 | | | | | | | | March 22, 2016 | | | | | First Impressions | | | In case you missed it:
2016 Exchange CEO Series: CME's Gill Looking For Customer Efficiencies
JohnLothianNews.com
CME Group has been focused on global growth, just like every other major exchange. But to get there, the exchange leader believes it has to work with customers to streamline costs so it can expand.
In part one of our two-part interview at the FIA Boca Conference, CME CEO Phupinder Gill said that the exchange is working on new ways to address capital efficiencies through products such as cleared swaptions, but also new clearing services that will help institutions reduce collateral.
CME is also continuing to work on market disruptors such as blockchain technology, which may change the way in which clearing services are delivered.
| | | | | | Quote of the day: | | | | | | “ | "I am sure there are many who won't sleep comfortably in their beds tonight. They will hang out all the dirty laundry, and this way we will learn the whole truth."
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| ” | Kemal Kilicdaroglu, leader of Turkey's main opposition CHP, in the story, "U.S. arrest of Iranian gold trader reopens wounds in Turkish graft scandal"
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| | | | Lead Stories | | |
Look at Credit, Not Currencies, to See The Impact of Central Banks
Mike Bird - WSJ
Central banks are losing sway in markets as attempts to stimulate the economy have increasingly less impact  or so the story goes. But central bank watchers might be looking for the impact in the wrong place: try the credit markets. Monetary policy easing in Europe and Japan hasn't had much of an impact on exchange rates this year, with both the yen and euro strengthening against the dollar.
goo.gl/tAmoXc
Bond investors ready to back eurozone periphery for bigger return
Elaine Moore - Financial Times
Seventeen years after European countries bound themselves together with a single currency, the region remains starkly divided between a wealthy, economically stable north and a deeply indebted south. While Germany enjoys a current account surplus and record low unemployment, Spain and Italy have deficits that exceed the EU threshold and a generation of young people stuck in an adolescent twilight without jobs, savings or homes of their own.
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Esma to prioritise Mifid II amendments
James Rundle - Financial News
The European Commission sent three regulatory technical standards from the review of the Markets in Financial Instruments Directive back to the European Securities and Markets Authority on March 14. The standards as written, the EC said, did not adequately reflect concerns from the European Parliament and Council, and it urged a more cautious approach in order to avoid damaging liquidity. The three areas covered were the transparency thresholds for trading in bonds and derivatives, which determine whether or not trade information needs to be made public, the limits placed on how much trading in a single commodity derivative one firm can control, and exemptions from Mifid II for ancillary activities, or financial-market actions by non-financial firms for the purposes of hedging interest or exchange rate fluctuations.
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Banks have another crack at talking about women
The Telegraph
The Bank of England's lofty corridors are paved in mosaics, giving visitors' footsteps a pleasingly grand echo as they walk through the building. The sound was louder than usual recently, when more than 100 women in senior finance posts attended the latest review of the gender imbalance in the industry. A few joked about whether we were even allowed near the priceless tiles, with our clattering heels in danger of making a dent in the floors of the Old Lady of Threadneedle Street. Others noted the rarity of an event in the City of London that was not attended mostly by men in sombre suits.
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Wake up  Britain is heading for Brexit
Financial Times
The British debate about Brexit, at the moment, reminds me of the discussions I heard in the US, late last year, about Donald Trump. Back then the opinion polls said that Mr Trump was well ahead in the race. But the conventional wisdom in Washington was that he would never win the Republican presidential nomination. Everybody told me that, once voters focused on the race, Mr Trump's lead would crumble.
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Big Banks: Expect the Unexpected
Aaron Back - WSJ
A billion dollars here, a billion dollars there. Pretty soon, it adds up. Even as big U.S. banks try to squeeze every last dime out of their cost bases, unexpected, big-ticket charges keep cropping up. In recent years, these have typically involved regulatory fines and litigation expenses. Though they are often regarded as one-time charges by management and investors, the charges still hurt. Importantly, they take big chunks out of retained earnings that could otherwise be used to meet regulatory requirements for higher capital bases.
