quarter Net Income Includes Deferred Tax Asset Valuation Release of $17.7 Billion
February 23, 2012 04:19 PM Eastern Time

NEW YORK--(EON: Enhanced Online News)--American International Group, Inc. (NYSE: AIG) today reported net income attributable to AIG of $19.8 billion for the quarter ended December 31, 2011, compared to $11.2 billion in the prior year quarter. Diluted earnings per share were $10.43 for the fourth quarter and $16.60 for the prior year quarter. For the full year 2011, net income attributable to AIG was $17.8 billion compared to $7.8 billion in 2010. Diluted earnings per share were $9.44 for the full year and $11.60 for the prior year.

“Two years ago, skeptics – and even some supporters – thought it inconceivable that we would be in a position to post our second consecutive annual profit.”

Net income reflected a U.S. consolidated income tax group deferred tax asset valuation allowance release of $17.7 billion for the quarter and $16.6 billion for full year 2011. As previously disclosed, AIG established a framework for assessing the recoverability of its deferred tax assets. Based on the application of this framework, AIG concluded that it is more likely than not that a substantial portion of the deferred tax assets of the U.S. consolidated income tax group will be realized, and therefore released the valuation allowance equal to that portion in the fourth quarter 2011.

After-tax operating income in the 2011 fourth quarter was $1.6 billion, or $0.82 per diluted share compared to a loss of $2.2 billion, or $15.99 per diluted share in the corresponding prior year quarter. After-tax operating income for the full year of 2011 was $1.8 billion, or $1.02 per diluted share compared to a loss of $898 million, or $6.57 per diluted share in 2010.

Full year net income includes catastrophe losses totaling $3.3 billion in 2011, up from $1.1 billion in 2010, $1.7 billion in impairment charges and fair value adjustments at International Lease Finance Corporation (ILFC) related to its fleet during 2011, and a net $2.9 billion pre-tax loss on extinguishment of debt, primarily representing the accelerated amortization of the prepaid commitment fee asset related to the full repayment of the Federal Reserve Bank of New York Credit Facility, partially offset by a gain on the exchange of junior subordinated debentures for senior notes. Full year 2010 net income included pre-tax gains of $17.6 billion from the sale of properties and divested businesses and a $4.2 billion net charge to strengthen Chartis loss reserves. The January 2011 issuance of AIG common stock to the U.S. Department of the Treasury affected the determination of net income or losses attributable to AIG common shareholders and the weighted average shares outstanding, both of which are used to compute earnings per share.

“Fourth quarter and full year profitability reflects the tremendous commitment and focus on business fundamentals by everyone at AIG,” said Robert H. Benmosche, AIG President and Chief Executive Officer. “The quality of our earnings, against the backdrop of record natural catastrophes, enables this great company to again stand proud as a market leader. I am also extremely proud that when natural catastrophes strike, we stand with our customers and provide them with the peace of mind that we’re there for them.

“Two years ago, skeptics – and even some supporters – thought it inconceivable that we would be in a position to post our second consecutive annual profit,” Mr. Benmosche continued. “During 2011, we completely repaid the Federal Reserve Bank of New York Credit Facility and restructured the U.S. government ownership to provide the U.S. Department of the Treasury a clear exit path, while maintaining our investment grade ratings. We proved to investors that AIG is back and worthy of investor confidence through the $8.7 billion equity offering and our ability to raise capital at competitive rates in the public debt markets. We also completed much of the work necessary to stabilize and de-risk our businesses, among so many other critical accomplishments.

“In 2011, we began to prosper once again,” Mr. Benmosche concluded. “We have a high degree of confidence in our future earnings prospects, which is a critical element in our assessment supporting the release of the deferred tax asset valuation allowance. As we look to 2012 and beyond, we anticipate we’ll continue to be competitive in all areas of our core insurance businesses. We’re seeing markets hardening at Chartis. At SunAmerica, we have taken a leadership position to meet the critical needs of retirees, and at United Guaranty, we’ve become the market leader and we’re creating innovative products that help protect lenders, homeowners, communities, and local economies from mortgage default. In 2011, United Guaranty helped about 40,000 families stay in their homes.”

See the full AIG release here.

February 23, 2012: Consumer Comfort Highest in Almost Four Years; Jobless Claims Hold Steady At Four-Year Low [NEWSLETTER]

2012-02-23T16:27:00.000-06:00

February 23, 2012

Conversation Starter

Five Minutes With Bluford Putnam

Bluford Putnam has served as managing director and chief economist of CME Group since May 2011. He is responsible for leading economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company's business strategy. He also serves as CME Group's spokesperson on global economic conditions and manages external research initiatives. He recently talked with JLN Managing Editor Christine Nielsen.

Q) The head of the Philadelphia Federal Reserve Bank warned recently against efforts to accelerate the nation’s economic recovery, citing the threat of inflation. According to Charles Plosser, the Fed has taken several steps to help revive the economy, and with a very accommodative monetary policy already in place, officials must guard against the medium- and longer-term risks of inflation. Would you agree with his assessment?

A) FOMC members and the market participants have deep divisions over the current relative balance of the risks of higher inflation versus slipping back into recession. At the current time, my perspective is that both risks are now very low. If the FOMC, however, keeps the Federal funds rate near zero through the end of 2014, as they have suggested they may do, then I think the risks of inflation will trump recession risks. But my view is that the FOMC may not follow its own guidance if my U..S economic outlook proves correct and 2012 is a strong growth year with the unemployment rate in the 7.5 percent territory and falling by the fourth quarter. The Fed provides rate guidance, not commitments.

Q) How would you describe the current economy, and the outlook for the economy in the near term?

A) The 2012 outlook for the U.S. economy is the best it's been in years. We see 3.5 percent to 4 percent real GDP growth in 2012, with the unemployment rate falling through 8 percent and to 7.5 percent by the fourth quarter.

The really important thing to understand about 2012 is that it's not 2011. Those things that scared you to death in 2011 have pretty much diminished.
See the full interview here: http://jlne.ws/zQUNnX

----------------------------------------

CBOE Futures Exchange Puts Real Estate on the Radar
By Sarah Rudolph

CBOE Futures Exchange (CFE) launched futures on the Radar Logic 25-Metropolitan Statistical Area (MSA) RPX Composite Index on Feb. 2. We wanted to learn more about the index and the futures contracts, so JLN Options Newsletter editor Sarah Rudolph sat down to talk with John Angelos, director, institutional marketing, credit derivatives, at the Chicago Board Options Exchange.

The credit crisis was disastrous for the market in mortgage-backed securities and spelled the end for over-the-counter mortgage-backed-security (MBS) derivatives that could help hedge those portfolios. Now the CBOE Futures Exchange (CFE) is aiming to give the MBS market a tool to mitigate risk through new real estate futures contracts.

CFE’s entrance into the space is a revival of sorts, using the Radar Logic RPX Composite Index (RPX), which tracks U.S. residential housing values and is one of several Radar Logic 28-Day Real Estate indexes on which CFE is planning to offer futures contracts. CFE’s contracts follow an over-the-counter version of the RPX index that had traded for four years, up until the credit crisis, when the securitization market dried up and OTC trading disappeared, creating a void. But mortgage-backed-security portfolios haven’t disappeared; they still exist all over the U.S., and MBS portfolio managers need a new way to hedge their exposure, according to John Angelos of the CBOE.

The idea evolved from portfolio managers who came to Michael Feder, the owner of Radar Logic, to help them find a way to fill that void by creating a tool to mitigate their risk. They introduced Feder to the CFE, which came up with a futures contract based on the Radar Logic cash Index.
See the full interview here: http://jlne.ws/zeffr5

Lead Stories

Consumer Comfort Highest in Almost Four Years
Consumer confidence in the U.S. increased last week to the highest level since April 2008 as more Americans had a favorable view of their finances.
http://jlne.ws/yLjUB3

Jobless claims hold steady at 4-year low
Reuters via Yahoo! News
WASHINGTON (Reuters) - New claims for unemployment benefits were unchanged last week, holding at the lowest level since the early days of the 2007-2009 recession and giving a fresh sign the battered labor market is healing. Workers filed 351,000 initial claims for state unemployment benefits, the Labor Department said on Thursday.
http://jlne.ws/AqdvLe

**CN: What were you doing in the early days of the recession?

You know the deficit hawks. Now meet the deficit owls
Washington Post
About 11 years ago, James K. "Jamie" Galbraith recalls, hundreds of his fellow economists laughed at him. To his face. In the White House. It was April 2000, and Galbraith had been invited by President Bill Clinton to speak on a panel about the budget surplus. Galbraith was a logical choice.
http://jlne.ws/y11wxK

The Federal Reserve's Rule-Making Secrecy
Swampland
The Wall Street Journal has a thoroughly reported story today on the rise in regulatory secrecy at the Federal Reserve. On 45 of 47 of the draft or final regulatory measures voted on by members since the passage of the Dodd-Frank financial reform bill in July 2010.
http://jlne.ws/ybW1uQ

Fed's Fisher says economy brighter, no need for QE3
Reuters via Yahoo! News
(Reuters) - Dallas Federal Reserve Bank President Richard Fisher said on Thursday U.S. economic conditions were improving and repeated his view that further easing from the U.S. central bank was not needed. "The tone is a lot better. It's not brilliant; we don't have enough new hiring taking place, (but we're) definitely moving in the right direction," Fisher told CNBC television.
http://jlne.ws/zBbhfC

Volcker Said to Lobby SEC Chairman Personally on Volcker Rule
BusinessWeek
Former Federal Reserve chairman Paul Volcker met in person with U.S. Securities and Exchange Commission Chairman Mary Schapiro this week to discuss the proposed ban on proprietary trading named for him, according to a person familiar with the meeting.
http://jlne.ws/x4APM3

Federal Reserve Driven Inflation Hurts Savers
James Rickards is a hedge fund manager in New York City and the author of Currency Wars: The Making of the Next Global Crisis from Portfolio/Penguin.
http://jlne.ws/zFypVY

Libor Probe Said to Expose Collusion, Lack of Internal Controls
BusinessWeek
Global regulators have exposed flaws in banks' internal controls that may have allowed traders to manipulate interest rates around the world, two people with knowledge of the probe said.
http://jlne.ws/zwKgEq

New York Federal Reserve Said to Plan Sale of AIG-Linked Mortgage Bonds
Bloomberg
The Federal Reserve Bank of New York will seek bids for more of the mortgage bonds assumed in the government rescue of American International Group Inc. (AIG) after it was approached by a potential buyer, according to two people with knowledge of the plan.
http://jlne.ws/A0H8Je

Federal Reserve Chairman Bernanke says nation's community banks are stronger
New Haven Register
WASHINGTON - Federal Reserve Chairman Ben Bernanke says the health of the nation's community banks has strengthened, despite what he calls a frustratingly slow economic recovery.
http://jlne.ws/ACrObT

Community banks may get smaller TARP bills
The Standard-Times
WASHINGTON - Community banks that still owe billions of dollars to the Treasury Department's bailout program may get a break, as Treasury may sell the stakes it got in the banks via its Troubled Asset Relief Program (TARP) to third parties.
http://jlne.ws/wnaiGx

*CN: As of last month, 372 banks still owed $16.8 billion in TARP funds.

Tri-Party Repo Task Force to Take Diminished Reform Role
BusinessWeek
A Federal Reserve-sponsored group working to improve efficiency in the market for borrowing and lending securities will take a diminished role in efforts to cut systemic risk in the market for dealer financing.
http://jlne.ws/wGKgxm

Fed Regional Bank Directors Predicted 'Moderate' Growth in 2012
Bloomberg
Directors at the Federal Reserve's regional banks last month saw "moderate" growth in 2012 even as the U.S. economy showed signs of strengthening.
http://jlne.ws/wBetao

Obama to offer corporate tax reform plan
CNN
The Treasury Department will unveil President Barack Obama's corporate tax reform plan Wednesday -- a framework that would reduce the overall rate paid by corporations, a senior administration official told CNN.
http://jlne.ws/yVawgR

Geithner Bond Returns Trail Paulson While Beating Rubin
BusinessWeek
Timothy F. Geithner, who took over the Treasury Department in the midst of the worst financial crisis since the Great Depression and oversaw the almost doubling of U.S. public debt, has done better for investors than Robert Rubin while falling short of Henry Paulson.
http://jlne.ws/wccKVz

Greece readies launch of debt swap for rescue
Reuters via Yahoo! News
ATHENS (Reuters) - Greece's parliament was expected to endorse a debt swap with private bondholders on Thursday that forms the core of its 130-billion-euro bailout, despite new protests against tough budget cuts demanded in return for the rescue deal.
http://jlne.ws/w13JbX

Low Yields Likely To Linger, Barclays Says
Nasdaq
Even as equities-dominated portfolios have failed to bring home impressive returns for at least a decade, a structural change in the supply of low-risk assets
http://jlne.ws/xjh8wU

Strauss-Kahn Freed After Questioning in Prostitution Inquiry
Bloomberg
Dominique Strauss-Kahn, the former head of the International Monetary Fund, has been released from police custody after almost two days of questioning as part of an investigation into a French prostitution ring.
http://jlne.ws/A8nBpN

EU expects eurozone to suffer mild recession
Associated Press via Yahoo! News
The 17-nation eurozone economy will suffer a modest recession this year despite recent signs of stabilization, particularly in financial markets, the European Union's executive branch said Thursday.
http://jlne.ws/xQoOh2

Deutsche Bank Says ECB to Wind Down LTROs After Three-Year Loan
BusinessWeek
The European Central Bank's second tranche of three-year loans next week may mark the end of its "generous" provision of long-term funding, according to Deutsche Bank AG.
http://jlne.ws/wGxdxu

Fannie, Freddie legal fees: $110 million and counting
CNN Money
A watchdog agency said Wednesday that the legal tab for former leaders of mortgage finance giants Fannie Mae and Freddie Mac is at least $110 million.
http://jlne.ws/xg7mvx

Greece's Parliament approves terms of major debt-swap deal
http://jlne.ws/AxIcRA








Exchanges, Clearing Houses & MTFs

TriOptima and LCH.Clearnet Compression of Cleared Interest Rate Swaps Exceeds $100 Trillion in Notional
http://jlne.ws/yrVmPW

LCH.Clearnet Raise Discount On Spain,Italy Collateral Bonds
http://jlne.ws/AhDkGS

Firms & Banks

JPMorgan Wagers $72 Billion on Global Home Loans in Yield Hunt: Mortgages
Bloomberg via Yahoo! Finance
JPMorgan Chase & Co. (JPM) has more than tripled its holdings of mortgage securities without U.S.government guarantees to $72 billion.
http://jlne.ws/yvo9s2

Pimco Said to Quit Mortgage Bond Group
http://jlne.ws/yqOa7h

Regulators

CFTC Poised to Re-Propose Dodd-Frank Block Trade Regulation
BusinessWeek
The U.S. Commodity Futures Trading Commission is poised to re-propose Dodd-Frank Act regulations that would determine when swaps are big enough that their price and size don't need to be reported immediately to the public.
http://jlne.ws/yhnJqi

IMF Resources Talks Should Follow Europe Financial Firewall, Brainard Says
Bloomberg
Group of 20 nations should discuss possible further resources for the International Monetary Fund after Europe decides on its financial firewall, the U.S. Treasury Department's top international official said.
http://jlne.ws/z1eO53

Global News

Bank Of England Miles: Inflation To Keep Slowing In 2012
Nasdaq
http://jlne.ws/xbO6Vr

Fed's Inflation Target Stirs Japan Lawmaker Ire at BOJ Record
BusinessWeek
The Federal Reserve's decision to set a 2 percent inflation target last month had a ripple effect a continent away: Japanese lawmakers are invoking it as evidence that their own central bank comes up short.
http://jlne.ws/ynprjf

Gillard Urged to Follow Bernanke With Australia Loans: Mortgages
BusinessWeek
Australia's Prime Minister Julia Gillard may be forced to follow U.S. Federal Reserve Chairman Ben S. Bernanke by increasing mortgage purchases as house prices slump and the nation's biggest banks extend their grip on the home-loan market.
http://jlne.ws/wQipGs

Australia Central Bank Sees Scope for Further Rate Cuts: Economy
BusinessWeek
Australia's central bank said it has scope to ease monetary policy if needed, after keeping the benchmark interest rate unchanged this month as risks in Europe abated, minutes of its Feb. 7 meeting showed.
http://jlne.ws/AlEjQA

Polish Rates Likely to Rise on Growth Forecast
Bloomberg
Feb. 21 (Bloomberg) -- Andrzej Bratkowski, member of the Polish central bank's Monetary Policy Council, discusses the outlook for the economy, inflation and interest rates. He spoke yesterday with Bloomberg's David McQuaid in Warsaw.
http://jlne.ws/z8GKNL

