Thursday 21st September 2017
NEWS TICKER September 20th: Portugal's debt agency, Instituto de Gestao da Credito Publico (IGCP) is re-opening a 6-month March 23rd, 2018 T-bill and issue new 12-month Sep 21st, 2018 T-bill for an indicative amount of between €1.5bn to €1.75bn today. Demand should be buoyant. At the last 6-month T-bill auction on July 19th this year, IGCP allotted €500m at an average yield -0.292% and ended up being covered 2.77 times. At the re-opening of the Jul 20th, 2018 T-bill on Aug 16th, IGCP allotted €750m at an average yield -0.291% and bid-to-cover of 2.45 times – Norway’ sovereign wealth fund reports that it has touched a record $1trn in assets as of yesterday -The Fed’s FOMC policy announcement today (expected around 18.00 GMT) is colouring global markets today. The committee will also release its latest economic projections; while Fed chair Janet Yellen’s commentary is expected about half an hour or so later – In other US market news today, look out for NAR home sales data and the Department of Energy’s latest report on weekly crude oil stocks -- Can Theresa May begin to salvage Brexit this week? Donald Tusk, president of the European Council, says he will meet with UK Prime Minister in London next week to discuss Brexit. Negotiations between the EU and UK have stalled with little progress made in recent weeks. Meantime local press reports have it that at her upcoming speech in Florence she will lay out an initial offer to contribute to the EC to secure access to the single market for a transitionary period. Will both initiatives reinject some life into the clearly stalled talks? -- Meantime corporate results news today is broadly positive despite some questions over UK consumer demand. “Kingfisher’s half year results released to the market today showed revenues rising by 4.5% to just over £6bn, with a good portion of this rise attributed to currency movements. Stripping out those currency effects, investors should note that the numbers do not look as good, with sales falling by 1.3% and underlying pre-tax profits rising by just 0.9% to £440m, reports the Share Centre. “General performance in the UK was mainly good, driven mostly by the success of Screwfix. However, this was more than offset by the continuing weakness in France where sales fell by 4.6% on a like for like basis. Overall sales were also disrupted by continuing operational changes the management is taking. This includes integration of its various brand’s operations under one IT system and one supply purchase system. Whilst some of the financial benefits are already showing through, the restructuring was expected to hit sales and interested investors should acknowledge that management is working on minimizing this effect over the longer term. This performance is not too much of a surprise to the market but interestingly, the shares were up by around 8% in early trading. Likely down to management reiterating that they expect to meet consensus underlying eps targets, despite still flagging caution for the second half of the year. They also announced a £60m share buyback which would have contributed to this morning’s share price rise.” Nonetheless, the analytics group says that it retains a cautious attitude to the retail environment as consumers in the UK are increasingly felling the pressure in real incomes. Moreover, the generally more upbeat tone in Europe isn’t feeding through to the group’s French businesses – The European Banking Authority is inviting comments on rules governing asset securitisation. The EU banking regulator is looking into concerns that some parts of its securitisation rules may make it more difficult for banks to shift nonperforming loans off balance sheets -- Having been strong in the previous week and then seen a slow session on Monday, Northern and Central European sovereign spreads traded wider yesterday, according to VTB’s Capital Bond Morning commentary today. Long and belly Russian benchmarks increased 6bps-8bps in yield, while the front end was more balanced, rising only 2bps-4bps. The bank also noted profit-taking in Ukrainian bonds, with the sovereign curve shifting up 10-12bp in the long end and 6bps-7bps in shorter durations. Kazakhstan moved up 3-4bp in all tenors. In Azerbaijan, AZERBJ 24 (YTM 4.28%) underperformed, going 5bsp higher, yield-wise. Armenia was the sole name in the sovereign space which was resilient to the weaker risk appetite, closing intact yesterday. Meanwhile, the Russian Ministry of Finance is to announce the results of the bonds swap today – Commenting on continued low market volatility in a client note this morning, Arne Staal, head of multi-asset quantitative strategies, at Standard Life Investments says, “The low volatility regime reflects an unusually ‘volatility-accommodative’ macro and corporate environment. A lack of major surprises in financial and economic data has allowed markets to price in benign economic growth expectations. Some gradual normalisation of volatility in the direction of average long-term levels is likely (in the absence of catalysts for a more abrupt increase in risk). For volatility to rise more structurally, we need to see developments that alter the expected path of the global economy. Some of the known macro risk catalysts that could lead to an abrupt transition to a high volatility regime include the risk of major government or central bank policy errors in the US, China or Europe, or geopolitical events, such as the possibility of military conflict in North Korea. In addition, valuations in many asset classes seem stretched by standard measures.” --