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Goldman-1MDB Probe Zeroes In on Bond Deals
WSJ
U.S. authorities are investigating whether Goldman Sachs Group Inc. misled bondholders when the firm sold securities issued by a Malaysian government-investment fund that is at the center of a corruption scandal, according to a person familiar with the matter.
on.wsj.com/1WGviaX
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| Central Banks | We ignore the effects of a rate rise at our peril
The Telegraph
Many will think that it may be odd to contemplate the consequences of interest rates rising when all we hear points towards further procrastination by central banks, with some going even further and dipping their toes into the unorthodox water of negative interest rates. However, barring significant external shocks or continued sharp market volatility, rates could start rising in a number of countries, including the UK, this time next year. The rise is likely to be very gradual, but most businesses underestimate the pain even a subdued increase could inflict.
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Milton Friedman's 'Helicopter Money' Is Looking Less Crazy
Mark Gilbert - Bloomberg
Increasingly, central bankers, economists and market watchers are discussing the pros and cons of what's called helicopter money, a 47-year old idea that posits a way to kickstart an economy through dropping money on its citizens. Peter Praet of the European Central Bank, for example, said in an interview published last week that "all central banks can do it" if needed; his ECB colleague Jens Weidmann warned that such a move "would rip huge holes in central bank balance sheets." Helicopter money feels very much like an idea whose time may be coming.
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Property Bubble Ghost Haunts Central Bankers Trying to Boost Prices
Bloomberg
The property market is an animal almost every central banker is worried about and hardly anyone can control. As the Federal Reserve downshifts into go-slow mode while the European Central Bank and other monetary authorities ease, expect to hear a lot of concern about property prices. Here's the dilemma: How do you cut rates to goose too-low inflation and support growth without lighting a fuse under real estate?
bloom.bg/1WGw08f
Exclusive: China central bank to Fed: A little help, please?
Reuters
Confronted with a plunge in its stock markets last year, China's central bank swiftly reached out to the U.S. Federal Reserve, asking it to share its play book for dealing with Wall Street's "Black Monday" crash of 1987. The request came in a July 27 email from a People's Bank of China official with a subject line: "Your urgent assistance is greatly appreciated!"
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Fed Lockhart: A Kaleidoscopic Context For Monetary Policy
Market Pulse
Last week, the Federal Open Market Committee, the Federal Reserve's group responsible for setting monetary policy, met and decided to keep unchanged the benchmark policy interest rate that influences the rates that businesses and households pay and earn. The statement issued at the conclusion of the meeting characterized an economy that continues to grow at a moderate pace supported to a significant extent by growth of consumer spending.
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China's Dilemma: Stabilize Monetary Policy or the Renminbi?
CFA Institute
Since 2016 began, the prospect of a major devaluation of China's renminbi (RMB) has been hanging over global markets like the Sword of Damocles. This explains why China's policymakers worked hard to dispel worries about the weakening RMB at the G-20 Finance Ministers and Central Bank Governors Meeting held in Shanghai on 26 - 27 February. Zhou Xiaochuan, governor of the People's Bank of China (PBOC), reiterated that there is no basis for persistent depreciation, that China will not engage in competitive currency devaluation, and that structural reforms will be implemented decisively.
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Nigeria Central Bank Reverses Policy by Raising Rate to 12%
Bloomberg
The Central Bank of Nigeria unexpectedly raised its benchmark interest rate by 1 percentage point, reversing direction after inflation in Africa's largest economy soared. The Monetary Policy Committee increased its main rate to 12 percent, Governor Godwin Emefiele told reporters on Tuesday in the capital, Abuja. All 14 analysts surveyed by Bloomberg predicted the rate would remain unchanged at 11 percent.
bloom.bg/1WGiD7S
Political split clouds future of Turkey's central bank chief
Reuters
Turkey's central bank governor will preside over the final policy meeting of his term this week amid uncertainty over who might replace him after he angered President Tayyip Erdogan by refusing to cut interest rates. With expectations that Erdem Basci's mandate may not be renewed, the lack of clarity over who would succeed him if he goes is unnerving investors already worried about political influence over monetary policy.