Namibia's central bank leaves rates at 6.0 percent
Reuters via Yahoo! News
JOHANNESBURG (Reuters) - Namibia's central bank on Wednesday left its bank rate unchanged at 6.0 percent, citing concerns of "frail" economic growth. "Our estimate is that growth for 2011 is going to be just under 4 percent compared to 6.6 percent in 2010," central bank Governor Ipumbu Shiimi said at a briefing.
http://jlne.ws/A1qMgU

Turkish Central Bank Unexpectedly Cuts Its Maximum Lending Rate to 11.5%
Bloomberg
Turkey's central bank cut the maximum interest rate at which it lends to banks overnight to 11.5 percent from 12.5 percent, saying it was taking into account monetary easing in other economies. Bond yields dropped to a four-month low.
http://jlne.ws/AspGh4

Russia Central Bank Forex Reserves Feb 17 Down $4.7 Billion To 504.4 Billion
Nasdaq
http://jlne.ws/yoDmrc

Royal Bank of Scotland Posts a Wider-Than-Estimated Loss
BusinessWeek
Royal Bank of Scotland Group Plc, Britain's biggest government-owned lender, posted a wider full- year loss than analysts estimated after writing down Greek debt and compensating customers who were improperly sold insurance.
http://jlne.ws/xlLcXD

Thai Central Bank: 4Q11 GDP Contraction Worse Than Expected
Nasdaq
http://jlne.ws/zsp0yr

Euro-Area Central Banks Said to Swap Greek Portfolio Bonds
BusinessWeek
Euro-area central banks will swap the Greek bonds in their investment portfolios for similar securities to avoid enforced losses during a debt restructuring, a euro-area official said.
http://jlne.ws/wJ2LER

Top Interest Rate Headlines 02-22-2012: Obama Introduces Plan To Cut Corporate Tax Rate

2012-02-22T15:41:00.000-06:00

Obama Introduces Plan to Cut Corporate Tax Rate
The New York Times
President Obama asked Congress on Wednesday to scrub the corporate tax code of dozens of loopholes and subsidies to reduce the top rate to 28 percent, from 35 percent, while giving preferences to manufacturers that would set their maximum effective rate at 25 percent.
http://jlne.ws/ysTns8

Should Mortgage Rates Even Be Lower?
WSJ.com
Mortgage rates are the lowest on record. But by a key historical measure, they should be even lower. Over the past year, a wide gap ripped open between the mortgage rates house hunters see and a benchmark interest rate investors demand to buy bonds backed by home loans.
http://jlne.ws/xNqvl7

THE PRESIDENT’S FRAMEWORK FOR BUSINESS TAX REFORM
http://jlne.ws/xx4nSv

New NFA members take aggressive approach
FuturesMag.com
A point that is often missed in the coverage of MF Global is that this is a crime in progress and not merely a bad thing that happened that has to be cleared up. Every day that customers are not made whole the crime becomes worse and damage to the industry accrues.
http://jlne.ws/zSpiNJ

Greek Parliament to discuss austerity, bond swap deal as unions plan protest rally
The Washington Post With Bloomberg
A new €130 billion ($172 billion) bailout deal “binds Greece to euro” and will shield the country from default, the finance minister said Wednesday. Evangelos Venizelos made the remarks after the government conceded a new round of austerity measures will deepen the recession and cause the country to miss its target of generating a primary budget surplus in 2012.
http://jlne.ws/wmdOz3

NFA's Board of Directors elects Christopher Hehmeyer to serve as Chairman
Press Release
February 22, Chicago - The Board of Directors of National Futures Association (NFA) has elected Christopher K. Hehmeyer, Non-Executive Chairman at Penson GHCO, to serve a one-year term as Chairman. The Board also elected Paul J. Georgy, President of Allendale, Inc., to serve as Vice Chairman.
http://jlne.ws/zFdCSJ

CFPB Opens Inquiry Into Overdraft Fee Practices
The Consumer Financial Protection Bureau takes its road show to New York City Wednesday, Feb. 22, to ask bank customers about “their experiences with financial products and services.”
http://jlne.ws/wGpeD1

Jan. Existing Home Sales Rise 4.3% to 4.57M Unit Rate
The Bond Buyer
Existing home sales increased 4.3% in January to a seasonally adjusted 4.57 million-unit rate, after a downwardly revised 4.38 million unit rate in December originally reported as 4.61 million units, the National Association of Realtors announced Wednesday.
http://jlne.ws/A1457A

Top Interest Rate Headlines 02-21-12: Fed Writes Sweeping Rules From Behind Closed Doors

2012-02-21T16:49:00.000-06:00

Fed Writes Sweeping Rules From Behind Closed Doors
BY VICTORIA MCGRANE AND JON HILSENRATH - WSJ
The Federal Reserve has operated almost entirely behind closed doors as it rewrites the rule book governing the U.S. financial system, a stark contrast with its push for transparency in its interest-rate policies and emergency-lending programs. While many Americans may not realize it, the Fed has taken on a much larger regulatory role than at any time in history.
http://jlne.ws/wk2HTR

NFA considering proposal to restore money lost by MF Global
By Lynne Marek - Crain's
(Crain's) Two new reform-minded National Futures Association board members are pressing the group to help restore money lost by MF Global Inc.'s futures-trading customers and require futures commission merchants to disclose daily where customer funds are held.
http://jlne.ws/yJk1bl

You know the deficit hawks. Now meet the deficit owls.
Washington Post
About 11 years ago, James K. "Jamie" Galbraith recalls, hundreds of his fellow economists laughed at him. To his face. In the White House. It was April 2000, and Galbraith had been invited by President Bill Clinton to speak on a panel about the budget surplus. Galbraith was a logical choice. A public policy professor at the University of Texas and former head economist for the Joint Economic ...
http://jlne.ws/y11wxK

UBS Launches New E-Trading Platform For Credit-Default Swaps
By Katy Burne Of DOW JONES NEWSWIRES
Seeing that a pending regulatory overhaul of the $708 trillion private derivatives market will bring down the curtain on the lucrative business of dealing in swaps, UBS is looking for a new way to stay in the game. In a wholesale shift in how credit derivatives have been traded, the Swiss banking giant has launched an electronic market for credit-default swaps, allowing customers to buy or sell the insurance-like instruments directly with other customers on-screen or trade with the bank's own traders.
http://jlne.ws/wcrAcW

UBS Turning Whistleblower in Libor Probe Puts Pressure on Rivals
BusinessWeek
UBS AG's decision to become first- confessor as regulators probe the alleged manipulation of interest rates will ratchet up the risks for other banks that set the benchmark for $360 trillion of securities worldwide.
http://jlne.ws/wJ8Hbq

Trustee Finds No Missing MF Global Customer Cash JP Morgan Account
By PATRICK FITZGERALD
Louis Freeh, the bankruptcy trustee overseeing MF Global Holdings Ltd.'s Chapter 11 case, determined that none of the estimated $1.6 billion in missing customer cash ended up in a company account at J.P. Morgan Chase & Co. that he was reviewing.
http://jlne.ws/xRuqbc

Euro Zone Ministers Approve $171B Greek Aid Package
International Business Times
Euro zone finance ministers meeting in Brussels early Tuesday approved a $171 billion bailout package for Greece, sparing the nation a default and the continent a dramatic economic downturn.
http://jlne.ws/yuiupD

Top Interest Rate Headlines 02-17-2012: Congress Approves Payroll Tax Cut, Sending Measure To President Obama

2012-02-17T16:46:00.000-06:00

Top Interest Rate Headlines 02-17-2012: Congress Approves Payroll Tax Cut, Sending Measure To President Obama

2012-02-17T16:33:00.000-06:00

Congress approves payroll tax cut, sending measure to President Obama
The Washington Post
http://jlne.ws/yZRaQl

Could ECB Greek Bond Swap Trigger Ratings Default?
WSJ.com
Greece's debt rating could fall into default in the coming days if past comments by ratings firms are any indication after the country completed a debt exchange on bonds held by the European Central Bank.
http://jlne.ws/yCGynh

Leaders of Germany, Greece and Italy optimistic a Greek bailout deal will be agreed next week
The Associated Press
Greece’s hopes to finally get its bailout and dodge default next month were boosted Friday, when key European leaders, including German Chancellor Angela Merkel, sounded confident a deal could be agreed.
http://jlne.ws/yF9dlt

Fitch Upgrades Iceland Rating To First Step Of Investment Grade
WSJ.com
Fitch Ratings lifted its rating on Iceland to investment grade, citing the nation's progress in stabilizing its economy and pushing ahead with structural reforms.
http://jlne.ws/yKbFOB

Italy police seize $6 trillion of fake U.S. T-bonds
Italian police said on Friday they had seized about $6 trillion worth of fake U.S. Treasury bonds and other securities in Switzerland, and arrested eight Italians accused of international fraud and other financial crimes.
http://jlne.ws/zdoK79

Fed Bank Of Dallas CEO On CBS 11
Federal Reserve Bank of Dallas President and CEO Richard W. Fisher joined CBS 11 Thursday afternoon to talk money, what the bank does, and to answer questions from viewers.
http://jlne.ws/wcuFG2

Portugal premier says not to seek more bailout funds
Portugal's prime minister ruled out on Friday any intention to seek more emergency funding or to extend a 78-billion-euro bailout, underlining that his government will meet fiscal goals and economic reforms to overcome the country's debt crisis
http://jlne.ws/xKM93J

February 16, 2012: Big Banks Expected Fed to Keep Rates Low Longer [NEWSLETTER]

2012-02-16T16:39:00.012-06:00

February 16, 2012

JLN Interest Rates - http://www.jlninterestrates.com

Conversation Starter

Excerpts: Steven B. Kamin, Director, Division of International Finance
The European Financial Situation
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.
February 16, 2012

***For two years now, developments in Europe have played a critical role in shaping the tenor of global financial markets. The combination of high debts, large deficits, and poor growth prospects in several European countries using the euro has raised concerns about their fiscal sustainability. Such concerns were initially focused on Greece but have since spread to a number of other euro-area countries, leading to substantial increases in their sovereign borrowing costs. Pessimism about these countries' fiscal situation, in turn, has helped to undermine confidence in the strength of European financial institutions, increasing the institutions' borrowing costs and threatening to curtail their supply of credit. These developments have strained global financial markets and weighed on global economic activity.

***The changes in swap arrangements --have had some positive effects on dollar funding markets. Since the announcement of the changes at the end of November, the outstanding amount of dollar funding through the swap lines has increased substantially, to more than $100 billion, and several measures of the cost of dollar funding have declined.

That being said, many financial institutions, especially those from Europe, continue to find it difficult and costly to acquire dollar funding, in large part because investors remain uncertain about Europe's economic and financial prospects. Ultimately, the easing of strains in U.S. and global financial markets will require concerted action on the part of European authorities as they follow through on their announced plans to address their fiscal and financial difficulties. The situation in Europe is continuously evolving. Thus, we are closely monitoring events in the region and their spillovers to the U.S. economy and financial system.

See the full speech here.

Lead Stories

Big Banks Expected Fed to Keep Rates Low Longer
WSJ.com
Ahead of the last Federal Reserve meeting, Wall Street’s biggest banks expected the central bank to lengthen the period it saw interest rate rates staying very low, although not by as much as the Fed actually delivered. In a survey of the primary dealer banks that serve as counterparties to Fed market interventions, the median projection of the banks was that the Fed will raise interest rates in the second quarter of 2014. The survey of dealers was conducted in advance of the Jan. 24-25 Federal Open Market Committee. Dealers got the questions on Jan. 12, with the responses received by Jan. 17.
http://jlne.ws/woiILz

Federal Reserve Open Market Committee Meeting Minutes for Jan. 25 (Text)
Bloomberg
Following are the minutes of the Federal Reserve's Open Market Committee meeting that concluded on January 25.
http://jlne.ws/yjAVhI

Federal Reserve minutes show members divided over bond buys
Los Angeles Times
The Federal Reserve appears open to the idea of a third round of bond purchases to boost a still-modest recovery. But members remain divided over when or whether to take that step.
http://jlne.ws/AvQKzq

Moodys Unveils Broad Ratings Review of Major Banks
By JULIA WERDIGIER - NY Times
LONDON Goldman Sachs, Morgan Stanley, Deutsche Bank, UBS and more than 100 other financial institutions might have their credit ratings cut by Moody’s Investors Service because of increasingly challenging market conditions.
http://jlne.ws/xIykdJ

Federal Reserve Board Approves Capital One Plan To Buy ING Bank
Nasdaq
http://jlne.ws/xbNZYZ

Fed Bond Purchase Option Kept in Reserve as Officials Weigh Data
BusinessWeek
Federal Reserve officials are keeping open the option of a third round of bond purchases in case the economy weakens or inflation stays low.
http://jlne.ws/y7KerZ

**CN: Policy makers willing to wait for evidence of weakness in the economy before taking further action are probably in the majority says a former senior staff economist in the central bank’s division of monetary affairs.

Fed Bond Purchase Option Kept in Reserve as Officials Weigh Data
BusinessWeek
Federal Reserve officials are keeping open the option of a third round of bond purchases in case the economy weakens or inflation stays low.
http://jlne.ws/y7KerZ

Federal Reserve Unlikely to Buy More Assets
New York Times
Minutes of the Jan. 24-25 meeting of the policy group show that the central bank continued to predict only modest economic growth this year.
http://jlne.ws/yV3B7g

Bernanke says community banks have strengthened
Associated Press via Yahoo! News
Federal Reserve Chairman Ben Bernanke said Thursday that the health of the nation's community banks has strengthened, despite what he described as a frustratingly slow economic recovery.
http://jlne.ws/yZiDRM

Fed's Tri-Party Repo Group Says More Work Needed on Dealer Funding Reforms
Bloomberg
A Federal Reserve-sponsored advisory panel formed to help devise ways to reduce risks and improve the efficiency of the market for borrowing and lending securities said further work was needed as the group concluded its efforts.
http://jlne.ws/AibWE3

Federal Reserve minutes show members divided over bond buys
Los Angeles Times
The Federal Reserve appears open to the idea of a third round of bond purchases to boost a still-modest recovery. But members remain divided over when or whether to take that step.
http://jlne.ws/AvQKzq

Zoellick to leave World Bank
By Alan Beattie in Washington - Financial Times
Robert Zoellick, president of the World Bank since 2007, announced on Wednesday he would step down when his current term ends on June 30. His departure will start a battle for a prized position that has traditionally been in the gift of the US but for which an emerging market candidate may make a bid.
http://jlne.ws/wTbZEx

The Federal Reserve's Explicit Goal: Devalue The Dollar 33%
Business Insider
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years.
http://jlne.ws/xDYJBB

New York Fed to Take More Direct Role in Repo Market
Wall Street Journal Blogs
At issue is the state of the triparty repo market. This sector is the backbone of bond trading and its high-volume trades are very short term in nature. Since the financial crisis, the market has been beset by problems, among them issues with the documentation of trades.
http://jlne.ws/wKIuF7

Student Loans Near $1 Trillion Hurting Young Buyers: Mortgages
BusinessWeek
Roshell Schenck has a PhD in pharmacy and earns $125,000 a year, yet can't qualify for a mortgage for a house for herself and her 9-year-old daughter. The 2008 graduate of Lake Erie College of Osteopathic Medicine, in Erie, Pennsylvania, has more than $110,000 in student debt.
http://jlne.ws/xwFLrF

U.S TIC Flows
International Business Times
The U.S Department of the Treasury released the TIC flows for the month of December, where total Net TIC Flows rose to $87.1 billion, from a revised estimate of $42.9 billion. Net long -term TIC flows fell to $17.9 billion in December, down from a revised estimate of $61.3 billion and median estimate.
http://jlne.ws/Aupmhc

Broadway Financial Enters Definitive Agreement With U.S. Treasury Department
Business Wire
LOS ANGELES--(BUSINESS WIRE)--Broadway Financial Corporation (NasdaqCM:BYFC), the holding company of Broadway Federal Bank, f.s.b., today announced it has entered into an agreement with the U.S. Department of the Treasury (the "Treasury") pursuant to which the Treasury will exchange its Series D and E preferred stock in the Company for new common stock.
http://jlne.ws/zQTu7n

Treasury says it can skimp and save
UPI
WASHINGTON, Feb. 13 (UPI) -- U.S. Treasury Secretary Timothy Geither touted the department's proposed budget allocation as an effort to be thrifty, but also create jobs.
http://jlne.ws/wPqjBp

China's U.S. Mortgage Buying May Be Bet on QE3, Nomura Says
BusinessWeek
Chinese investors added U.S. government-backed mortgage securities and so-called agency debentures in December, signaling the country may be anticipating further purchases of housing debt by the Federal Reserve, according to Nomura Securities International analysts.
http://jlne.ws/yKqr4B

Foreign demand for US Treasury debt declines
Channel 8 San Diego
Foreign demand for U.S. Treasury debt fell slightly in December after hitting a record high the previous month.
http://jlne.ws/xtguPo

ECB Following US Lead in Handling Greece: Ross
CNBC
European policymakers are taking a page from their American counterparts in dealing with their sovereign debt crisis, a development that vulture investor Wilbur Ross considers positive.
http://jlne.ws/yIRwgg

Pimco: Foreclosure Deal Cheap for Banks
Bloomberg
In what the U.S. called the largest federal-state civil settlement in the nation's history, five banks including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM) yesterday committed $20 billion in various forms of mortgage relief plus payments of $5 billion to state and federal governments.
http://jlne.ws/ynKseT

Gross Buys Treasuries as Buffett Says Bonds Are 'Dangerous'
BusinessWeek
Pacific Investment Management Co.'s Bill Gross increased his holdings of Treasuries to the highest level since July 2010, while billionaire investor Warren Buffett called them "dangerous."
http://jlne.ws/wdWkFK

Simon Johnson: Paul Volcker vs. the Bank of Canada
New York Times
In opposing an American regulation limiting banks' proprietary trading, the Canadian central bank recommends an approach that would seriously undermine financial stability in the United States, Canada and other countries, an economist writes.
http://jlne.ws/zcPejl

The Volcker Rule's Unusual Critics
New York Times
While Wall Street is the chief critic of the rule, which bans banks from trading with their own money, the financial industry is finding sympathy from some unexpected quarters, including the owners of Red Lobster, Macy's and Safeway.
http://jlne.ws/w1I5We

CME Group Asks Regulators to Exempt Futures From Volcker Rule
By Matthew Leising
Feb. 15 (Bloomberg) -- CME Group Inc. is asking regulators to include futures contracts in a list of exempted investments that won’t be prohibited under the Volcker rule’s limits on proprietary trading. [...] Leaving futures contracts off the list probably was “inadvertent,” CME Group Chief Executive Officer Craig Donohue wrote to regulators in a Feb. 13 letter.

