First Impressions
Pounds for Kids and £aughs For Kim
By John Lothian
The sold out Futures For Kids annual IDX Gala Dinner raised over £120,000 on Wednesday evening, with this year’s “man in a skirt” Simon Puleston Jones topping £5,000. The event also featured an auction of a Toblerone chocolate bar for Kim Taylor, and her charity of choice, The Lisa Fund. What emerged in that lively auction was a battle between two Goldman Sachs tables, won by none other than Mike Dawley for £5,000.
Well done folks. A great night for some great causes.
Quote of the Day
“This latest spate of dovishness is about keeping the foot on the accelerator until we see the data we’re expecting.”
Peter Hooper, chief economist at Deutsche Bank Securities, in the story, “Bond selloff a wild card that could delay Fed rate hike”
Lead Stories
EU Prepares for Worst as Greece Drives Finances to Brink
By Radoslav Tomek and Patrick Donahue – Bloomberg
European officials are preparing for the worst as Prime Minister Alexis Tsipras’s brinkmanship pushes Greece’s finances to the limit.
Chancellor Angela Merkel urged Tsipras to accept the framework for financial aid as the German public turns against supporting Greece and euro-area officials demanded a proposal for stabilizing the country’s debt by the end of Friday. The International Monetary Fund team left Brussels earlier this week, despairing of Tsipras’s tactics.
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House Rejects Trade Bill, Rebuffing Obama’s Dramatic Appeal
By Jonathan Weisman – NY Times
House Democrats rebuffed a dramatic personal appeal from President Obama on Friday, torpedoing his ambitious push to expand his trade negotiating power — and, quite likely, his chance to secure a legacy-defining trade accord spanning the Pacific Ocean.
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Bond selloff a wild card that could delay Fed rate hike
By Jonathan Spicer – Reuters
The sharp bond market selloff is starting to pinch American consumers and companies, causing a mild economic tightening that, if sustained, could raise alarms at the Federal Reserve and even delay a plan to hike interest rates in coming months.
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Treasuries Get Crowded Out as Corporate Bonds Inundate Investors
By Daniel Kruger and Cordell Eddings – Bloomberg
The way Treasury yields are rising, you’d think the economy was booming and Federal Reserve policy makers were on course to jack up interest rates as soon as next week.
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The ‘Bigger Short’ Or How To Play This Crazy Bond Market
By Steve Blumenthal – Forbes
This is just not normal. Nearly 90% of the industrialized world economy is presently anchored by zero rates, and half of all government bonds in the world today yield less than 1%. Wow. The race into risky assets continues, but those assets are bid up and richly priced.
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Greece Crisis: What Happens if There’s No Debt Deal
By Nikos Chrysoloras and James Hertling – Bloomberg
With financial doomsday drawing ever closer in Athens, everyone from creditors and investors to depositors is increasingly focusing on what’s next.
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Why a Bond Fund’s ‘Duration’ Is Crucial as Interest Rates Rise
By Greg McBride – WSJ
There are a couple of items bond investors should be mindful of as the eventuality of a Federal Reserve interest-rate hike draws closer. For those investing in bond mutual funds or exchange-traded funds (ETFs), look at the “duration” of the fund.
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U.S. Junk Bonds Show Signs of Cracking as Buyers Pull Cash
By Cordell Eddings – Bloomberg
Investors pulled $2.56 billion from U.S. junk-bond funds in the past week, the second largest outflow this year, as cracks appear in one of the few fixed-income asset classes to withstand the global bond rout.
The two-month jump in government bond yields worldwide is starting to catch up with speculative-grade company debt. The pullback is slowing what had been a record pace of issuance, with sales of the securities poised for the slowest week this year.
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Central Banks
Fed Meetings May Be Live, But Here’s Why They’re Unlikely to Surprise
By Michael S. Derby – WSJ
If Federal Reserve policy is as data-driven as officials say it is, that means the outcome of any central bank interest rate meeting is a wildcard, right?
Well, not exactly. While it’s true that central bankers are saying a lot less about the timing of boosting rates off currently near-zero levels, that doesn’t mean they’ll be going into Federal Open Market Committee gatherings without a pretty strong idea about what they, individually, want to happen.
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Pinning the Tail On the Fed-Timing Donkey
By Adam Warner – Schaeffer’s Research
Everybody keeps trying to play “Pin the Tail On the Fed-Timing Donkey” game. And if history is any guide, we’re not likely to play the game very well.