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Issue 82 - May/June 2015

There’s a new paradigm in investor services. FTSE Global Markets spoke to Daron Pearce, Global Head, Investment Managers segment for Asset Servicing at BNY Mellon, about the evolution of the investment services business set and what is means, long term, for the bank’s clients. Backed by innovations in technology the company now mines a rich seam in ground-breaking client services based on sophisticated analytics that help its clients better understand the world in which they operate, and allows BNY Mellon to develop new tools and models that leverage their expertise to better service their own customers.

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High valuations and the prospect of a gradual rise in US interest rates look to be the main concern of investors right now. Given the oversubscription of even measly priced UK gilts and other sovereign bonds, it is clear that sovereign debt will remain the asset class of choice for pension funds. Given that understanding and failing a grand rotation back into equities, the issue is then whether rate rises reinforce the drift into developed market sovereign bonds at the expense of emerging markets.  Relative to equities flows government bonds remain at historic highs. Just how soon the US Federal Reserve will begin to raise rates now the question du jour. We look at some of the fallout once it happens

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Wednesday, 24 June 2015

A fix for fixed income?

With the corporate bond market still dealing with a pronounced demand-supply imbalance, newer protocols capable of connecting multiple sources of liquidity continue to grow in popularity—among them open or all-to-all trading solutions, designed to provide investors, dealers and other market participants with greater efficiency around fixed-income trades. Dave Simons reports from Boston.

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According to the latest survey from data provider Preqin, some 51 investors have increased their allocation to the hedge funds to over the $1bn benchmark, while 27 investors have seen their allocation fall below that level. There are now a total of 227 investors around the globe that have $1bn or more in assets invested in hedge funds, and collectively these investors have $735bn invested in the asset class, representing almost a quarter of the total capital invested in the industry (up 13%) on a year ago. Most of these were in America. What’s going on?

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Wednesday, 24 June 2015

Find me a prime

Will the current climate continue to favor the various small-time prime models that have emerged in the wake of the recent PB purge? Are these specialty firms capable of handling the ever-expanding field of small funds in need of a home? Dave Simons reports.

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As with any business decision, financial analysis is a critical input to deciding whether to upgrade/build a trade reporting solution or outsource to a third-party provider. In building or upgrading a solution, firms typically incur costs involved in interpreting regulations and defining business requirements, design/engineering and project implementation, physical infrastructures, operations and support staff and trade repository fees. Finally, there is the consideration of opportunity costs—the consumption of resources that could support other business initiatives—should be factored into the total cost of ownership. The following two scenarios demonstrate the total cost of ownership of building an in-house reporting system versus using a managed solution. Costs and calculations reflect Sapient’s first-hand experience working with banks and buy-side firms worldwide.

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When financial regulations were coming into effect in 2012, there were no managed solutions available to help market participants handle trade reporting. Today, robust, third-party managed services are available, offering organizations a number of benefits:

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Now that most G20 member states have mandated trade reporting of derivatives, market participants have an opportunity to evaluate the agility and sustainability of their current approach. In this article, Randall Orbon, Arun Karur and Cian Ó Braonáin of Sapient Global Markets discuss the state of trade reporting and show how growing costs, complexity and regulatory scrutiny are fuelling a compelling business case for third-party managed solutions.

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