Woman Saves Baby as Car Hits House
http://jlne.ws/yeECdS

**CN: Not about rates, but so brightly shines a good deed in a weary world.

Events

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

ISDA 27th Annual General Meeting
April 30 - May 2, 2012
Only ISDA Members Eligible To Attend
http://jlne.ws/yrvU5E

48th Annual Conference on Bank Structure and Competition
May 9 - May 11, 2012
Annual Conference On Bank Structure
http://jlne.ws/xwqkLK

Firms & Banks

State Street Launches SwapEx Initiative, Significantly Expanding End-to-End Derivatives Solution
Business Wire via Yahoo! Finance
State Street Corporation , one of the world's leading providers of financial services to institutional investors, today announced the expansion of its end-to-end derivatives solution to include an execution platform for the trading of derivatives products.
http://jlne.ws/A1XnxN

Ex-Citigroup Trader Denies Wrongdoing in Tibor Probe
BusinessWeek
An ex-Citigroup Inc. executive accused in a probe by Japanese regulators of suspected interest- rate manipulation denied wrongdoing and said authorities never questioned him before they issued findings.
http://jlne.ws/ySLbUl

UBS suspends traders in Libor probe
By Megan Murphy and Cynthia O’Murchu - Financial Times
UBS has suspended some of its most senior traders in connection with an international probe into the possible manipulation of interbank borrowing rates, in the latest controversy to hit the Swiss bank since the financial crisis.
http://jlne.ws/yEaO5Z

Wanted to Buy: MF Global Claims
By DAN STRUMPF - WSJ
Since MF Global Holdings Ltd. filed for bankruptcy protection last year, some customers of its failed brokerage have had little choice but to wait for the full return of their cash. That is beginning to change. Lately, investors that gobble up claims in bankruptcy or other distressed situations have begun approaching former MF Global customers with offers to buy their claims for cash, at a discount.
http://jlne.ws/zLvyhi

Citigroup Mortgage Unit to Pay $158.3 Million in Settlement
BusinessWeek
Citigroup Inc.'s Citimortgage unit agreed to pay $158.3 million to settle claims tied to its actions in a federal home-loan insurance program, the Manhattan U.S. Attorney's office said.
http://jlne.ws/AmbSdT

Deutsche Bank Sued in New York Over $512 Million in Mortgage Securities
Bloomberg
Deutsche Bank AG's Ace Securities was sued in New York state court for fraud for allegedly misrepresenting the quality of $512 million worth of residential mortgage-backed securities by Phoenix Light SF Ltd.
http://jlne.ws/yzWt1h

Morgan Stanley and Citi face losses on block trades
By Robin Wigglesworth, Capital Markets Correspondent - Financial Times
Morgan Stanley and Citigroup face potentially painful losses on two recent European share sales that went awry, highlighting the dangers of the currently aggressive bidding by banks for so-called ‘block trade’ work.
http://jlne.ws/Akb3Vn

Regulators

Atlanta Federal Reserve President On Valentine's Day: U.S. Economy Has Been 'Rather Frisky Lately'
The Huffington Post
Here's the Federal Reserve wishing you a Happy Valentine's Day.
http://jlne.ws/zSWIjF

Kocherlakota's priority: Federal Reserve transparency
MinnPost
Narayana Kocherlakota describes himself as a "pro-transparency" kind of guy. In the 28 months since he became president of the Federal Reserve Bank of Minneapolis, the affable former economics professor has given 39 speeches and issued 21 papers or policy statements, far outpacing his predecessor.
http://jlne.ws/zzhueU

Williams Says Fed Should Keep U.S. Monetary Throttle Wide Open
BusinessWeek
Federal Reserve Bank of San Francisco President John Williams said the U.S. central bank should keep trying to boost growth because it's missing its goals for employment and price stability, while stopping short of calling for more asset purchases for now.
http://jlne.ws/yJmHEs

Fed's Tarullo Abstains on Vote to Back Statement of Principles
Wall Street Journal Blogs
Not everyone at last month's Federal Open Market Committee signed off on the central bank's new statement of principles.
http://jlne.ws/xSeTdD

Dallas Fed President Fisher says more easing may be harmful
http://jlne.ws/zignz0 via Yahoo! Finance
Additional monetary accommodation may only fuel inflation fears, said Fed President Richard Fisher in a speech today, according to a transcript.
http://jlne.ws/xWR3dr

Nicaragua Central Bank Head Quits Amid Alba Spat With Ortega
BusinessWeek
Nicaragua's Central Bank President Antenor Rosales quit following a disagreement with President Daniel Ortega over the use of foreign currency reserves to fund a regional bank for the Venezuelan-led bloc of eight nations known as Alba.
http://jlne.ws/xBCzvL

Global News

BOJ signals more aggressive policy, sets inflation goal
Hartford Courant
TOKYO (Reuters) - The Bank of Japan boosted its asset buying program by $130 billion on Tuesday and in the face of political pressure set an inflation goal of 1 percent, signaling a more aggressive monetary policy to pull an ailing economy out of deflation.
http://jlne.ws/zKcB4K

Brazil's Economic Activity Rises in December for Second Straight Month
Bloomberg
Brazil's economy expanded in December for the second straight month, adding to evidence that Latin America's biggest economy recovered from a third-quarter contraction.
http://jlne.ws/xLHq2h

Sweden's Central Bank Cuts Main Rate to Ward Off Recession
BusinessWeek
Sweden's central bank cut its benchmark interest rate for a second consecutive meeting to prevent the largest Nordic economy from falling into a recession as Europe's debt crisis erodes export demand.
http://jlne.ws/AbIJec

Central Bank's Occupy policy enrages local business owners
Irish Central
Central Bank Governor Patrick Honohan angered business owners after saying last week that while he didn't welcome the Dame Street protesters, he had no plans to take action against them.
http://jlne.ws/AmxKfg

Ghana c.bank hikes rates, cites euro zone
Reuters via Yahoo! News
ACCRA (Reuters) - The Bank of Ghana's Monetary Policy Committee announced a one percentage point increase to 13.5 percent in its prime lending rate on Wednesday, the first hike in three years, citing risks from the euro zone debt crisis and currency volatility.
http://jlne.ws/zbk9Wj

Norway Policy Dilemma Pits House Debt Against Krone 'Headache'
BusinessWeek
Norway's overheated credit and property markets are vying with export-eroding krone gains for policy makers' attentions as officials risk fueling either an asset bubble or currency appreciation.
http://jlne.ws/wIKjv1

French banks' central bank liabilities hit
Reuters via Yahoo! News
PARIS (Reuters) - French banks' liabilities with the Bank of France hit a record high of 218 billion euros in December, of which 119.6 billion was used for monetary policy, the central bank said on Tuesday.
http://jlne.ws/xRWNs2

British Central Bank Sees 'Zigzag' Growth
New York Times
http://jlne.ws/xc44cM

Riksbank Cuts Repo Rate Amid European Woes
Nasdaq
http://jlne.ws/zADnsT

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Top Interest Rate Headlines 02-15-2012: Some Fed Officials Saw Need For More Stimulus: Minutes

2012-02-15T17:31:00.000-06:00

Some Fed officials saw need for more stimulus: minutes
http://jlne.ws/wtX07a

State Street Launches New E-Platform for Derivatives Trading
http://jlne.ws/w8Lvwo

Greek bailout decision postponed
http://jlne.ws/yiRsal

OPERATORS OF CALIFORNIA-BASED MORTGAGE MODIFICATION SCAM PLEAD GUILTY TO CONSPIRACY TO COMMIT FRAUD
http://jlne.ws/zAaOFW

Analysis: Greece heads for record books as economy slumps
http://jlne.ws/xaKgZp

Finance Ministers Debate Delaying Release of Bailout Funds
http://jlne.ws/zxTuII

Eurogroup’s Juncker: Substantial further progress has been made
http://jlne.ws/xsw2Wk

Strange twist: ECB balance sheet buoys euro
http://jlne.ws/wxcPY9

Hearing on President's Fiscal Year 2013 Budget Proposal With U.S. Depart Of the Treasury Secretary Timothy F. Geithner
http://jlne.ws/zhzVIY

NAHB Housing Index Jumps to 29 in February
http://jlne.ws/A2Wqju

Fed’s Fisher Dismisses QE3 as ‘Wall Street Fantasy’
http://jlne.ws/zEv5Lq

World Bank president Robert Zoellick to step down in June
http://jlne.ws/xic7y2

The Dodd-Frank Act’s Potential Effects on the Credit Rating Industry
http://jlne.ws/wvSUkL

World Bank's Zoellick to spell out plans: sources
http://jlne.ws/z4cT6b

Federal Open Market Committee Minutes - January 25

2012-02-15T13:14:00.002-06:00

Press Release

Release Date: January 25, 2012
For immediate release

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

Preliminary WTI Signals Stability in Wage Increases

2012-02-15T11:52:00.003-06:00

ARLINGTON, Va., Feb. 15, 2012 /PRNewswire-USNewswire/ -- Annual wage growth for private sector workers likely will be stable in the coming months, according to the preliminary first quarter Wage Trend Indicator (WTI) released today by Bloomberg BNA, a leading publisher of specialized news and information.

The index declined to 98.48 (second quarter 1976 = 100) from 98.56 in the fourth quarter of 2011, as revised. If confirmed by more complete data in the revised and final first quarter readings, this would be the WTI's first decline in six quarters.

"Although the job market has shown improvement recently, inflation expectations have weakened at least temporarily," economist Kathryn Kobe, a consultant who maintains and helped develop Bloomberg BNA's WTI database, said. "Based on preliminary information, the latest WTI is indicating a stall in the pace of wage growth, but it is premature to call this a turning point," Kobe said.

Over its history, the WTI has predicted a turning point in wage trends six to nine months before the trends are apparent in the Department of Labor's employment cost index (ECI). A sustained decline in the WTI is predictive of a deceleration in the rate of private sector wage increases, while a sustained increase forecasts greater pressure to raise wages.

Annual wage increases in the private sector are expected to be close to the 1.6 percent gain in 2011 measured by the ECI.

Reflecting recent labor market conditions, four of the WTI's seven components made negative contributions to the preliminary first quarter reading, while two factors were positive and one was neutral.

This month's WTI report incorporates annual revisions to historical data based on revised component data published recently by BLS and the Federal Reserve.

Contributions of Components

Of the WTI's seven components, the four negative contributors to the preliminary first quarter reading were forecasters' expectations for the rate of inflation, compiled by the Federal Reserve Bank of Philadelphia; industrial production, measured by the Federal Reserve Board; average hourly earnings of production and nonsupervisory workers, reported by DOL; and the share of employers planning to hire production and service workers in the coming months, as tracked by Bloomberg BNA's quarterly employment outlook survey. The positive factors were job losers as a share of the labor force and the unemployment rate, both reported by DOL. The neutral component was the proportion of employers reporting difficulty in filling professional and technical jobs, from Bloomberg BNA's employment survey.

Bloomberg BNA's Wage Trend Indicator™ is designed to serve as a yardstick for employers, analysts, and policymakers to identify turning points in private sector wage patterns. It also provides timely information for business and human resource analysts and executives as they plan for year-to-year changes in compensation costs.

The WTI is released in 12 monthly reports per year showing the preliminary, revised, and final readings for each quarter, based on newly emerging economic data.

More information on the Wage Trend Indicator is available on Bloomberg BNA's WTI home page at www.wagetrendindicator.com.

The next report of the Wage Trend Indicator will be released on Thursday, March 15, 2012 (revised first quarter)

Bloomberg BNA, a wholly owned subsidiary of Bloomberg, is a leading source of legal, regulatory, and business information for professionals. Its network of more than 2,500 reporters, correspondents, and leading practitioners delivers expert analysis, news, practice tools, and guidance — the information that matters most to professionals. Bloomberg BNA's authoritative coverage spans the full range of legal practice areas, including tax & accounting, labor & employment, intellectual property, banking & securities, employee benefits, health care, privacy & data security, human resources, and environment, health & safety. www.bna.com

Dr. Joel Popkin, who is acknowledged as one of the country's foremost authorities on the measurement and analysis of wages and prices, developed the WTI for Bloomberg BNA. Formerly an official with the Bureau of Labor Statistics, Dr. Popkin has been an analyst observing and predicting the U.S. economic outlook for 40 years. Kathryn Kobe, who worked with Popkin in designing the indicator for Bloomberg BNA, is director of price, wage, and productivity analysis at Economic Consulting Services LLC.

To obtain Wage Trend Indicator reports by e-mail on a regular basis, contact Jerry Walsh, BNA PLUS, 800-372-1033.

Top Interest Rate Headlines 02-14-12: Philly Reserve Bank Head Warns Against Speeding Up Economy

2012-02-14T13:24:00.002-06:00

Philadelphia Reserve Bank head warns against speeding up economic recovery
AP/The Washington Post
http://jlne.ws/yuP6hk

Deal Size Becoming A Bigger Deal In Investment-Grade Bond Issues
By Katy Burne Of DOW JONES NEWSWIRES
Crowded into a corner by the pullback in trading on Wall Street, corporate-bond investors are finding there's safety in bigger deals. How easy it is to trade a bond has long influenced the performance of risky high-yield debt. But until recently, the investment-grade corporate bond market has remained relatively immune to concerns about liquidity,
http://jlne.ws/wJkwXU

Canada Examines How Benchmark Rates Get Set
BY BEN DUMMETT, PAUL VIEIRA AND JEAN EAGLESHAM - WSJ
Canada's top antitrust watchdog said it is investigating allegations of collusion in the setting of key benchmark interest rates, joining law-enforcement authorities across the globe in a probe of how the rates are set.
http://jlne.ws/zxM5xa

Foreign outcry over ‘Volcker rule’ plans
By Shahien Nasiripour in Washington and Tracy Alloway and Telis Demos in New York - Financial Times
US regulators are facing a flood of foreign complaints about the “Volcker rule” aimed at banning proprietary trading at banks, increasing the chances that the measure may be watered down.
http://jlne.ws/z7Gked

Foreign critics should not worry about ‘my’ rule
By Paul Volcker - Financial Times
I confess total surprise about the complaints by some European and other foreign officials about the restrictions on proprietary trading by American banks embedded in the Dodd-Frank Act – now dubbed the “Volcker” Rule.
http://jlne.ws/zyS8CQ

Greece far from safe even after debt swap
By Willem Buiter - Financial Times
On Sunday night, as Athens burned, the Greek parliament voted to approve an omnibus bill. It contained the main elements of an agreement with the Troika on fiscal austerity, privatisation and structural reform, and the recapitalisation of Greek banks. Was this a ‘make or break’ moment for Greece?
http://jlne.ws/x6TC35

Merkel Backs Indirect Regulation Of Shadow Banks
FOX Business
BERLIN -- German Chancellor Angela Merkel on Monday backed a proposal to indirectly regulate the shadow banking system prior to imposing direct regulation on institutions such as hedge funds and money-market funds that have traditionally been outside the scope of financial supervision.
http://jlne.ws/z38ufu

Moody’s threatens to downgrade UK
By Michael Mackenzie and Vivianne Rodrigues in New York and Jim Pickard in London - Financial Times
Moody’s put the UK, France and Austria on negative outlook late on Monday night, raising the prospect that the three countries would lose their triple A ratings due to exposure to the eurozone debt crisis.
http://jlne.ws/ApCsDQ

Rating Action: Moody's Adjusts Ratings Of 9 European Sovereigns To Capture Downside Risks
Press Release
http://jlne.ws/yEattM

Top Interest Rate Headlines 02-13-12: Barack Obama Proposes U.S. Budget To Raise Taxes On The Wealthy

2012-02-13T16:27:00.000-06:00

Barack Obama Proposes U.S. Budget To Raise Taxes On The Wealthy
The Telegraph
President Barack Obama has set out his stall for re-election, unveiling a proposed budget for the start of his second term that called for $1.5 trillion (£950 billion) in tax hikes on the richest Americans.