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Here’s the Research That Could Push Back a Fed September Rate Hike
By Craig Torres and Jordan Yadoo – Bloomberg
Next week, Federal Reserve officials publish new quarterly forecasts, and all eyes are going to be on where they set the job market’s Goldilocks rate.
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In Minnesota, high employment and weak wages show Fed’s quandary
By Howard Schneider – Reuters
By all rights wages should be soaring in Minnesota, a Midwestern state that boasts one of the best educated and well-paid workforces in the United States and where the unemployment rate stands at a 14-year low.
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Interest rate rise getting closer, says Bank of England policymaker
By Peter Spence – The Telegraph
The Bank of England is edging closer to a rise in interest rates for the first time since the financial crisis, as the UK economy remains on track to move back into inflation, according to a policymaker.
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Monetary Policy Hasn’t Helped European Unemployment But It’s Not The Cause Of This Evidence
By Tim Worstall – Forbes
We can definitely say that the ECB’s monetary policy hasn’t helped unemployment in the eurozone. For goodness sake, they have been making the same mistake the Federal Reserve did in the 1930s. Thinking that low interest rates are equivalent to a loose monetary policy. They even raised interest rates at the depths of the Great Recession. And only just recently have they started doing the quantitative easing that the US and UK were doing three and four years ago. No, monetary policy in Europe has not been good in recent years. More an example of what not to do by modern lights rather than anything that anyone should want to follow.
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BofA’s Harris: Fed Can’t Be Blamed for Income Inequality
By Rob Williams – Newsmax
Critics who say the Federal Reserve’s easy money policies only benefit millionaires and billionaires are wrong, said Ethan Harris, head economist at Bank of America Merrill Lynch
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Fed Focuses on Treasury Volatility Mystery as It Plots Rate Rise
By Jeanna Smialek – Bloomberg
As Federal Reserve officials look to raise interest rates for the first time since 2006, they are studying changes in the $12.7 trillion Treasury market and are worried about what they don’t know.
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How the Fed screwed up the bond market
By Jeff Cox – CNBC
Live by central bank liquidity, die by central bank liquidity.
That could well become the mantra for a bond market that, after years of support by the Federal Reserve and its global counterparts, now finds itself suffering under the unintended consequences of the trillions in easing distributed to allay the fears of a market in crisis.
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Russia’s interest rate options
Financial Times
Monday is Russian rates decision day. Here’s a range of views on what might happen.
You never quite know what the Central Bank of Russia will deliver. This time, the betting is on anything from a two percentage point cut to half a percentage cut.
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South Africa’s Reserve Bank Ready to Act, Deputy Governor Says
By Rene Vollgraaff – Bloomberg
South Africa’s central bank is ready to act to curb inflation as tighter monetary policy in the U.S. threatens to weaken the rand further, Deputy Governor Daniel Mminele said.
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Hungary Central Bank Shift Risks Credibility, OTP Fund Says
By Gabriella Lovas and Marton Eder – Bloomberg
Hungary’s central bank is moving away from targeting inflation by shifting its attention to economic growth and increasing demand for government debt, according to the country’s largest investment fund.
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Currencies
Is the World Ready for the Rise of the Yellen Dollar?
By Tom Keene – Bloomberg
“We believe in a strong dollar policy.” It’s a phrase that’s been stated seemingly since the beginning of time.
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Expecting the dollar to gain heading into FOMC decision
By Jameel Ahmad – FXStreet.com
The continued mixed sentiment towards the USD is inspiring the currency markets to struggle when it comes to finding direction. While there was an initial buying reaction towards the USD when US retail sales were confirmed as advancing by 1.2% during May, it was in line with expectations and failed to reinvigorate USD momentum. The only positive I saw from the data was that there was a revised upward revision for April, which provides further support that US economic momentum has picked up in the second quarter. Moving away from the US economic data, I am expecting the USD to gain as we head into next week’s FOMC decision as there will be traders tempted to purchase the USD on the outside chance that the Federal Reserve might shock the financial markets with a US interest rate rise.
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Kuroda Seen Capping Yen Slide as Officials Hint Limit Close
By Kevin Buckland and Kazumi Miura – Bloomberg
If recent remarks by Japanese officials including the head of the central bank were aimed at capping the yen’s plunge to a 13-year low, they appear to be working.
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Anyone have change for a quadrillion dollar bill?