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New Zealand central bank probes possible rate leak
MarketWatch
The Reserve Bank of New Zealand is investigating an allegation that its surprise decision to cut interest rates in March was leaked ahead of the official announcement. "We are aware of an allegation that information may have been leaked ahead of the official cash rate announcement on 10 March," Mike Hannah, head of communications for the central bank, said Monday.
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Bangladesh central bank weighs lawsuit against NY Fed over cyber heist
Reuters
Bangladesh's central bank has hired a lawyer in the United States for a potential lawsuit against the New York Federal Reserve after unknown hackers stole $81 million from its account with the U.S. bank, an internal report said.
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Philippine authorities close in on Bangladesh Bank robbers
Nikkei Asian Review
Anti-money laundering authorities in the Philippines on Tuesday moved on a Chinese businessman and a casino junket operator who they allege were involved in stealing $81 million placed on deposit by Bangladesh Bank in a New York bank. The Anti-Money Laundering Council (AMLC) said businessman Kam Sin Wong, or Kim Wong, and junket operator Weikang Xu received money stolen from an account of the Bangladeshi central bank at the Federal Reserve Bank of New York.
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Bangladesh bank heist: Cybersecurity investigator abducted during probe into $81m theft
International Business Times
A cybersecurity researcher investigating the massive £81m heist at the Bangladesh central bank has reportedly been abducted, only 24 hours after telling local media outlets he had uncovered three user IDs involved in the hack. Tanveer Hassan Zoha, 34, was working as a 'shadow investigator' in the ongoing police probe into the cyberattack and had previously raised concerns about security standards at the bank - a move his family claim may have played a part in his mysterious disappearance.
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| | | | Currencies | The currency war is over, says HSBC
MarketWatch
The currency war is over. With the dollar clocking significant declines against the euro and yen since the beginning of the year, it appears that the European Central Bank and the Bank of JapanÂwho along with the Fed comprise the primary antagonistsÂhave run out of ammunition for driving their currencies lower, according to a team of currency strategists at HSBC.
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What Happens When the U.S. Dollar Is No Longer A Hedge Fund Hotel?
Bloomberg
In the wake of last week's dovish decision from the Federal Reserve, investors have been throwing in the towel on the U.S. dollar. But Bank of America Merrill Lynch's proprietary positioning data suggests there's still another major shoe to drop for the greenback. In a note to clients, FX Strategists Myria Kyriacou and Athanasios Vamvakidis illustrate that hedge funds' long position in the U.S. dollar remains substantial relative to the past 12 months and to other investors
bloom.bg/1WGvJSL
Currency war truce
Financial Times
Farewell, currency wars. Hello, carry trade! Spring's arrival seems to have forex investors wondering if a new currency world order  in which central banks no longer drive each other's currencies to the bottom  is sprouting. And regardless of whether that is true or not, the Federal Reserve's supremely dovish tone may be enough to revive the carry trade strategy: borrowing from low interest rate countries to buy assets where rates are higher.
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Chinese currency moves sow confusion
Financial Times
Not for the first time this year, the behaviour of the Chinese renminbi is causing more than the odd furrowed brow in the markets. The powers that be in China have spent much of the past few months patiently explaining that their currency's long-time peg against the dollar is history, and henceforth the renminbi will be managed with reference to a trade-weighted basket of 13 currencies.
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Australian central bank uneasy about currency rise
MarketWatch
Australia's central bank signaled growing unease Tuesday about the recent strength of the Australian dollar, saying that given its current eight-month highs, it might be rising too quickly. "There is a risk that the currency might be getting a bit ahead of itself in my view," Reserve Bank of Australia Gov. Glenn Stevens told a conference of financial system regulators.
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Moody's Sees Gulf State Currency Pegs Withstanding Oil Rout
Bloomberg
Oil-rich countries in the Gulf Cooperation Council are unlikely to abandon their decades-old currency pegs to the U.S. dollar even as a slump in oil prices puts a $250 billion squeeze on the region's finances, according to Moody's Investors Service.
bloom.bg/1pHep5P
| | | | Indexes & Index Products | Money managers shake up ETF landscape
Financial Times
The booming exchange traded fund industry, in which investors can buy shares that track an underlying basket of securities, shows few signs of slowing down. Within the industry, institutional investors play a prominent role, attracted by lower costs and flexibility of the product. Large pools of capital controlled by large investors including pension funds and insurers that were once directed into mutual funds are now increasingly being placed into ETFs.