China says Europe debt crisis is now 'critical'
AFP via Yahoo! News
Europe's debt crisis has reached a "critical juncture", Beijing said on Monday, a day ahead of talks between Chinese leaders and European Union officials.
http://jlne.ws/zZjahn

Bankers arrested in UK tax fraud probe
By Daniel Schäfer in London - Financial Times
Tax authorities have arrested a number of investment bankers at Royal Bank of Scotland and other banks in an inquiry into alleged fraud.
http://jlne.ws/xZe6wd

Draghi's $158 Billion Free Lunch to Boost European Bank Profits
BusinessWeek
Banks are benefiting from a European Central Bank subsidy that could reach 120 billion euros ($158 billion), enough to pay every bonus at financial firms in London for the next 24 years at today's levels.
http://jlne.ws/wyqiAR

Georges Ugeux: Is the European Central Bank Playing With Fire?
The Huffington Post
Never in the history has so much money been poured in the direction of banks, most of which don't need it. It is becoming clear that European banks will use it, not to boost the economy, but to manage their balance sheet.
http://jlne.ws/xPlE3l

Top Interest Rate Headlines 02-10-2012: S&P Downgrades 34 Italian Banks After Cutting Nation’s Grade

2012-02-10T17:41:00.000-06:00

S&P Downgrades 34 Italian Banks After Cutting Nation’s Grade
http://jlne.ws/z5hbXn

Bernanke urges action to heal housing markets
http://jlne.ws/x6D7BK

Hedge fund manager charged with insider trading
http://jlne.ws/w8wydA

U.S. Trade Deficit Expands
http://jlne.ws/zUmfFH

Economists see Q4 jobless rate at 8.1 percent
http://jlne.ws/zdCq3v

Consumer Sentiment Retreats in February
http://jlne.ws/y8Y1rD

Greek Laos Ministers Offer To Quit Government
http://jlne.ws/yoamRF

Fed Plays Wall Street Favorites in Secret Deals
http://jlne.ws/wi3bIl

February 9, 2012: White House To Issue Improved Jobs Projections, Contingent On Congress Passing Obama Agenda [NEWSLETTER]

2012-02-09T10:05:00.003-06:00

February 9, 2012

JLN Interest Rates - http://www.jlninterestrates.com

Conversation Starter

Federal Reserve Board Announces Agreement In Principle With Banks Regarding Issuance Of Monetary Sanctions

Release Date: February 9, 2012
For immediate release
The Federal Reserve Board on Thursday announced that it has reached an agreement in principle with five banking organizations regarding the issuance of monetary sanctions against the organizations totaling $766.5 million. The monetary sanctions would be assessed for unsafe and unsound processes and practices in residential mortgage loans servicing and foreclosure processing. These deficiencies were identified by examiners during reviews conducted from November 2010 to January 2011. The deficiencies represented unsafe and unsound practices at these five institutions and corrective measures were required by formal enforcement actions issued against the institutions on Apr. 13, 2011.

The Board will assess monetary sanctions against the parent holding companies of the five largest mortgage servicers supervised by federal banking regulators for failure to appropriately oversee their subsidiaries' mortgage loan servicing and foreclosure processing operations. Those parent holding companies are Bank of America Corp., Citigroup Inc., Ally Financial, Inc., JPMorgan Chase & Co., and Wells Fargo & Co. The Board will also assess monetary sanctions against the two mortgage servicers owned by JPMorgan Chase and Ally Financial that are subject to the Board's jurisdiction for the servicers' failures. Those servicers are GMAC Mortgage, LLC a subsidiary of Ally Financial, Inc., and EMC Mortgage Corporation, a subsidiary of JPMorgan Chase & Co.

The amounts of the monetary sanctions to be levied by the Board against these institutions are as follows:
Institution BHC Penalty Servicer Penalty Total
Bank of America $175.5 million $175.5 million
Wells Fargo $87 million $87 million
JPMorgan Chase $106.5 million $168.5 million $275 million
Citigroup $22 million $22 million
Ally Financial $17 million $190 million $207 million

**CN: The Fed says it will continue to closely monitor the conduct of the foreclosure review and the institutions' implementation of the plans, and will take additional enforcement actions as needed.

Moody's Investors Service: European CLO Top 50 Holdings Have Stronger Than Expected Credit, But Pose Concentration Risk

According to a report by Moody's Investors Service, a look at the broad characteristics of the 50 most referenced issuers in the European CLO leveraged loan universe reveals that they are likely to drive the performance of the universe as a whole. European CLO leveraged loan portfolios exhibit a high degree of overlap among issuers, with the 50 most referenced issuers accounting for about 4% of the unique names in the European CLO universe, but almost half the universe exposure amount. In light of the looming risk of recession in Europe, the performance of these issuers could have negative repercussions for the entire European CLO universe, even though the credit quality of the top 50 issuers is better than that of the universe of underlying CLO holdings.

-- Christine Nielsen

Lead Stories

White House To Issue Improved Jobs Projections, Contingent On Congress Passing Obama Agenda
Associated Press/Washington Post
The White House is lauding a rosier election-year economic forecast, predicting the economy could add two million jobs this year. But the upbeat projection is based partly on the shaky premise that Congress will sign off on President Barack Obama’s jobs agenda.
http://jlne.ws/xrgx4r

**CN: The budget Obama will release Monday forecasts an average unemployment rate of 8.9 percent in 2012.

Ex-Treasury Chief Summers Says U.S. Economy on 'Right Road' With Jobs Data
Bloomberg
Former U.S. Treasury Secretary Lawrence Summers said the latest jobs report shows the economy is "on the right road" while Glenn Hubbard, an adviser to Republican presidential candidate Mitt Romney, downplayed the impact of recent jobs data.
http://jlne.ws/zFM9e2

Bernanke cautions about budget shocks next year
Associated Press via Yahoo! News
Federal Reserve Chairman Ben Bernanke is urging senators to resolve debates over tax cuts that expire this month and at the end of the year, saying uncertainty around both could slow the economy.
http://jlne.ws/yh1JDg

Bernanke urges Congress to address Bush tax cuts
Reuters via Yahoo! News
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke on Tuesday warned Congress that putting off a decision on the fate of expiring Bush administration tax cuts could unsettle businesses and households, undercutting the U.S. economic recovery.
http://jlne.ws/zXec73

The Federal Reserve's Explicit Goal: Devalue The Dollar 33%
Forbes
The Fed has announced a course of action that will steal -- there is no better word for it -- nearly 10 percent of the value of American's hard earned savings over the next four years.
http://jlne.ws/zQqQHQ

If The Federal Reserve Is Abolished, What Then?
CNBC
Critics of the Federal Reserve won't be satisfied until the agency is shut down for good. But abolishing the Fed only raises the bigger issue: What would-or should-be in its place?
http://jlne.ws/yjsbOF

Bernanke-Led Economy Proving Critics Clueless About Federal Reserve Policy
Bloomberg
The numbers are proving Federal Reserve Chairman Ben S. Bernanke's critics wrong.
http://jlne.ws/w1WmyY

QE3 Remains On The Table, Fed's Williams Says
FOX Business
The Federal Reserve may need to launch another round of asset purchases with printed money, commonly known as quantitative easing, if the economy loses momentum or if inflation remains well below 2%, said John Williams, the president of the San Francisco Federal Reserve Bank, on Wednesday.
http://jlne.ws/xe9RKm

Federal Reserve Branch Chief Warns of 'Looming Disaster'
International Business Times
Saying the shock to the U.S. economy that followed the collapse of the housing bubble and financial crisis of 2008 was "like an earthquake which has left one part of the land higher than another part," Federal Reserve Bank of St. Louis President James Bullard sounded a somewhat critical note on the actions of the U.S.
http://jlne.ws/xsY67M

Fed's Lacker sees no need for more easing for now
Reuters via Yahoo! News
NEW YORK (Reuters) - A top Federal Reserve official said on Wednesday he does not see a rationale for more asset purchases if U.S. economic data continue to show the recovery is picking up steam.
http://jlne.ws/z7GfBE

Federal Reserve Chairman Ben Bernanke is Right on Taxes
CNBC
For one time in a row Fed head Ben Bernanke got the story right. No, it wasn't King Dollar. It was taxes. Testifying before members of the Senate Budget Committee today, Bernanke referred to the scheduled repeal of the Bush tax cuts.
http://jlne.ws/wLa5qc

Fed's Dudley Sees Significant Impediments to Economic Growth
BusinessWeek
Federal Reserve Bank of New York President William C. Dudley said the U.S. economy will probably slow this year while confronting risks "skewed to the downside."
http://jlne.ws/AjoC86

Economic forecast is good; Federal Reserve economic advisor provides outlook to chamber
Kutztown Area Patriot
The economic forecast for 2012 is positive. "The economy is performing better than a year ago," Luke Tilley, Ph.D., Regional Economic Advisor, Federal Reserve Bank of Philadelphia, told Northeast Berks Chamber of Commerce members recently. "Things have been looking up.
http://jlne.ws/we15AY

Fed Sells $6.2 Billion of Bonds From AIG Rescue to Goldman
BusinessWeek
The Federal Reserve Bank of New York sold $6.2 billion in face value of mortgage bonds it assumed in the rescue of American International Group Inc. to Goldman Sachs Group Inc., allowing one of its bailout loans to be repaid.
http://jlne.ws/zwGpCp

Fed Pushes ING-Capital One Vote To Monday
FOX Business
The Federal Reserve pushed back a vote on whether to approve Capital One's $9 billion acquisition of ING's U.S. online banking arm until Monday.
http://jlne.ws/xSq7tG

Draghi Signals Better Outlook as Greece Reaches Bailout Deal
http://jlne.ws/yK0ujz

Greece reaches austerity agreement
http://jlne.ws/yIgDDS

EU agrees rules to tame derivatives market
Reuters
European Union diplomats and the European Parliament agreed on Thursday to overhaul regulation of the roughly $700 trillion derivatives market, a move that will make it easier to control one of the most opaque areas of finance.
http://jlne.ws/xjF1db

'Perfect World' Eludes Regulators in Aligning Swaps Rules
BusinessWeek
The potential for U.S. and foreign regulations to reach across national borders and create overlapping or conflicting rules is gaining urgency as global authorities seek to complete rules this year to prevent a repeat of the 2008 credit crisis.
http://jlne.ws/wxH23U

MF Brokerage Trustee Traced $105 Billion in Cash Movement
BusinessWeek
MF Global Inc.'s $1.2 billion in missing customer funds began to filter out on Oct. 26 as the company's computers and employees couldn't keep up with margin calls and increased demands for collateral.
http://jlne.ws/yv9EnU

Treasury, IRS propose easier tax rules for overseas banks
Washington Post
The U.S. Treasury Department and the Internal Revenue Service are trying to make it easier for overseas banks to comply with a tax-withholding and information-collection requirement for some U.S. clients.
http://jlne.ws/zG2axM

Expert Panelists Dissect & Discuss Impact of Proposed FATCA Regulations from U.S. Treasury
PR Newswire
ARLINGTON, Va., Feb. 8, 2012 /PRNewswire-USNewswire/ -- The U.S. Treasury has just released hundreds of pages detailing the new proposed regulations under the Foreign Account Tax Compliance Act ("FATCA").
http://jlne.ws/xQ7ZdQ

Fitch: Investable Universe Likely to Expand for U.S. MMFs
Business Wire
NEW YORK--(BUSINESS WIRE)--Fitch Ratings believes the U.S. Treasury Department decision to begin offering floating-rate notes would significantly expand investment opportunities for conservative investors, including money market funds (MMFs). Last week, the Treasury's borrowing advisory committee released a report indicating the potential sale of short-term floating-rate securities.
http://jlne.ws/zMh0yd

U.S. Will Run $1.1 Trillion Deficit, CBO Says: Washington Mover
BusinessWeek
The U.S. budget deficit will shrink this year to $1.1 trillion, the Congressional Budget Office said today in a report sure to inflame the election-year debate over the government shortfall.
http://jlne.ws/zIDS1w

Bill Gross Blasts Ultra-Low Rates, And Says The Fed Is Taking Us On The Course Of Japan
Business Insider
In a complex editorial published in the Financial Times this morning, PIMCO founder and co-CIO argues that the continued depression of interest rates on U.S. Treasury bills might not really be helping the economy.
http://jlne.ws/xxIgWG

Buffett Rule Proposal Is A Win For Tax Exempt Bonds And Divorce
Forbes
Details of new 30% minimum tax shows how adding yet another alternative minimum tax creates its own problems.
http://jlne.ws/zDgxfV

ECB Leaves Key Refi Rate Unchanged At 1%
Zero Hedge
As expected. 9 February 2012 - Monetary policy decisions At today's meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.
http://jlne.ws/zlzxJx

Index Contingent Credit-Default Swaps Ready To Trade
By Katy Burne Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A group of dealers and investors have agreed on uniform trading standards for a new type of privately traded credit derivative, anticipating a rare growth spurt in a quiet corner of the much-criticized $32 trillion credit-default swap market. The so-called "contingent" credit-default swaps have been traded on individual borrowers for a few years, but now will be made available to trade on a basket or index.

Events

13th Annual Credit Suisse Financial Services Forum
February, 7-10th, 2012
Annual Forum From Credit Suisse
http://jlne.ws/yrDiOw

National Association of Home Builders' Show
February 10, 2012
Special Session With Fed's Bernanke Open To All Registered Attendees
http://jlne.ws/tEcqjW

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

ISDA 27th Annual General Meeting
April 30 - May 2, 2012
Only ISDA Members Eligible To Attend
http://jlne.ws/yrvU5E

Firms & Banks

MF Global Customers Protest Corzine's 'Wrongful Act' Insurance
By Joseph Checkler Of DOW JONES DAILY BANKRUPTCY REVIEW
Customers of MF Global Holdings Ltd. (MFGLQ) say the failed brokerage shouldn't be allowed to pay for a potential "wrongful act" legal defense of former Chief Executive Jon S. Corzine and others with money from MF Global's own insurance subsidiary.
http://jlne.ws/A7Cq3I

Goldman executive talks up Volcker rule
By Tracy Alloway in New York - Financial Times
A senior Goldman Sachs executive told an industry conference that a ban on speculative trading at commercial banks could end up improving profitability, breaking with the consensus about the effects of the new financial regulation.
http://jlne.ws/xFf1EV

RBS Condoned Libor Conduct, Sought Scapegoats, Fired Trader Says
BusinessWeek
Royal Bank of Scotland Group Plc, which accused a fired Singapore trader of manipulating London interbank offered rates, had condoned such behavior and sought scapegoats in an internal probe, the former employee said.
http://jlne.ws/wdL0Tk

Barclays Falls Short of Big Dreams
By DAVID ENRICH And DANA CIMILLUCA - WSJ
LONDON—In June 2009, top Barclays PLC executive Robert Diamond laid out an ambitious plan for the venerable British bank "to be the premier global investment bank," a goal he hoped to achieve "over the next couple of years."
http://jlne.ws/yK2hua

UBS gives data on rivals in US tax probe
AFP via Yahoo! News
Swiss banking giant UBS has handed over to US tax authorities data indicating which of the bank's rivals took on its American clients following a probe, it was reported on Thursday.
http://jlne.ws/xG1sT6

Citigroup Sued by Lehman for $2.5 Billion 'Wrongfully' Taken
BusinessWeek
Citigroup Inc.'s Citibank was sued for $2.5 billion by bankrupt Lehman Brothers Holdings Inc., which said the bank "wrongfully" withheld the money after it was transferred by Lehman in the months before its 2008 bankruptcy.
http://jlne.ws/yqcAs0

Deutsche Bank Said to Cap Immediate Bonuses at 200,000 Euros
BusinessWeek
Deutsche Bank AG, Germany's largest lender, told employees it will impose a 200,000 euro ($266,000) cap on bonuses paying out this year, said three people with knowledge of the discussions.
http://jlne.ws/zKxyjZ

Credit Suisse Posts First Loss in Three Years on Investment Bank
BusinessWeek
Credit Suisse Group AG, the second- biggest Swiss bank, said it had a loss in the fourth quarter for the first time since 2008, hurt by "adverse markets" and costs to reorganize the investment bank.
http://jlne.ws/xzMA30

Regulators

King Follows Greenspan Into Credit 'Debacle,' Edwards Says
BusinessWeek
Bank of England Governor Mervyn King is mimicking "ruinous" Federal Reserve monetary policies that led to the current financial crisis, Societe Generale SA's top- ranked strategist Albert Edwards said.
http://jlne.ws/wb73um

