Analysis: Bond markets have good news for Europe | Markets signal little worry about eurozone debt | BoE cautions about investors' return to risk taking
January 22, 2013
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Sentiment considerably improved in latest IACPM Credit Outlook Survey
Nearly half of IACPM members polled expect yield spreads to narrow on speculative-grade debt in Europe over the next few months, even as they express continued concern over the longer-term outlook for corporate defaults. "There are still a lot of underlying problems that are still unsolved. There are still some people who think that things will get worse," said Som-lok Leung, IACPM's executive director. Read more about the Credit Outlook Survey. Bloomberg Businessweek (1/17), Pensions & Investments (free access for SmartBrief readers) (1/17), (free registration) (1/16)
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Analysis: Bond markets have good news for Europe
Demand for Spanish and Italian government bonds is growing steadily, and that's good news as "positive contagion" sweeps through Europe, according to The Economist. "Confidence in bond markets is being seen as a turning-point in the crisis," the magazine notes. "Yet some of the vital signs may be misleading. One worry is that the connection between weak banks and weak governments may have strengthened again in recent months." The Economist (tiered subscription model) (1/19)
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Markets signal little worry about eurozone debt
Concerns about the eurozone debt crisis are fading, despite weakness in underlying economies. Italian and Spanish bonds have been strengthening for six months, and the euro is at its highest value in 10 months. Meanwhile, Spain has successfully concluded a large debt offering. Reuters (1/17), The Wall Street Journal (tiered subscription model) (1/18)
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BoE cautions about investors' return to risk taking
Bank of England Governor Mervyn King told lawmakers that because of the weak recovery, investors are searching for returns in riskier places. The situation is one that "we will have to monitor very carefully," he said. Reuters (1/16)
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Central securities depositories form a coalition
Central securities depositories in Germany, Spain, Australia, Brazil and South Africa have launched a forum to address concerns that regulations will lead to a global capital crunch. "Different markets have different needs and a truly global liquidity management solution needs to factor in these differences while still catering to the globally operating banks. It is our objective that the Liquidity Alliance will deliver an efficient value proposition for the worldwide industry enriched by local know-how and experience," says Peter Hiom of ASX Group. Financial Times (tiered subscription model) (1/16), The Wall Street Journal (tiered subscription model)/Dow Jones Newswires (1/16)
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CreditSights is the premier provider of independent credit research in the Capital Markets, producing analysis that is globally respected for its integrity and quality. Our analysis spans 40 industries and is focused on U.S. & European High Grade/High Yield issuers and in the last six months we have begun to roll out Asian companies coverage. Click here to learn more.
Regulatory and Accounting Issues
BoE official calls for simpler alternative to Basel III
Andrew Haldane, executive director of financial stability at the Bank of England, has again spoken out about complex challenges in Basel III. "Regulators cannot really police this complex beast," he said. "There are moves afoot with the Basel Committee [on Banking Supervision] to seek ways to simplify and streamline the move to a proper regulatory, rather than self-regulatory, edifice." Haldane says the U.K. Financial Services Authority is ahead of the Basel Committee in developing a simpler model. Reuters (1/21)
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EU lawmakers might force rethink of derivatives rules
The European Parliament is considering requiring a formal review of derivatives regulation, sources say. "The draft resolution is being put together now," a source said. "There are legitimate concerns." The biggest issue pertains to exemptions for airlines and other nonfinancial firms that use derivatives. Reuters (1/21)
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BoE official suggests easing access to corporate-bond market
Ian McCafferty, a member of the Bank of England's Monetary Policy Committee, says the central bank should consider easing bond-market access for small and midsize businesses to stimulate the economy. "We need to be open to considering other unorthodox means to conduct monetary policy if they become necessary," McCafferty said. Reuters (1/18), The Telegraph (London) (tiered subscription model) (1/18)
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Bond dealers get chance to comment on policy changes
The U.S. Treasury Department sent a questionnaire last week looking for opinions on "current drivers of supply and demand in the Treasury bill and repo markets," as well as how new regulations are affecting trading. Officials are also seeking to establish whether the new interest-rate swap market is seeing changes because of the new reporting requirements. Bloomberg (1/18)
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Key eurozone bank plan faces hurdles
European officials are reconsidering a plan, announced in June, to allow the region's rescue fund to lend money directly to banks in troubled countries. In addition to voicing concerns about the speed with which this plan would deplete the funds, some countries, including Germany, have begun to insist that governments in the countries where banks receive loans should be responsible to a share of repayment. The Wall Street Journal (tiered subscription model) (1/16)
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IMF's Lagarde calls for faster reform of financial system
International Monetary Fund Managing Director Christine Lagarde said she fears that the momentum of efforts to reform the global financial system is waning and called for faster action to prevent a "relapse" into crisis. She said she is concerned that some rules aimed at making the financial system stronger are being "softened at the margins" in response to opposition from banks. The Washington Post (tiered subscription model) (1/17)
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Commentary: Basel revision shows limits of regulation
The much-discussed revision of Basel III liquidity rules highlights shortcomings of international regulation, writes Karen Shaw Petrou, a managing partner at Federal Financial Analytics. "Real rules require best-practice criteria, not complex, compromised ones that delay meaningful reform in countries willing and able to exact it," she writes. (free content)/BankThink (1/16)
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Other News
Stepping up to the Liquidity Challenge: The Changing Role of CPM
A White Paper outlining the findings of the 2012 IACPM/KPMG benchmarking survey on funding liquidity management and credit portfolio management has been published. Learn more.
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Not in the clamor of the crowded street, not in the shouts and plaudits of the throng, but in ourselves, are triumph and defeat."
-- Henry Wadsworth Longfellow,
American poet and educator
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