Futures market signals skepticism of Fed rate increase | Investors gravitate to credit-risk transfers | Fitch: FICC revenue to drop if volatility doesn't return
August 15, 2017
SIFMA SmartBrief
News on the capital markets
Morning Bell
Futures market signals skepticism of Fed rate increase
Traders are reacting to July's weak inflation numbers by scaling back bets the Federal Reserve will increase interest rates again this year. The federal funds futures market indicated a 37.4% chance Friday of a rate increase in December, down from 46.8% the week before, according to CME Group.
MarketWatch (8/14),  The Wall Street Journal (tiered subscription model) (8/14) 
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Industry News
Investors gravitate to credit-risk transfers
The market for Fannie Mae and Freddie Mac credit-risk transfers has grown to $48 billion since the programs' inception, a shift toward a reduced role for government in the US mortgage market. JPMorgan Securities estimates sales will reach $15 billion this year, up from the previous record $13 billion issued in 2016. "The government's footprint in the mortgage market is receding quickly and significantly," said Mark Zandi, chief economist at Moody's Analytics.
The Wall Street Journal (tiered subscription model) (8/14) 
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Fitch: FICC revenue to drop if volatility doesn't return
Large banks' fixed-income, currency and commodity revenue will continue to suffer if volatility remains low, according to a report from Fitch Ratings analysts.
Financial News (UK) (tiered subscription model) (8/14) 
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Berkshire Hathaway sells GE shares
Berkshire Hathaway sells GE shares
Buffett (Jamie McCarthy/Getty Images)
Warren Buffett's Berkshire Hathaway has sold 10.6 million General Electric shares worth roughly $315 million in the second quarter, according to a securities filing. GE shares have lost 20% of their value this year, while the Standard & Poor's 500 index has risen 10%.
Fox Business/Dow Jones Newswires (8/14) 
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Analysis: Geopolitical events could roil markets
Brexit, gridlock in Washington, D.C., and sanctions against Russia are all geopolitical issues that could impact markets in the second half of 2017. Additionally, upheaval in Venezuela could disrupt the oil-producing nation.
Bloomberg Professional Services (8/11) 
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Washington Roundup
Fed's Dudley supports one more 2017 rate hike
Fed's Dudley supports one more 2017 rate hike
Dudley (Kirsty Wigglesworth/AFP/Getty Images)
Treasury yields rose after Federal Reserve Bank of New York President William Dudley said he favors another interest-rate increase this year if economic improvement appears. The Fed balance sheet likely will fall to between $2.5 trillion and $3.5 trillion five years after shrinkage starts, he said.
Reuters (8/14),  Reuters (8/14) 
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Economists weigh in on Trump's odds of passing tax cuts
President Donald Trump stands a good chance of getting a package of tax cuts enacted by Congress ahead of the 2018 midterm elections, economists polled by Bloomberg said. Meanwhile, S&P Global Ratings' U.S. Chief Economist Beth Ann Bovino wrote in a recent report that Trump's administration is not likely to push through its tax reform or infrastructure plans in the near future.
Bloomberg (8/14),  ThinkAdvisor (free registration) (8/14) 
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Firms cite cybersecurity in appeal to delay SEC rules
Firms and industry groups have raised concerns about cybersecurity in requests to the Securities and Exchange Commission to delay a rule establishing liquidity risk-management programs and a change in reporting requirements because they need more time to comply. The SEC has not responded publicly, but one industry representative points out the SEC has data-security issues that could attract cybercriminals.
The Wall Street Journal (tiered subscription model) (8/14) 
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Global Update
NAFTA renegotiations poised to begin
Trade negotiators for the US, Mexico and Canada begin renegotiating the North American Free Trade Agreement in Washington, D.C., on Wednesday. US President Donald Trump, Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau each have their priorities, which could be deal-breakers, and a number of sticking points need to be resolved.
Bloomberg (8/15),  The Wall Street Journal (tiered subscription model) (8/14) 
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SIFMA Ops: Industry changes are bringing new ways to understand customers and markets
When SIFMA hosted its 2017 Operations Conference and Exhibition in Florida, technology, regulation and compliance operations dominated the discussions. Over the last few years, questions on the transformative potential of technology together with the culmination of initial experiments, promising proof-of-concept projects, and analysis of early results have driven the financial services industry to go beyond simply asking what emerging technology can do. As we look forward to OPS 2018, SIFMA's Tom Price notes that today's industry changes aren't just about FinTech.
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SEC Chairman Clayton to Address The Capital Markets Conference
In a recent speech, SEC Chairman Jay Clayton outlined eight principles to guide his Chairmanship of the SEC. SIFMA welcomes him for a one-on-one conversation at The Capital Markets Conference to discuss how these principles will be put into practice. Chairman Clayton joins confirmed speakers including Treasury Secretary Steven Mnuchin; Abigail Johnson of Fidelity Investments; David Solomon of Goldman Sachs; and Warren Stephens of Stephens Inc. Returning to Washington, D.C. on October 23-24, the event features candid conversations and nine in-depth breakout sessions on the state of America's capital markets. Early bird rates now available.
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