Swiss Bank Wegelin Charged With Helping U.S. Clients Evade Taxes
BusinessWeek
Wegelin & Co., the 270-year-old private bank, became the first Swiss lender to face criminal charges in a broadening U.S. crackdown on offshore firms suspected of helping Americans evade taxes.
http://jlne.ws/zLGOrn

Global News

Fed's Inflation Target Stirs Japan Lawmaker Ire at BOJ Record
BusinessWeek
The Federal Reserve's decision to set a 2 percent inflation target last month had a ripple effect a continent away: Japanese lawmakers are invoking it as evidence that their own central bank comes up short.
http://jlne.ws/zCgBM3

Brazil Said to Consider Smaller Budget Cuts Than Economists Are Seeking
Bloomberg
Brazilian policy makers are considering cutting the 2012 budget by less than 50 billion reais ($29 billion), two people familiar with the plan said. The amount less than some local economists expect, prompting yields on long-term interest rate futures to rise.
http://jlne.ws/A4XREl

Too Soon For Brazil To See Record Low In Base Interest Rate
Nasdaq
http://jlne.ws/ACzAd4

Fed Clears Hana Financial Acquisition Of Korea Exchange Bank Unit
FOX Business
The Federal Reserve on Wednesday granted Seoul's Hana Financial Group Inc.(086790.SE) approval to acquire an indirect controlling interest in KEB NY Financial Corp.
http://jlne.ws/ymwavq

Bank Of England Boosts Bond Buys, Holds Rates
FOX Business
The Bank of England's Monetary Policy Committee on Thursday boosted the size of its asset-purchase program by 50 billion pounds to a total of 325 billion pounds and voted to leave the central bank's key lending rate unchanged at a record low 0.5%.
http://jlne.ws/yUu0Gk

UBS's Wang on China Economy, Central Bank Policy
Bloomberg
Feb. 9 (Bloomberg) -- Tao Wang, China economist at UBS AG, talks about the nation's economy and central bank monetary policy. China's inflation unexpectedly rebounded in January as a weeklong holiday boosted spending and food-price gains accelerated.
http://jlne.ws/xW9SPD

Bank Of Korea: Future Policy Aims To Keep Inflation At Midpoint Of Target Range
Nasdaq
http://jlne.ws/xuhwPl

Reserve Bank Of Australia Monetary Policy Statement
Nasdaq
http://jlne.ws/x8eV1f

Serbian Central Bank Holds Interest Rate Amid IMF Deadlock, Dinar Weakness
Bloomberg
Serbia's central bank kept its main interest rate on hold for the first time since September amid renewed dinar weakness and reports the government won't come to terms with the International Monetary Fund on the 2012 budget.
http://jlne.ws/ya4DhS

Swiss central bank delays issuing of new notes
Boston Globe
Switzerland's central bank says it has had to delay the issuing of new high-security bank notes by at least a year because of "unexpected technical problems."
http://jlne.ws/xYsQot

Indonesia Central Bank Unexpectedly Cuts Rate On Global Slowdown
RTT News
Indonesia's central bank unexpectedly slashed its key policy rate by a quarter-point on Thursday to boost economic growth amid deteriorating global economic conditions.
http://jlne.ws/zBRDHK

Disclaimer: The John Lothian, Environmental Markets, JLN Metals, JLN Managed Futures, JLN Interest Rates, JLN Options and JLN FX newsletters and blogs and MarketsWiki are products of John J. Lothian & Company, Inc. The opinions expressed in these publications are strictly those of their respective editors. They are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Security futures are not suitable for all customers.

Futures and options trading involve risk. Past results are no indication of future performance.

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Copyright 2011 John J. Lothian & Company, Inc. All Rights Reserved.

Top Interest Rate Headlines 02-08-2012: Bankruptcy lawyers: Student Debt Is Looming Economic Bomb

2012-02-08T17:56:00.000-06:00

Bankruptcy lawyers: Student debt is looming economic bomb
http://jlne.ws/zcc4qg

ISDA media.comment: A Not-So-Noble Idea
http://jlne.ws/vJgrL9

UBS to Claw Back Bonuses
http://jlne.ws/AgBWlQ

Will MF Global Customer Interests Be Crushed by Big Banks?
http://jlne.ws/w3dPGV

Refi Activity Rises on New Record Low Rates
http://jlne.ws/x6raZT

Greek debt not sustainable with 70 pct haircut: S&P
http://jlne.ws/Acsx4c

Faulty Loans Top $72 Billion as Banks Seek Deal With Regulators
http://jlne.ws/wlSwJU

Oil and Gas Boom Lifts U.S. Economy
http://jlne.ws/xdlZqo

Quadriserv appoints joint CEOs
http://jlne.ws/x1XW71

BlackRock’s Fink Says Be 100% in Equities
http://jlne.ws/zsVlqe

ECB still split on joining Greece debt deal: sources
http://jlne.ws/wOQIzZ

Fed may need to buy more mortgage bonds: Williams
http://jlne.ws/w7Oq9Y

Newedge and MTS launch Agency Cash Management (ACM) platform for tri-party repo market
http://jlne.ws/y4Pqmx

AcadiaSoft to Go Live With 3 Major Asset Managers on OTC derivatives community, MarginSphere
http://jlne.ws/yY0dnn

Another Year of Fear for Municipal Bonds
http://jlne.ws/xfjIJm

Bernanke-Led Economy Shows Critics Wrong About Fed
http://jlne.ws/w1WmyY

Greek Party Leaders Pore Over Loan Deal
http://jlne.ws/zvlTe6

Top Interest Rate Headlines 02-07-12: Greece Works On Final Rescue Draft

2012-02-07T17:54:00.000-06:00

Greece Works on Final Rescue Draft
Greek Prime Minister Lucas Papademos postponed a meeting with heads of the political parties supporting his caretaker government a second time in as many days as the government and international creditors haggled over terms to secure a second aid package.
http://www.bloomberg.com/news/2012-02-07/greek-officials-working-on-final-draft-to-meet-international-rescue-terms.html

EU Transaction Tax Is 'Undesirable,' Dutch Central Bank Says
BusinessWeek
The Dutch central bank said it opposes the introduction of a European financial transaction tax that it estimated would cost the nation's lenders, pension funds and insurers about 4 billion euros ($5.2 billion) and hurt economic growth.
http://jlne.ws/AgTEOy

IMF warns China on eurozone fallout
By Jamil Anderlini in Beijing - Financial Times
Economic growth in China could drop by half this year in the event of a sharp recession in Europe, the IMF predicted on Monday in a report that underscored the importance of global trade to the worlds second largest economy.
http://jlne.ws/xNqC8x

Rate Probe Keys On Traders
By JEAN EAGLESHAM, ATSUKO FUKASE and SAM HOLMES - WSJ
Investigators in a world-wide probe of how crucial interest rates are set are focusing on a small number of traders suspected of trying to influence other bank employees to manipulate the rates, according to people familiar with the situation.
http://jlne.ws/wh8ZV0

MF Brokerage Trustee Traces $105 Billion in Cash Movement
By Tiffany Kary and Linda Sandler - Bloomberg
Feb. 6 (Bloomberg) -- The $1.2 billion in MF Global Inc. customer funds estimated to be missing began to flow out of the brokerage on Oct. 26, five days before its collapse, as its computers and employees failed to keep up with margin calls and demands for collateral, according to a trustees investigation.
http://jlne.ws/xlfOwb

Challenges for MF Trustee
BY AARON LUCCHETTI - WSJ
A bankruptcy trustee investigating MF Global Holdings Ltd. said he faces huge challenges getting back an estimated $1.2 billion in customer funds drained from the securities firm before it collapsed.
http://jlne.ws/yIu5Yp

Top Interest Rate Headlines 02-06-2012: Fed Officials to Meet on Capital One/ING Direct Deal

2012-02-06T16:38:00.000-06:00

Fed Officials to Meet on Capital One/ING Direct Deal
http://jlne.ws/w2FNH5

Chinese Nod for Citi Cards May Signal Market Opening
http://jlne.ws/xCzvou

IMF's Blanchard Warns Of 'Deadly' Feedback Loop In Eurozone
http://jlne.ws/zYDWoR

MF Global shortfall worsened as bankruptcy neared
http://jlne.ws/xKEBoc

Hedge Funds Underestimate Policy Makers’ Will to Impose Greek Bond Losses
http://jlne.ws/z0jVQ9

Weekly T-Bills Go At 0.080%, 0.100%
http://jlne.ws/zp0Pec

Greece on the brink
http://jlne.ws/zN1D09

Charles Schwab: The Fed Votes No Confidence
http://jlne.ws/xeCSZP

IMF Urges Beijing to Ready Bold Moves
http://jlne.ws/xtLjGT

JPMorgan settles overdraft fee case for $110 mln
http://jlne.ws/xk3MMK

Bullard Says Rate Policy Assuming Economic Slack Risks Disaster
http://jlne.ws/yJ67Hg

States have until late Mon to agree to deal to relieve homeowners struggling with mortgages bigger than home's value
http://jlne.ws/wzzs0t

The Volcker Rule: Let’s get it right
http://jlne.ws/w63P1a

Derivatives Entrepreneur to Launch Swaps Exchange
http://jlne.ws/w9hkbd

NYSE Liffe U.S. Names Harvey Flax Business Manager, GCF Repo Index Futures

2012-02-06T09:55:00.000-06:00

Press Release
NEW YORK, Feb. 6, 2012 ─ NYSE Liffe U.S., the innovative U.S. futures exchange of NYSE Euronext (NYX) today announced that Harvey Flax has been appointed to the newly created position of Business Manager, GCF Repo IndexTM futures. Mr. Flax will be responsible for leading the launch and development of the DTCC GCF Repo Index futures products trading exclusively on NYSE Liffe U.S. and cleared on NYPC. Based in New York, he will report to Lynn Martin, Chief Operating Officer, NYSE Liffe U.S.

“I am pleased to welcome Harvey to the NYSE Liffe U.S. team to lead our exciting new GCF Repo futures launch,” said Thomas F. Callahan, CEO, NYSE Liffe U.S. “Harvey brings a wealth of industry experience in the financing markets and has the ideal background to lead this important initiative. Market feedback since our announcement of GCF Repo futures has been overwhelmingly positive. We believe it will provide a liquid, transparent and efficient risk management tool to allow our customers to better manage their term exposure. I am confident that with Harvey joining our strong team we can quickly build this complex to its full potential.”
In his 25 year career at Morgan Stanley, Mr. Flax held a number of senior roles in their Fixed Income and Equity Financing groups that includes, trading, risk management, infrastructure and capital deployment/optimization. Most recently, he was Executive Director of the Equity and Fixed Income Repo Financing unit where he supervised the term stable liquidity financing program and managed significant Equity and Fixed Income Repo Counterparty relationships.
About DTCC GCF Repo IndexTM Futures
The DTCC GCF Repo IndexTM is the financial services industry’s first index to list average daily interest rates for General Collateral Finance repurchase agreements or the multi-billion-dollar GCF Repo market, which clears at DTCC’s Fixed Income Clearing Corporation (FICC). Futures on the DTCC GCF Repo IndexTM will enable traders to more effectively manage interest rate exposure via a new short term benchmark tied to actual, collateralized repo transactions. These products will clear at NYPC, and therefore benefit from the features offered by this innovative clearing mechanism that combines the capital efficiencies achieved by calculating margin requirements based on the total risk within a portfolio of both FICC-cleared repos and futures. Trading on the LIFFE CONNECT platform, these futures will be listed alongside the highly liquid NYSE Liffe U.S. Eurodollar and US Treasury Futures.
For more information and market data, please visit: http://www.nyseliffeus.com and http://youtu.be/YW--G2FBlD0

Top Interest Rate Headlines 02-03-12: Fed Makes Low Rates Vow, But Traders Afraid Of Commitment

2012-02-03T17:28:00.000-06:00

Fed makes low rates vow, but traders afraid of commitment
http://jlne.ws/yN81Iz

Ex-President of Florida Bank Pleads Guilty to Bank Fraud
http://jlne.ws/wEznoT

Portugal pressed to restructure
http://jlne.ws/xkmQiA

Geithner Talks Fannie And Freddie, Ending Too Big To Fail
http://jlne.ws/Av4ZAh

What’s Behind the Unemployment Rate Drop?
http://jlne.ws/zCMNdR

Fannie, Freddie writedowns too costly: Regulator
Reuters
The regulator for Fannie Mae and Freddie Mac told lawmakers that forcing the two mortgage firms to write down loan principal would require more than $100 billion in fresh taxpayer funds.
http://jlne.ws/wJ6Dtq

Morgan Stanley Is Said to Plan Sale of U.K. Wealth Manager to Bridgepoint
Bloomberg
Morgan Stanley (MS) is in talks to sell U.K. wealth manager Quilter Holdings Ltd. to buyout firm Bridgepoint Capital Ltd., two people with knowledge of the plan said.
http://jlne.ws/yOPKcx

February 2, 2012: Fed will protect U.S. from Europe fallout: Bernanke [NEWSLETTER]

2012-02-02T10:08:00.007-06:00

February 2, 2012

JLN Interest Rates - http://www.jlninterestrates.com

Conversation Starter

Commodity Futures Trading Commission and Securities and Exchange Commission Release Joint Report to Congress on International Swap Regulation
February 2, 2012
Press Release
Washington, DC – The Commodity Futures Trading Commission and the Securities and Exchange Commission delivered to Congress a report on international swap regulation, as required by Section 719(c) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The provision requires the Commissions to report on how swaps are regulated in the United States, Asia, and Europe and to identify areas of regulation that are similar and other areas of regulation that could be harmonized.

See the full CFTC and SEC report here.

------------------------------------------------------------------------------------------------------------------------------

MARKETAXESS RELEASES YEAR-END REVIEW OF 2011 U.S. CORPORATE BOND MARKET
Press Release
NEW YORK and LONDON – February 2, 2012, MarketAxess Holdings Inc. (Nasdaq: MKTX), the operator of a leading electronic trading platform for U.S. and European high-grade corporate bonds, emerging markets bonds and other types of fixed-income securities, today released its first year-end review of trading activity in the U.S. corporate bond market for 2011. The analysis was conducted by MarketAxess Research.
The analysis is based on FINRA TRACE and other publicly-disseminated data, as well as proprietary trading data from MarketAxess from January through December 2011. MarketAxess Research uses its own proprietary approach to analyze price movements and liquidity trends.
Rick McVey, Chairman and CEO of MarketAxess, said: “Following a period of generally favorable conditions in the credit markets in 2010 and early 2011, the second half of 2011 saw headwinds develop, with widening credit spreads and increased credit spread volatility. Among other factors the ongoing dislocation in the European markets has increased market risk, one indicator of which is the reduction in primary dealer balance sheets for corporate bond market-making. These declined, most notably in the second half of 2011, finishing the year below the credit crisis lows and over 80% below pre-crisis levels. Declining liquidity and challenging market conditions were also reflected in decreasing average trade size throughout the year, evidence that as the year progressed investors found greater success in executing smaller trades versus large blocks.”
2011 Notable Trends:
Overall High Grade TRACE volumes increased slightly to 2.92 trillion in 2011, up from 2.89 trillion in 2010.
However, TRACE volumes decreased 6.6% in the fourth quarter to 617.0bn, compared to 660.9bn in the fourth quarter of 2010.
Primary Dealer corporate bond inventories were down 45.9% for the year and currently stand at $46.7 billion, according to the Federal Reserve Bank of New York. This is 21.9% below the credit-crisis low of $59.8bn.
Various measures of market liquidity declined throughout the year. Turnover, defined as the total amount traded divided by the total amount outstanding for the bonds that traded, declined 2.8 percentage points to 16.8% in the fourth quarter, compared to 19.6% in the fourth quarter of 2010.
According to MarketAxess estimates, bid-ask spreads were flat at around 10 basis points (bp) for the first half of the year but widened out significantly beginning in August, ending the year at around 20bp.
Block size trades (greater than 5 million in size) decreased 4.0 percentage points to 36.7% of overall TRACE volumes in the fourth quarter of 2011, compared to 40.7% in the fourth quarter of 2010.
Consistent with a more challenging trading environment, as well as the trend in annual numbers released by FINRA, counterparty diversification on the MarketAxess electronic trading platform increased for institutional investor clients. The percentage of volume executed by ‘new’ dealers on the MarketAxess trading system (defined as dealers who have joined MarketAxess since 2008) accounted for almost 21.4% of volume on the system in Q4 2011, compared to 17.5% in Q4 2010.
The cost savings for MarketAxess clients trading electronically increased 22.0% to 6.7 bps in the fourth quarter, compared to 5.5 bps in the fourth quarter of 2010. We calculate transaction cost savings by comparing trade prices on MarketAxess with the weighted average spread of comparable trades in the same bond reported to TRACE.
Total global trading volume on MarketAxess in 2011 increased 31% to $525bn, compared to $402bn for 2010.
High-grade volumes on MarketAxess in 2011 increased 33% for the full year, compared to a year ago. MarketAxess’ estimated high-grade market share increased to 11.1% in 2011, compared to an estimated 8.4% in 2010.