By Edward Hadas – Reuters
Zimbabwe has offered a reminder of what really bad monetary policy can do. On June 11, its central bank said it would implement the government’s policy of eliminating the national currency by exchanging Zimbabwe dollars into U.S. dollars at a ratio of 35 quadrillion to one.
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Real Leads Declines as Greece Overshadows Brazil Interest Rates
By Paula Sambo – Bloomberg
Brazil’s real led global currency drops as concern over Greece damped demand for higher-yielding assets from emerging markets and overshadowed the allure of the South American country’s interest rates.
Most developing-nation currencies declined as Germany urged Greece to accept the framework for financial aid after an International Monetary Fund team left Brussels. The real was still headed for a weekly rally after minutes of the Brazilian central bank’s June meeting signaled further increases in the benchmark Selic lending rate.
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Indexes & Index Products
Don’t Let MSCI’s Index Delay Scare You Away from Chinese Stocks
By Gregg Greenberg – The Street
Investors in Chinese stocks may have been disappointed with MSCI’s decision this week to delay the inclusion of Chinese A-shares in its indexes. However, Chen Ding, CEO of CSOP Asset Management, said they should not be too distraught, because the sting won’t last long. “We are very, very close to getting China A-shares into MSCI’s index framework,” said Ding. “We observed that [London’s] FTSE already did it last month and I think it won’t be way too long.”
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The Smarter Investor
By Chris Bennett – S&P Dow Jones Indices Indexology Blog
Investors have spoken: There is a world outside of traditional indexing, and they want in.
“Smart beta” or factor indices bridge the gap between active and passive management by allowing investors to tilt toward specific investment attributes – for example, low volatility or high dividend yield. These indices use factors in a rules-based, transparent manner to determine index composition and/or weighting. Smart beta products give passive investors access to factor exposures that were once only available through active management.
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New OMX Baltic Benchmark Portfolio Selected
MondoVisione
The semi-annual review of OMX Baltic Benchmark index constituents has been completed. The new composition will become effective with the market open on Wednesday, July 1, 2015.
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Gold
Gold Embracing Dollar Once More as Haven Demand Fails to Emerge
By Eddie Van Der Walt and Debarati Roy – Bloomberg
The dollar is dominating the gold market.
With markets showing relative calm in the face of Greece’s debt crisis and equities near all-time highs, there’s little demand for the safety of haven assets like gold, giving changes in the dollar more sway. The metal has moved in the opposite direction as the Bloomberg Dollar Spot Index every day except one this month.
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Will Mining Stocks Get a Summer Rally?
By Brian Sylvester – The Gold Report
The summer months are the time to establish positions in the “best of the best” at valuations the mining sector has not witnessed in 20 years, says Gwen Preston, editor and publisher of Resource Maven, a subscriber-based junior mining newsletter. She doesn’t know if the mining stock rally will start this summer but that really doesn’t matter — what matters is that we are at the bottom. In this interview with The Gold Report, Preston says if the TSX Venture Exchange starts to see gains over the summer months, buckle your seat belts because that’s a sure sign that the long-anticipated stock rally has begun.
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Avi Gilburt doubles down: Gold is going to $25,000
By Avi Gilburt – MarketWatch
Last week I wrote a column on MarketWatch that seems to have stirred quite a bit of debate. Within the column, I was pointing to the potential for a multi-decade rally to be seen in the metals and mining stocks. It seems many of you had very strong feelings that this was simply not possible. Over the next few weeks, I will attempt to address the concerns many of you have presented in your comments to my piece.
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Miscellaneous
Debate continues over whether Dodd-Frank requires an SEC complaint
By Ada W. Dolph and Olushola Ayanbule – Lexology
Our Whistleblower Team continues to monitor whether courts will require an employee to have complained directly to the SEC to state a claim for whistleblower retaliation under the Dodd-Frank Wall Street Reform and Consumer Protection Act. (See our past blogs on this issue here, here and here). We checked in again on the state of the law and can report that the debate rages on.
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Startups are coming to crush the banks
By Jonathan Marino – Business Insider
Startups are chipping into every line of business big banks enjoyed leading up to the financial crisis.
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READ MORE: JLN Financials: EU Prepares for Worst as Greece Drives Finances to Brink; House Rejects Trade Bill, Rebuffing Obama’s Dramatic Appeal; Bond selloff a wild card that could delay Fed rate hike.