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March Madness: What Investors Can Learn From Picking Brackets
ETF Trends
The month of March brings the focus of the sport's world on college basketball's "March Madness." The upsets, the drama, and the buzzer-beaters during the NCAA basketball tournament capture the imagination of even the casual fan. Filling out, comparing, and bragging about tournament brackets dominate conversations around the water cooler for weeks. There are a variety of strategies that go into completing a tournament bracket.
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Currency Hedging Is Growing Up. Are Your Foreign ETFs Keeping Up?
Nasdaq
Global currencies have been in the news a lot lately. In December, the Federal Reserve Bank hiked interest rates. Meanwhile, the Bank of Japan (BOJ) recently tried to push its currency lower with negative interest rates. The European Central Bank has cut rates as well. And the Chinese currency has moved lower since dropping 2% last August when the People's Bank of China let the yuan float.
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Pimco Sees China Bonds in Global Indexes by 2018 - With a Caveat
Bloomberg
Pacific Investment Management Co. says China's inclusion in major global bond measures within two years will usher in an era where the nation's financial markets are more relevant to global investors than its factories.
bloom.bg/1WGufrm
In Crisis-Hit Brazil, ETF Traders Actually See Less Volatility
Bloomberg
Investors are betting on calmer days ahead for Brazilian stocks, according to options trading on the biggest exchange-traded fund tracking the country's equities. A measure of volatility for the iShares MSCI Brazil Capped ETF reached its highest level since the end of 2014 versus one tracking the U.S. stock market. But traders see the turmoil as temporary, betting volatility will drop by 9 percent in the next three months amid speculation a change of government can pave the way for needed reforms.
bloom.bg/22CKCce
| | | | Gold | U.S. arrest of Iranian gold trader reopens wounds in Turkish graft scandal
Reuters
The arrest of an Iranian gold trader whom Turkish prosecutors placed at the heart of a Turkish government graft scandal two years ago hit shares in a state-run bank on Tuesday and raised opposition hopes that new light would be shed on a case it said was covered up.
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Gold Trader at Heart of Turkey Graft Scandal Charged in U.S.
Bloomberg
Reza Zarrab, a gold trader at the center of a bribery scandal that engulfed Turkey's leadership more than two years ago, was charged by the U.S. of running a scheme to help the Iranian government launder hundreds of millions of dollars and evade economic sanctions.
bloom.bg/1WGyAea
Why Goldman is wrong about gold-Âcommentary
CNBC
Goldman Sachs has been predicting the demise of gold for the past few years. Last summer, the firm predicted gold would fall to $1,000 by the start of 2016. The firm reiterated that call in its latest commodities report (March 7), saying it thought gold would fall to that key level within 12 months.
cnb.cx/1WGkUA6
U.S. Mining Losses Last Year Wipe Out Profits From Past Eight Years
Eric Morath - WSJ
The U.S. mining industryÂa sector that includes oil drillersÂlost more money last year than it made in the previous eight. Mining corporations with assets of $50 million or more recorded a collective $227 billion after-tax loss last year, according to Commerce Department data released Monday. That loss essentially wipes out all the profits the industry had made since 2007.
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German Central Bank enhances gold repatriation program
New Europe
Germany continues the gold repatriation program successfully according to an interview by the president of the Bundesbank Jens Weidmann. Weidmann said that Bundesbank promotes its gold repatriation plan which suggests that at least half of the total gold reserves of the country should be transferred to Frankfurt am Main until 2020. According to the President of the German Central Bank, 366 tons of gold at a total value of approximately EUR11.5 billion have been delivered to Frankfurt so far.
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| | | | Miscellaneous | A growing corner of China's $2 trillion mortgage market looks a lot like the US subprime bubble
Quartz
The US subprime boom that eventually would trigger the 2008 global financial crisis started when lenders pushed outsized home loans on people without the wherewithal to pay them back. These homeowners were often so cash-strapped that they made tiny down payments on their properties. When home prices fell and loans went bad, banks and investors holding the loans, and financial investments build off them had to eat massive losses.
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