See the entire MarketAxess release here.

-- Christine Nielsen

Lead Stories

Fed will protect U.S. from Europe fallout: Bernanke
Reuters via Yahoo! News
WASHINGTON (Reuters) - Europe's financial crisis still threatens the U.S. recovery, and the Federal Reserve will do everything it can to prevent it from damaging the economy, Fed Chairman Ben Bernanke said on Thursday. Bernanke told Congress he was seeing signs that some of the uncertainty dampening U.S. business investment, including European banking woes, might be waning.
http://jlne.ws/xzHBlf

Sustainable budget should be top US priority: Fed
AFP via Yahoo! News
The US Federal Reserve chairman Ben Bernanke told Congress Thursday that achieving a sustainable budget and debt balance should be a "top priority" for the government.
http://jlne.ws/yGqRwg

Federal Reserve says full recovery could take 3 more years
York Daily Record
WASHINGTON-The Federal Reserve signaled Wednesday that a full economic recovery could take nearly three more years, and it went further than ever to assure consumers and businesses that they will be able to borrow cheaply well into the future.
http://jlne.ws/zxHAm7

Trying to read between the lines of the Fed rate message
Reuters via Yahoo! News
NEW YORK (Reuters) - For a central bank that wants to make transparency its hallmark, the Federal Reserve's new forecast of nearly three more years of super-low rates has left room for a few doubts.
http://jlne.ws/yoJSoc

Dollar Tumbles on Fed Interest Rate Pledge, Greek Debt Talks
BusinessWeek
The dollar fell against all its most-traded counterparts after the Federal Reserve pledged to keep interest rates low for at least three years, spurring investors to seek higher-yielding assets.
http://jlne.ws/zS1UOz

Economic forecast is good; Federal Reserve economic advisor provides outlook to chamber
Kutztown Area Patriot
The economic forecast for 2012 is positive. "The economy is performing better than a year ago," Luke Tilley, Ph.D., Regional Economic Advisor, Federal Reserve Bank of Philadelphia, told Northeast Berks Chamber of Commerce members recently. "Things have been looking up.
http://jlne.ws/wo3fsd

Federal Reserve System evolving
Jacksonville Daily Record
While Ron Paul was trying to win votes Tuesday in Florida with his calls to "end the Fed," one Federal Reserve official was explaining to a group of Jacksonville business people what the Fed actually does for them.
http://jlne.ws/yU66vR

Small biz loan demand up, Federal Reserve says
CNN
A growing portion of the nation's banks saw a spike in demand for loans to smaller firms late last year, according to the latest Federal Reserve figures.
http://jlne.ws/xlH1kb

Boston Federal Reserve elects 3 new members
Boston Globe
The Federal Reserve Bank of Boston announced the election of three new members to its Board of Directors and the reelection of a current member. The new members are: Peter L. Judkins, Roger S. Berkowitz, and Gary L. Gottlieb. The reelected director is Kathryn G. Underwood.
http://jlne.ws/wbtUfc

The Richest Members of the Federal Reserve
CNBC
WASHINGTON (Reuters) - It's hardly a huge surprise: those Federal Reserve officials that made careers in the financial sector are much wealthier than their colleagues, according to new disclosures on Tuesday.
http://jlne.ws/wxtVxE

**CN: This issue also noted in the JLN Metals Newsletter. Turns out the Dallas Fed's Richard Fisher owns around $1 million in gold.

Goldman Sachs Among Banks Fighting to Exempt Half of Swaps Books
BusinessWeek
More than half of the derivatives- trading business of Goldman Sachs Group Inc., Morgan Stanley and three other large banks could fall largely outside the Dodd- Frank Act if they succeed in lobbying regulators to exempt their overseas operations, government records show.
http://jlne.ws/yNbbnf

U.S. Cuts Quarterly Borrowing Estimate 18% to $444 Billion
BusinessWeek
The U.S. Treasury Department lowered its borrowing estimate for the current quarter by 18 percent to $444 billion, reflecting higher receipts and lower spending.
http://jlne.ws/yAlztf

US Treasury Mulls Floating-Rate, Negative-Yield Notes
FOX Business
The U.S. Treasury Department plans to decide this spring whether to offer floating-rate and negative-yield securities, though the agency would need additional time before it could issue these bills and notes, a senior department official said Wednesday.
http://jlne.ws/yUZ9lA

US Treasury Forcing Mortgage Principal Forgiveness
http://jlne.ws/tMNY8O
By Diana Olick, Real Estate Reporter, CNBC NEW YORK (CNBC)-- Late Friday the U.S. Treasury Department announced a major expansion of its Home Affordable Modification Program (HAMP). The three-year-old program has been largely deemed unsuccessful, as it has provided just about 750,000 borrowers with permanent loan modifications.
http://jlne.ws/zGYG85

Legg Mason Launches Fixed Income Fund of Hedge Funds
http://jlne.ws/ymiuPZ

TIPS Beating Treasuries for 4th Year Seen With Fed at Zero
BusinessWeek
Bonds that pay negative yields are turning into the hottest part of the $9.94 trillion market for U.S. Treasuries, a sign of shaken investor confidence in an economy the Federal Reserve says shows only "modest" strength.
http://jlne.ws/wqUGpm

Obama seeks to broaden reach of housing assistance
Associated Press via Yahoo! News
Conceding his earlier housing programs have fallen short, President Barack Obama on Wednesday proposed a vast expansion of government assistance to homeowners, aiming to make lower lending rates a possibility for millions of borrowers who have not been able to get out from under burdensome mortgages.
http://jlne.ws/yQfi2r

Most of the missing MF Global funds found
http://jlne.ws/xLnI8h
Jon S. Corzine, former MF Global Holdings chairman and CEO, is sworn in on Capitol Hill in Washington in December prior to testifying before the Senate Agriculture Committee.
http://jlne.ws/AmOvoE

U.S. weighs 30 percent "Buffett Rule" tax on millionaires
Reuters
http://jlne.ws/yLdusb

Pimco exec says Federal Reserve's policies have "not been sufficient"
Nasdaq
Pimco Chief Executive and Chief Investor Officer Mohamed El-Erian is joining the chorus of voices warning about the Federal Reserve's recent announcement.
http://jlne.ws/xuagTa

Freddie Mac bets against American homeowners - Tue, 31 Jan 2012 PST
The Spokesman-Review
Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that payoff if homeowners stay trapped in expensive mortgages with interest rates well above current rates.
http://jlne.ws/xCU79G

Rate on 30-year mortgages falls to record low 3.87%
http://jlne.ws/wvX81X

Events

National Association of Home Builders' Show
February 10, 2012
Special Session With Fed's Bernanke Open To All Registered Attendees
http://jlne.ws/tEcqjW

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

Economic News

U.S. jobless claims fall to 367,000 in latest
Reuters via Yahoo! News
NEW YORK (Reuters) - New U.S. claims for unemployment benefits fell last week, a government report showed on Thursday, pointing to more healing in the nation's battered jobs market.
http://jlne.ws/yZ2Hbn

U.S. consumers fizzle out even as incomes rise
Reuters via Yahoo! News
WASHINGTON (Reuters) - U.S. consumer spending was flat in December as households put the largest rise in income in nine months into their savings, potentially signaling slower consumption early in 2012. It was the weakest reading on spending since June, the Commerce Department said on Monday, and it followed two tepid gains in October and November.
http://jlne.ws/wWiFB6

Exchanges, Clearing Houses & MTFs

ICE Reports Daily Futures Volume for January; $27 Trillion Cleared in CDS Globally to Date
http://jlne.ws/zLh5qt

CME Group Volume Averaged 11.6 Million Contracts per Day in January 2012, up 21 Percent from December 2011
PR Newswire via Yahoo! Finance
CHICAGO, Feb. 2, 2012 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced that January 2012 volume averaged 11.6 million contracts per day.
http://jlne.ws/yPxPGy

MF Global triggers regulatory rethink at CFTC
Reuters via Yahoo! News
WASHINGTON (Reuters) - The head of the Commodity Futures Trading Commission has ordered an extensive review of how futures brokerages are regulated, following the collapse of MF Global three months ago, a CFTC official told Reuters on Wednesday. CFTC Chairman Gary Gensler ordered the review after questions emerged about whether the CFTC or exchange-operator CME Group.
http://jlne.ws/wrAcBy

Niederauer Keeps NYSE Board Support as Deutsche Boerse Backs CEO
BusinessWeek
Duncan Niederauer and Reto Francioni retained the backing of their boards even after regulators in Brussels put an end to their year-long attempt to merge NYSE Euronext and Deutsche Boerse AG.
http://jlne.ws/AClX2n

CME Clearing to Compete in Europe as Volume Grows, CEO Says
BusinessWeek
CME Group Inc.'s European clearinghouse this month processed more than half the volume of last year's trades, as it steps up competition in the region.
http://jlne.ws/zEa2V6

CME Group To Establish Guarantee Fund; 4Q Surges On Tax-Related Adjustment
FOX Business
CME Group Inc. (CME) announced plans Thursday to beef up protections for some customers through a new $100 million fund that will back losses sustained by "family farmers and ranchers" in the event of another failure like MF Global Holdings (MFGLQ).
http://jlne.ws/z3vpZX

EU Blocks Deutsche Boerse-NYSE Euronext Merger
NPR
The EU's executive body said the combined exchange would have controlled more than 90 percent of the trading in European derivatives - complex but highly profitable financial products that allow investors to bet on changes in interest rates or the price of oil.
http://jlne.ws/zTEXZT

Firms & Banks

Credit Suisse Breaks New Ground with Streaming U.S. Treasury Trading
PR Newswire via Yahoo! Finance
NEW YORK, Jan. 31, 2012 /PRNewswire/ -- Credit Suisse is proud to introduce Credit Suisse Onyx Streaming, a new way of trading Cash U.S. Treasury securities.
http://jlne.ws/yFTDjf

Van Eck Plans Slew Of Corporate Bond ETFs
http://jlne.ws/xRJ9ZV via Yahoo! Finance
Van Eck plans six corporate bond funds that aim to serve up extra yield in a yield-starved world.
http://jlne.ws/zhd4nh

Eris forges ahead with cross-margining
http://jlne.ws/yC1Jgs

NFA Signs Agreement with MarketAxess to provide Regulatory Services to MarketAxess' Swap Execution Facility
Press Release
http://jlne.ws/zECurn

Citigroup Says Bank Will Exit Mortgage Brokerage Business
BusinessWeek
Citigroup Inc., the third-largest U.S. lender by assets, plans to stop using brokers to originate mortgages and probably will cut jobs as it exits the business while banks grapple with the fallout from the housing collapse.
http://jlne.ws/wXPb1x

RBS Sells Hoare Govett To Jefferies For Nominal Cash Sum
Dow Jones
The Royal Bank of Scotland Group PLC (RBS, RBS.LN) said Wednesday it has agreed to sell its RBS Hoare Govett corporate broking operations to U.S. investment bank Jefferies Group Inc. (JEF).
http://jlne.ws/wWbT2J

Ex-Credit Suisse CDO Chief Charged in Scheme to Boost Bonuses
BusinessWeek
Kareem Serageldin, Credit Suisse Group AG's former global head of structured credit trading, was charged in a scheme to falsify prices tied to collateralized debt obligations to meet targets and boost year-end bonuses for his $5.35 billion trading book.
http://jlne.ws/yDfdc9

Goldman Sachs Appoints Italy Chairman As Head Of Russia Business
Olga Razumovskaya, Dow Jones Newswires
MOSCOW -(Dow Jones)- Goldman Sachs Group Inc. (GS) has appointed Paolo Zannoni, chairman of its Italian investment banking business, as the head of its Russian operations, replacing two co-heads, according to a company memo seen by Dow Jones Newswires on Wednesday.
http://jlne.ws/zGARcA

JPMorgan slashes $710 million Lehman bankruptcy claim
Reuters via Yahoo! News
(Reuters) - JPMorgan Chase & Co has agreed to drop almost all of a $710 million claim against Lehman Brothers Holdings Inc's bankruptcy estate, freeing up more money to be distributed to creditors, Lehman said on Wednesday.
http://jlne.ws/wblZmH

Regulators

Plosser says he didn't back Fed's late 2014 rate pledge
http://jlne.ws/xcnQ2S
Federal Reserve Bank of Philadelphia President Charles Plosser said he didn't support the central bank's decision last month to extend the time frame for low rates at least through late 2014.
http://jlne.ws/zKZWD0

U.S. Regulators Weigh Volcker Exemption for Sovereign Debt
BusinessWeek
U.S. banking regulators are exploring whether they can exempt sovereign debt from the Dodd-Frank ban on proprietary trading after foreign governments complained that the rule could raise borrowing costs and impede the flow of capital, a person familiar with the talks said.
http://jlne.ws/zHHDSB

Bank's Posen says inflation falling as forecast - radio
Reuters via Yahoo! News
LONDON (Reuters) - The Bank of England's quantitative easing policy has not been inflationary and inflation will continue to fall as forecast this year, Bank of England policymaker Adam Posen said in a radio interview on Thursday. "It is going to keep falling all year just as we forecast," Posen told BBC Radio 5 when asked if the central bank's quantitative easing was creating inflation.
http://jlne.ws/weosXs

Turkey's Monetary Policy Overburdened, Fiscal Policies Underutilized: IMF
http://jlne.ws/yMKv5Z

BOE Posen: Banks Aren't Doing Enough To Aid Economy
Dow Jones
LONDON -(Dow Jones)- Banks aren't doing enough to help the U.K. economy, and businesses need more alternatives to bank lending, Bank of England policy maker Adam Posen said Thursday.
http://jlne.ws/xyTmMx

Global News

Bank Of Italy Authorizes Lenders To Buy Back Own Bonds
FOX Business
The Bank of Italy has authorized local lenders to buy back some of their own debt securities that count as regulatory capital.
http://jlne.ws/xKuPff

Brazil Confronting Limits on 'Capacity' to Weaken Currency, Pimentel Says
Bloomberg
Brazil's government faces limits on how much it can do to prevent its currency from strengthening, Trade Minister Fernando Pimentel said.
http://jlne.ws/wh8Mtw

Specter of forced selling haunts rallying Italy debt
Reuters via Yahoo! News
LONDON (Reuters) - Italy's bonds have made sizzling returns this year but fears the country will lose its investment-grade status are putting off long-term investors whose support Rome needs to tackle a mountain of refinancing and ease worries about its debt.
http://jlne.ws/yV4Z0y

Portugal Borrowing Costs Fall At T-Bill Auction
Nasdaq
http://jlne.ws/Amk3cw

Gokarn Says Visible Drop in Indian Prices Will Trigger Rate Cut
BusinessWeek
Reserve Bank of India Deputy Governor Subir Gokarn said the monetary authority will cut borrowing costs once it's confident inflation will keep slowing.
http://jlne.ws/xcESSP

Somaliland to pass central bank law within 3 weeks: cbank
Reuters via Yahoo! News
HARGEISA (Reuters) - Somaliland's central bank governor said on Thursday parliament is expected to pass a law within three weeks that will formerly establish a central bank, paving the way for foreign commercial banks to start operating in the self-declared country by 2013. Somaliland, a breakaway state in the northeast of Somalia, remains unrecognised internationally.
http://jlne.ws/wMNjgU

Irish Central Bank Slashes GDP Outlook
Nasdaq
http://jlne.ws/zvTYKj

SNB’s Jordan vows to continue radical intervention
http://jlne.ws/xBbmCC

Disclaimer: The John Lothian, Environmental Markets, JLN Metals, JLN Managed Futures, JLN Interest Rates, JLN Options and JLN FX newsletters and blogs and MarketsWiki are products of John J. Lothian & Company, Inc. The opinions expressed in these publications are strictly those of their respective editors. They are intended solely for informative purposes and are not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Security futures are not suitable for all customers.

Futures and options trading involve risk. Past results are no indication of future performance.

Nothing on any John J. Lothian & Company site should be considered an endorsement by any sponsor of any web site or newsletter content.

Copyright 2011 John J. Lothian & Company, Inc. All Rights Reserved.

Top Interest Rate Headlines 02-01-2012: ECB Role In Greek Bailout Under Discussion

2012-02-01T17:16:00.006-06:00

Payroll-Tax-Cut Extension Gets Bipartisan Backing
http://jlne.ws/yGUpxj

Mortgage deal would give states enforcement clout
http://jlne.ws/yoLAKm

Belgium Slides Into Recession
http://jlne.ws/zZnPyw

Dodd-Frank in one (really big) chart - The Washington Post
http://jlne.ws/zlxh7L

Goldman Joins Wall Street to Fund Romney
http://jlne.ws/yLc9r3

MF Global's Missing Cash Mostly Accounted For
http://jlne.ws/AwV6dx

ECB May Hold Out on Greek Debt Swap Until Investors Reach Deal
http://jlne.ws/zYJHvC

ECB Role in Greek Bailout Under Discussion
http://jlne.ws/xkR7eq

Credit Suisse Ex-Trader Pleads Guilty
http://jlne.ws/xEvGcT

Citigroup Joins MSRB to Oppose Applying Dodd-Frank Law to Muni-Bond Market
http://jlne.ws/AaQPmD

NFA to provide regulatory services for MarketAxess swap execution facility - Banking Business Review
http://jlne.ws/zECurn

CFTC Weighs Rules for High-Frequency Derivatives Trading Under Dodd-Frank - Bloomberg http://jlne.ws/wx7Fpp

Volcker Rule Stirs Up Opposition Overseas
http://jlne.ws/zF43Pf

Former Credit Suisse Employee Surrenders to FBI
http://jlne.ws/xEJuoM

EU Vetoes Deutsche Boerse-NYSE Euronext Deal
http://jlne.ws/zF6I3Z

Plosser slams Fed's 2014 low-rate forecast
http://jlne.ws/yIWIxX

Private Job Creation Slowed in January
http://jlne.ws/xg0J2u

Serious tightening of lending expected by banks-ECB
http://jlne.ws/y8VZXP

SEC Charges Former Credit Suisse Investment Bankers in Subprime Bond Pricing Scheme During Credit Crisis

2012-02-01T14:32:00.004-06:00

FOR IMMEDIATE RELEASE
2012-23

Washington, D.C., Feb 1, 2012 – The Securities and Exchange Commission today charged four former veteran investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3 billion in subprime bonds during the height of the subprime credit crisis.

The SEC alleges that Credit Suisse’s former global head of structured credit trading Kareem Serageldin and former head of hedge trading David Higgs along with two mortgage bond traders deliberately ignored specific market information showing a sharp decline in the price of subprime bonds under the control of their group. They instead priced them in a way that allowed Credit Suisse to achieve fictional profits. Serageldin and Higgs periodically directed the traders to change the bond prices in order to hit daily and monthly profit targets, cover up losses in other trading books, and send a message to senior management about their group’s profitability. The SEC alleges that the mispricing scheme was driven in part by these investment bankers’ desire for lavish year-end bonuses and, in the case of Serageldin, a promotion into the senior-most echelon of Credit Suisse’s investment banking unit.

Top Interest Rate Headlines 01-31-12: Deficit Again Expected To Top $1 Trillion

2012-01-31T14:20:00.000-06:00

Deficit Again Expected To Top $1 Trillion
WSJ.com
The federal budget deficit likely will top $1 trillion for the fourth consecutive year in fiscal 2012 as the economy continues to grow at a sluggish pace, the nonpartisan Congressional Budget Office predicted Tuesday
http://online.wsj.com/article/SB10001424052970204740904577194872392678482.html?mod=WSJ_hp_LEFTTopStories

Wall Street loosens ties with CME rival ELX
Ann Saphir - Reuters
The Wall Street powerhouses that founded ELX Futures LP to combat CME Group Inc 's virtual monopoly in Treasury futures are cutting their ownership stakes in the tiny exchange, where trading volumes were battered by last fall's failure of MF Global Holdings. "We're working on a new capital structure for ELX," its new chief executive, Rich Jaycobs, told Reuters on Monday, in his first public interview since taking the job on Jan 20.
http://jlne.ws/wiAa2Q

ICE to combine margins for CDS clearing
By Telis Demos in New York - Financial Times
The IntercontinentalExchange will begin allowing banks to combine the margin used to clear trades in single-name and indices of credit default swaps, but is still waiting on regulatory approval to allow banks customers to do so.
http://jlne.ws/xRDaUG

Banks set to double crisis loans from ECB
By Patrick Jenkins and David Oakley in London and Ralph Atkins in Frankfurt - Financial Times
European banks are preparing to tap the European Central Banks emergency funding scheme for up to twice as much as the ECB supplied in its debut E489bn auction last month, providing further evidence of the sectors liquidity squeeze.
http://jlne.ws/xkGh0J

Citigroup's Coutts Said to Depart as Co-Chief of France Unit
BusinessWeek
Citigroup Inc.'s co-chief country officer and head of corporate and investment banking for France, Eric Coutts, left the company as the lender reduces staff, according to a person with knowledge of the matter.
http://jlne.ws/z6zvKw

Citigroup Said to Cut Bonuses in Investment Bank By About 30%
BusinessWeek
Citigroup Inc., the third-biggest U.S. lender by assets, cut 2011 bonuses in its investment banking division by about 30 percent on average amid slumping revenue, according to a person briefed on the matter.
http://jlne.ws/yvTA5x

Santander annual profit falls 35%
By Victor Mallet in Madrid - Financial Times
Net profit at Spains Santander, the eurozones biggest bank by market capitalisation, fell 35 per cent last year to E5.35bn from E8.18bn in 2010 as the Spanish property market collapse and the eurozone debt crisis continued to erode earnings.
http://jlne.ws/AvZIvM

FSA warns on Mifid review proposals
By Philip Stafford - Financial Times
Proposed European Union legislation to create a new type of trading venue could lead to a significant withdrawal of liquidity from the regions largest off-exchange derivatives market, the UK regulator has warned.
http://jlne.ws/zmCHpw

Commerzbank Chief Defends Not Paying Past Bonuses
By JULIA WERDIGIER
LONDON Martin Blessing, the chief executive of Commerzbank, said on Monday that he thought he had acted honorably when the bank decided not to pay 2008 bonuses to 104 investment bankers.
http://jlne.ws/wNnwoV

Freddie Mac: A mess, and likely to stay that way
CNN Money
It's not tough to find critics of Freddie Mac and Fannie Mae on either the right or the left. But there has been little progress made in rehabilitating the mortgage giants.
http://jlne.ws/y1123a

Top Interest Rate Headlines 01-30-12: FRB: Senior Loan Officer Opinion Survey: Banks Saw “Somewhat Stronger” Demand For Loans From Businesses

2012-01-30T17:17:00.002-06:00

FRB: Senior Loan Officer Opinion Survey: January 2012
The January 2012 Senior Loan Officer Opinion Survey on Bank Lending Practices addressed changes in the supply of, and demand for, bank loans to businesses and households over the past three months. The survey included three sets of special questions: the first set asked banks about lending to firms with European exposures; the second set asked banks about changes in their lending policies on commercial real estate (CRE) loans over the past year; and the third set asked banks about their outlook for credit quality in 2012. This summary is based on responses from 56 domestic banks and 23 U.S. branches and agencies of foreign banks.
http://jlne.ws/znUiip

Missing Funds at MF Global May Have 'Vaporized'
WSJ.com
Nearly three months after MF Global Holdings Ltd. collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered, according to people familiar with the investigation.
http://jlne.ws/A4cy4k

Bernanke Beats Obama for Mortgage-Bond Investors
Mortgage-bond investors have been betting that Federal Reserve Chairman Ben S. Bernanke will do more to aid housing than President Barack Obama.
http://jlne.ws/A2ylmS

Sarkozy's modest financial tax has political aims
Reuters
French President Nicolas Sarkozy promised "shockwaves" with a unilateral tax on some financial transactions, but the modest levy his government outlined on Monday was viewed as a political gesture that will cause few market ructions.
http://jlne.ws/xsuwNx

ICE to Begin Portfolio Margining for Bank Credit Swap Trades
Bloomberg
Intercontinental Exchange Inc. (ICE), owner of the world’s largest credit-default swaps clearinghouse, said it received approval to lower its bank members’ cost to guarantee their proprietary positions.
http://jlne.ws/wk9Blb

States to decide this week on mortgage deal
Reuters
State and federal officials are close to a settlement with the largest U.S. banks over mortgage abuses, with states facing an end-of-the-week deadline to decide whether they will sign on, people close to the talks said.
http://jlne.ws/zN3qb7

ECB Opinion on CRD IV
http://bit.ly/zbOtIm

MF Global Said ‘Never Been Stronger’ a Week Before Failure
Bloomberg
A week before MF Global Holdings Ltd. collapsed, its chief financial officer told Standard & Poor’s in an e-mail that the futures broker had “never been stronger.”
http://jlne.ws/y5xs9d

EU leaders agree on permanent bailout fund
Reuters
EU leaders reached agreement at a summit on Monday on the introduction of a permanent euro zone bailout mechanism from July 2012, with a treaty governing the fund to be signed at a later date, three EU officials told Reuters.
http://jlne.ws/yj8T9D

SunGard Enhances Stream Fail Monitor for Mortgages and Agency Debt
Press Release
SunGard has enhanced its Stream Fail Monitor solution, part of its Stream suite of post-trade solutions, to help financial services firms comply with the expansion of the Treasury Market Practice Group (TMPG) penalties to apply to mortgages and agency debt fails.
http://jlne.ws/xo1izX

Spain seen heading for recession as economy shrinks
Reuters
Spain's economy looks set to slip into recession after contracting for the first time in two years in the last quarter of 2011, highlighting the challenge for EU leaders as they meet to find ways to boost growth while cutting budgets.
http://jlne.ws/xF4kGt

Fed Pulls Back the Curtain
Barron's
In a historic shift last week, the Federal Reserve removed all mystery about its plans for interest rates, declaring its intent to maintain the current "exceptionally low" target of near zero percent for the key federal-funds rate "at least through late 2014."
http://jlne.ws/ylfAbc

Citi Chairman Parsons Considers a Departure
WSJ.com
Richard D. Parsons, who as chairman of Citigroup Inc. helped steer the bank through its near-death experience in the financial crisis, is considering stepping down after three years in the post, said people familiar with the situation.
http://jlne.ws/xpzDpG

EU Leaders Hold Fiscal Talks
WSJ.com
European Union leaders gathered Monday to finalize accords on tighter fiscal discipline and a permanent bailout fund, even as a looming multibillion-euro debt-restructuring deal for Greece threatened to overshadow the talks.
http://jlne.ws/yo38W6

France cuts 2012 growth forecast
BBC
France has cut its growth forecast for this year to 0.5% from 1%, Prime Minister Francois Fillon has announced. The revision was made to "take into account the deterioration of the economic situation," he said.
http://jlne.ws/yW8OaM

Top Interest Rate Headlines 01-27-2012: EU Plans Complaint on 'Volcker Rule'

2012-01-27T17:13:00.000-06:00

EU Plans Complaint on 'Volcker Rule'
http://jlne.ws/ypXsdB

Germany wants Greece to relinquish budget controls
http://jlne.ws/AuT94a

Justice Department Unit Issues Subpoenas in Mortgage Fraud Inquiry
http://jlne.ws/wV3b2I

Basel III requirements will reduce corporate performance, say corporate treasurers
http://jlne.ws/yuvqH7

Lehman Says It May Give Creditors $8.1- $10.7B
http://jlne.ws/ysbAAl

Loans and Leases in Bank Credit
http://jlne.ws/xBN7nZ

Citi to Cut Bonuses in Investment Bank About 30%
http://jlne.ws/yxNIrZ

Fitch Downgrades Five Euro-Zone Members
http://jlne.ws/zYfijX

Federal task force to investigate mortgage crisis misconduct
http://jlne.ws/wuAOvH

Outsized Impact of Inventories on GDP Growth
http://jlne.ws/y4s84h

Spain announces budget reform as jobless rate soars above 5 million [Video]
http://jlne.ws/xXVOxc

Fed’s Dudley Sees Significant Impediments to Economic Growth
http://jlne.ws/wU3BYK

January 26, 2012: Bernanke has finger on trigger for new bond buys [NEWSLETTER]

2012-01-26T16:38:00.006-06:00

January 26, 2012

JLN Interest Rates - http://www.jlninterestrates.com

Conversation Starter

Deloitte Consumer Spending Index Ends 2011 on a Low Note; 2012 Outlook Suggests Contraction in Incomes, Future Spending

NEW YORK, Jan. 26, 2012 /PRNewswire/ -- Despite small improvements in three out of four components, the Deloitte Consumer Spending Index (Index) dipped slightly in December due to a decline in housing prices. The Index tracks consumer cash flow as an indicator of future consumer spending.
"Initial unemployment claims continued to decline in December, while real wages benefited from a decrease in energy prices," explained Carl Steidtmann, Deloitte's chief economist and author of the monthly Index. "This positive movement was not substantial enough to offset the continued pressure from the housing market, which has been the most significant drag on the Index for many months."
The Index, which comprises four components — tax burden, initial unemployment claims, real wages, and real home prices — fell to 1.86 from a reading of 1.93 the previous month.
"The New Year brings new demands on retailers," said Alison Paul, vice chairman and U.S. Retail & Distribution sector leader, Deloitte LLP. "In addition to a challenging economic climate, shifts in consumer behavior – from price consciousness to technology adoption – will force retailers to find new ways to remain relevant to their customers in 2012. Retailers should align talent, physical space, processes and technology in a way that moves the in-store environment from transactional to a complete and engaging brand experience."

Highlights of the Index include:

Tax Burden: The tax burden rose slightly to 11.09 percent as state and local governments increased taxes to cover budgetary shortfalls.
Initial Unemployment Claims: Claims moved lower in the most recent month to 396,250, falling below the 400,000 mark for the first time in seven months.
Real Wages: While down 2.1 percent from a year ago, real wages posted a small gain to $8.75 on falling energy prices.
Real Home Prices: Prices fell 5.72 percent from a year ago. Real home prices are now down to levels not seen since the middle of 2000.

Outlook for 2012

The ability for consumers to continue to spend at the rates seen in 2011 may be in question.
"Going forward, it is unlikely there will be another tax cut, and Social Security tax withholding may rise back to its previous level by March," said Steidtmann. "Another 150 basis point drop in savings is not likely, and while gas prices can always fall, the rising tensions in the Middle East would argue against such a drop."
Steidtmann contends that without income growth, spending will contract in a way that outpaces the decline in incomes.

About Deloitte's Retail & Distribution Practice

Deloitte is a leading presence in the retail and distribution industry, providing audit, consulting, enterprise risk management, financial advisory and tax services to 80 percent of the Fortune 500 retailers. With more than 1,400 professionals, Deloitte's Retail & Distribution practice delivers insights and solutions assisting retailers across all major subsectors including apparel, grocery, food and drug, wholesale and distribution and online address critical issues affecting their businesses. For more information about Deloitte's Retail & Distribution sector, please visit www.deloitte.com/us/retail-distribution.

As used in this document, "Deloitte" means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

See the full Deloitte release here:

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Fed's Bernanke To Lead College Classes On Role Of Fed In Today's Economy

The Federal Reserve Board announced on Thursday that Chairman Ben S. Bernanke will deliver a series of lectures aimed at college students. Beginning on March 20, he will lead four classes on "The Federal Reserve and its Role in Today's Economy" as part of a course offered to undergraduates at the George Washington University School of Business. The class will feature a variety of speakers who will discuss central banking. Chairman Bernanke's lectures are scheduled for March 20, 22, 27 and 29 and will begin at 12:45 pm EDT.

Online viewing will be available to the public at www.ustream.tv/channel/federalreserve Leaving the Board. After the lectures, the Board will post transcripts and video recordings at www.federalreserve.gov.

-- Christine Nielsen

Lead Stories

Bernanke has finger on trigger for new bond buys
Reuters
The Federal Reserve has moved closer to embarking on a new round of its controversial money-pumping after the central bank and its chairman Ben Bernanke highlighted a grim outlook for the U.S. economy.
http://jlne.ws/wny4n3

FOMC statement from January 24-25 meeting
Reuters via Yahoo! News
WASHINGTON (Reuters) - Following is the Federal Open Market Committee's statement on interest rate policy issued at the close of its meeting on Wednesday: "Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth.
http://jlne.ws/xXDxwd

The Fed acts without acting
The Economist
ONE truth that emerges clearly from the recent history of Federal Reserve monetary-policy action is that changing central bank policy goals is like steering the Titanic. You can see where the ship ought to go, and the captain himself might do his best to pilot it there, but the nature of the beast is that it simply won't turn on a dime. There are too many extremely cautious people influencing policy decisions and too much political and market scrutiny for that.
http://jlne.ws/y4s4aa

Fed on Hold Til Two Years After Mayan Apocalypse, Markets Cheer
Wall Street Journal Blogs
The Fed just extended its promise to keep rates low at least through late 2014.
http://jlne.ws/A4GoVq

**CN: This one was worth including just for the headline.

Bernanke shakes up central bank
By Robin Harding in Washington - Financial Times
Ben Bernanke’s road towards a more transparent US Federal Reserve was a long one, but he got there in the end. His tenure has been marked by momentous Fed meetings, and while this one may have lacked the drama of a weekend gathering to rescue the financial system, its long-term impact will not be less.
http://jlne.ws/zOT64i

The Fed experiments with imperfect tools
Mohamed El-Erian - Financial Times
Policy experimentation continues unabated in the US with the Federal Reserve launching on Wednesday a new initiative to influence market valuations and, through this, the outlook for the country’s economy. The Fed hopes to use greater transparency to mould expectations in a manner that promotes economic growth and price stability. But this new approach could also create confusion and even greater hesitancy on the part of healthy balance sheets to engage in productive investments.
http://jlne.ws/A3xM3q

Rate futures already say Fed rates low until 2014
Market Watch
NEW YORK (MarketWatch) -- Interest-rate futures traders have already shifted expectations for a rate increase from the Federal Reserve out to 2014, analysts said. That may dampen any market impact of a shift in policymakers' language in its policy statement released Wednesday after a two-day meeting.
http://jlne.ws/xlOsIF

Federal Reserve's transparency steps
Reuters via Yahoo! Finance
The Federal Reserve on Wednesday took a series of historic steps toward making the inner workings of its once-secretive rate-setting committee public.
http://jlne.ws/yN85Kt

Fed Rate Decision Welcome, but US Economy Shaky: CEOs
CNBC
The Federal Reserve's announcement on interest rates was welcomed by business leaders in Davos Thursday morning - but there is still nervousness about the future of the US economy.
http://jlne.ws/zdhEQs

Swonk, Broaddus on Fed Statement, QE3 Outlook
Bloomberg
Jan. 25 (Bloomberg) -- Diane Swonk, chief economist at Mesirow Financial Inc., and Alfred Broaddus, former president of the Federal Reserve Bank of Richmond, talk about today's Federal Open Market Committee policy statement and decision to specify a 2 percent goal for long-term inflation.
http://jlne.ws/wSPYAm

Geithner Says Obama Won’t Ask Him to Stay for Second Term
Bloomberg
Jan. 25 (Bloomberg) -- Treasury Secretary Timothy F. Geithner, the last remaining member of the Obama administration’s original economic team, said he doesn’t expect the president to ask him to stay in office if re-elected
http://jlne.ws/wnOZyI

Audit rips exec pay in bailouts
Detroit News
An audit released Tuesday criticized the U.S. Treasury Department's decision to allow firms that got large government bailouts to pay some executives cash salaries of more than $500,000 to keep them from quitting.
http://jlne.ws/zDmHb9

Taxpayers still owed $132.9B from bailout: report
Associated Press via Yahoo! Finance
A government watchdog says U.S. taxpayers are still owed $132.9 billion that companies haven't repaid from the financial bailout.
http://jlne.ws/x7ghhj

World Bank's action on Europe reflects fear of another global meltdown
Washington Post
The World Bank is moving to shore up economies in eastern Europe and central Asia as fear intensifies that problems in the euro area have begun spilling over to other parts of the world. The bank announced on Wednesday it would commit $27 billion to protect developing nations in the region from a western European crisis that has begun to undercut trade and investment.
http://jlne.ws/wzqkEL

Soros Promotes Crisis Plan for Europe
By ERIC PFANNER - NY Times
The billionaire investor George Soros said on Wednesday that it was possible Greece could be pushed out of the euro zone this year.
http://jlne.ws/xsziVf

Greek Debt Talks to Resume in Athens as Policy Makers Squabble
BusinessWeek
Talks on a debt swap to avert a Greek default resume today as international policy makers squabble over the mounting cost of the rescue.
http://jlne.ws/yUff34

Germany Approves Bank Bailout Bill
BY ANDREA THOMAS - WSJ
BERLIN—German lawmakers Thursday approved a bill to reactivate the country's bank bailout fund SoFFin to help banks weather the current debt crisis and improve their capital base.
http://jlne.ws/wWH9am

Illinois AG sues S&P over mortgage ratings
By Alejandra Cancino - Chicago Tribune
The nation's largest credit agency, Standard & Poor's, violated Illinois law when it assigned its highest credit rating to risky mortgage-backed investments in the years leading to the collapse of the housing market, Attorney General Lisa Madigan alleged Wednesday.
http://jlne.ws/ydp7RE

Old mortgages rise from the dead, haunt homeowners
In July 2009, Roy and Sheila Bowers refinanced the mortgage on their suburban ranch home in Topeka, Kansas. The couple wanted to take advantage of the low interest rates that were all the rage at the time.
http://jlne.ws/zhSAWb

**CN: An attorney with the National Consumer Law Center says record keeping on the part of the mortgage servicers is not to be trusted

U.S Economy Preferred by Investors in Global Poll on Markets
Bloomberg
Investors are turning increasingly bullish on U.S. markets as they declare its economy in better health than major rivals from Europe to Asia, according to the Bloomberg Global Poll.
http://jlne.ws/yKgR4F

Bank Tejarat Banned by U.S., EU in Move Stifling Iran Trade
BusinessWeek
The U.S. and European Union took steps to cut off from the international financial system Bank Tejarat, the last institution financing high-volume exports and imports between Iran and Europe.
http://jlne.ws/wNPuEe

Events

Treasury Futures: Using International Fixed-Income and Money Market Spreads
January 31, 2012
The IFM Instructs On Using Fixed Income And Money Market Spreads
http://jlne.ws/u7MgUK

National Association of Home Builders' Show
February 10, 2012
Special Session With Fed's Bernanke Open To All Registered Attendees
http://jlne.ws/tEcqjW

Retail Banking in Europe
March 13 and 14, 2012
Marketforce And The IEA’s 13th Annual Conference
http://jlne.ws/wNoXDO

Exchanges, Clearing Houses & MTFs

DTCC Names Mark Davies Vice President, Data Business Development
Press Release
NEW YORK & LONDON--(BUSINESS WIRE)-- The Depository Trust & Clearing Corporation (DTCC) announced today that it has named Mark Davies to the new position of vice president, Data Business Development, focusing on DTCC’s involvement in the Legal Entity Identifier (LEI) program in Europe.
http://jlne.ws/xiSlKD

Eurex and IFM announce joint educational initiative
Press Release
Eurex: Eurex Group and the Institute for Financial Markets (IFM) announced today that they have teamed up to offer a joint educational initiative. Both partners aim to bring IFM’s best-in-class derivatives education to Eurex Exchange members and potential clients as well as the general industry. One joint initiative will be the first-time offering of IFM’s well-respected courses in the form of webinars in English. A large subset of the webinars also will be available in Brazilian Portuguese. Members of the brokerage community will be involved to further extend customer outreach.
http://jlne.ws/y6EQPe

ELX Names Richard Jaycobs Chief Executive Officer
Marketwire
NEW YORK, NY--(Marketwire - Jan 20, 2012) - ELX Futures, L.P. (ELX), a leading electronic futures exchange, announced today that veteran futures industry executive Richard Jaycobs will succeed Neal Wolkoff as Chief Executive Officer of ELX.
http://jlne.ws/yxyLKt

Wolkoff Announces Plans to Depart ELX Effective April 30
Marketwire via Yahoo! Finance
NEW YORK, NY-- - Neal L. Wolkoff, Chief Executive Officer of ELX Futures, L.P. , today notified the ELX board of his resignation, effective April 30.
http://jlne.ws/yb1C87

CBOE Futures Exchange (CFE) to Launch Futures on Radar Logic 28-Day Real Estate
Press Release
http://jlne.ws/ybpaRd

GuavaTech Inc. Announces Presence in CME Group's Co-Location Facility
Press Release
Chicago January 25, 2012 – GuavaTech, Inc., a leading managed service provider specializing in customized IT solutions for proprietary trading firms, investment banks, hedge funds, broker/dealers, and FCM’s, today announced that it will begin offering proximity hosting and ultra-low latency connectivity solutions at the new CME Group data center located in Aurora, IL. CME Co-Location Services will launch live trading on January 29, 2012.
http://jlne.ws/AFqEEG

CME deal shows the problem with corporate tax breaks
Chicago Tribune
For several months, CME Group Inc., which owns the Chicago Mercantile Exchange and the Chicago Board of Trade, threatened to relocate outside of Illinois unless it received a specially tailored tax break from the state. The company got its wish when the Illinois Senate passed a bill last month that reduced the financial exchanges' tax bill by about $77 million.
http://jlne.ws/Al18Ah

NYSE Dream of Global Exchange Coming Apart on Derivatives Review
BusinessWeek
A decade-long march by market owners toward greater worldwide scope may be ending in Europe with antitrust regulators recommending against Deutsche Boerse AG's bid for NYSE Euronext.
http://jlne.ws/xiK4Ma

Firms & Banks

MF Global Clients May Lose in $700 Million Bankruptcy Fight
Kit Chellel - Bloomberg
MF Global Holding Ltd.'s clients may be the losers no matter who wins a $700 million dispute between bankruptcy administrators in London and New York that threatens the return of money locked in customer accounts.
http://jlne.ws/xJXvXz

Citigroup's Pandit Says Banks Have to Regain Public Trust
Bloomberg
Citigroup Inc. (C) Chief Executive Officer Vikram Pandit said banks need to start serving clients rather than themselves as the industry tries to rebuild public trust following the financial crisis.
http://jlne.ws/xfTZnI

Citigroup to Consider Further Cuts in Trading, Investment Bank
BusinessWeek
Citigroup Inc., the third-biggest U.S. bank, may make more spending cuts at its securities unit after an investment of almost $1 billion in the business last year failed to boost revenue.
http://jlne.ws/wGP6Ei

Barclays's Diamond Says Still Backs Universal Banking Model
BusinessWeek
Barclays Plc Chief Executive Officer Robert Diamond said he continues to believe in the "strength of the universal banking model" even as some regulators push lenders to split up businesses.
http://jlne.ws/zPlkGB

London Bankers Stay Put as Bonuses Wane
By JULIA WERDIGIER - NY Times
LONDON – The beginning of the year is usually a busy time for bankers and recruiters as many staffers wait to get their bonuses before setting off to a rival.
http://jlne.ws/y8Uybb

Morgan Stanley CEO Says Pay-Cut Complaints Would Be 'Naive'
BusinessWeek
Morgan Stanley Chairman and Chief Executive Officer James Gorman said employees understand why the investment bank had to cut pay, and those who don't grasp the reasoning need to adjust their attitude.
http://jlne.ws/xDaJLK

RBS Said to Be Nearing Sale of Hoare Govett Unit to Jefferies
BusinessWeek
Royal Bank of Scotland Group Plc, Britain's biggest state-owned lender, is nearing an agreement to sell its Hoare Govett corporate broking unit to Jefferies Group Inc., two people with knowledge of the talks said.
http://jlne.ws/wH9D4S

HSBC Seeks Buyer for Japan Retail Banking
BusinessWeek
HSBC Holdings Plc, Europe's largest bank, is seeking buyers for its Japanese consumer banking unit four years after starting the business, said three people familiar with the matter.
http://jlne.ws/yFcKtW

Cantor Fitzgerald & Co. Continues to Expand Its Credit Fixed Income Team
http://jlne.ws/xpDRub

Bank of America Mortgage Woes Lurk Behind Earnings
Forbes
Bank of America's (BAC) fourth-quarter earnings report showed the bank continuing to wrestle with mortgage-related headaches. First take, things look good. Bank of America?s mortgage banking unit earned $2.12 billion, versus an estimate of a $1.44 billion profit from Sandler O?Neill analyst Jeffrey Harte.
http://jlne.ws/xDVx3S

Regulators

Keith Smith Appointed Chairman of Los Angeles Branch Federal Reserve Board
Business Wire via Yahoo! Finance
The Federal Reserve Bank of San Francisco appointed Keith Smith chairman of the Los Angeles Branch board of directors, effective January 1, 2012.
http://jlne.ws/ymR9le

CFTC says customer-fund review comes up clean
Reuters via Yahoo! News
WASHINGTON (Reuters) - The futures regulator said on Wednesday that its spot check of major futures brokerages did not find any material breaches of protections for customer funds. The Commodity Futures Trading Commission conducted the sweep of the industry after the collapse of futures brokerage MF Global in late October.
http://jlne.ws/yfMezL

Global News

Swiss Regulator Steps Up Focus On Housing Market Boom -Survey
FOX Business
Switzerland's financial markets supervisor is stepping up its focus on the country's booming housing market to try and avoid a potential price bubble developing, it said Wednesday.
http://jlne.ws/xz8dPw

The Central Bank Of Myanmar Visits The Stock Exchange Of Thailand
Press Release
SET President Charamporn Jotikasthira welcomed an executive group of the Central Bank of Myanmar, led by Mr. Nay Aye – Deputy Governor of The Central Bank of Myanmar, on the occasion of visiting the SET’s office.
http://jlne.ws/xtwWBY

Brazil Rate Futures Yields Fall as Central Bank Signals Sub-10% Selic Rate
Bloomberg
Yields on Brazilian interest-rate futures contracts fell the most in four months after policy makers signaled they may cut the benchmark Selic rate to below 10 percent.
http://jlne.ws/xxRxoD

RBNZ Stays on Hold but Softens Rate Outlook
CNBC
New Zealand's central bank held its cash rate steady on Thursday, as expected, because of the European debt crisis and modest domestic demand, but added a dovish tone by softening its rate outlook.
http://jlne.ws/zpXPMB

Australian Core Inflation Quickens; Currency Gains as Rate-Cut Bets Pared
Bloomberg
Australia's core inflation rate accelerated above the middle of the central bank's 2 percent to 3 percent annual target range last quarter, prompting traders to pare bets on another interest-rate reduction next month.
http://jlne.ws/yZVGJD

Bank of England unanimously backed steady policy
Market Watch
FRANKFURT (MarketWatch) -- The Bank of England's nine-member Monetary Policy Committee unanimously backed the Jan. 12 decision to leave the central bank's key lending rate unchanged at 0.5% and to maintain its program of asset purchases at 275 billion pounds ($429.2 billion), according to minutes of the policy meeting released Wednesday.
http://jlne.ws/ABedy3

Czech central bank agrees on loan to IMF
Associated Press via Yahoo! News
The board of the Czech central bank has conditionally approved a loan to the International Monetary Fund as part of efforts to stabilize the European debt crisis.
http://jlne.ws/x1iTMB

Thai Central Bank Set To Cut Rates Further In Q2: Capital Economics
Nasdaq
http://jlne.ws/zlcIVN

Japan central bank downgrades growth forecast
Associated Press via Yahoo! News
Japan's central bank said Tuesday it expects the economy to shrink slightly during the fiscal year ending in March instead of expanding as it forecast earlier because of the overseas slowdown.
http://jlne.ws/wStgZy

India's Central Bank Lowers CRR To Infuse Liquidity
Nasdaq
http://jlne.ws/w5IN0S

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Top Interest Rate Headlines 01-25-2012: Bernanke Says Fed Pondering Further Stimulus

2012-01-25T17:13:00.000-06:00

Bernanke says Fed pondering further stimulus
Reuters
Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank was ready to offer the economy additional stimulus after it announced interest rates would likely remain near zero until at least late 2014.
http://jlne.ws/z97Uic

Tim Geithner Won't Stay On If Obama Wins Second Term: Report
Huffington Post
Barack Obama won't ask Timothy Geithner to stay on as Treasury Secretary if the president wins reelection, Geithner told Bloomberg TV's Trish Regan Wednesday.
http://jlne.ws/wOaZwg

Bernanke says Fed pondering further stimulus
Yahoo! News
Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank was ready to offer the economy additional stimulus after it announced interest rates would likely remain near zero until at least late 2014.
http://jlne.ws/z97Uic

CFTC Releases Results of Limited Reviews of Futures Commission Merchants
Press Release
The Commodity Futures Trading Commission (CFTC or Commission) today released findings of limited reviews of futures commission merchants (FCMs) to assess compliance with requirements to segregate customer funds pursuant to Section 4d of the Commodity Exchange Act (ACT). The limited reviews also covered the FCMs’ obligation to set aside in secured accounts funds deposited by customers for trading on foreign boards of trade under Section 4(b) of the Act and Part 30 of the Commission’s regulations. As of the review date for each FCM, all of the FCMs were in compliance with the segregation or Part 30 secured amount requirements.
http://jlne.ws/wlTODg

Merkel: Germany Ready to Transfer More Power to Europe
WSJ.com
German Chancellor Angela Merkel, sharply criticized for her government's prescriptions of austerity as a cure for the euro zone's sovereign-debt crisis, said labor-market reforms and greater European integration also were needed to correct flaws in the makeup of the common currency.
http://jlne.ws/xoohUi

Merkel says 'big rethink needed'
BBC
Germany's Chancellor Angela Merkel has told the World Economic Forum that a "big rethink" is needed in the eurozone within the global economy.
http://jlne.ws/xJy16Q

Federal Reserve Board and Federal Open Market Committee release economic projections from Jan 24-25 FOMC meeting
http://jlne.ws/zuXPrs

Barbara Rehm: Fed s Low-Rate Strategy May Come at a High Cost
American Banker
The central bank has held the federal funds rate near zero for over three years and intends to keep it there. Negative consequences are inevitable and policymakers ability to manage them far from certain.
http://jlne.ws/yURArv

Federal Open Market Committee Statement - Jan. 25, 2012
http://jlne.ws/wKabJg

Federal Open Market Committee Statement - Jan. 25, 2012

2012-01-25T11:47:00.000-06:00