Market Rumours

2010/04/21 08:16DJ Fed's Plosser: Supports Ending Fed Emergency Lending Power -Letter
NEW YORK -The president of the Philadelphia Fed wants to end the emergency lending powers most central bankers think were key to fixing financial markets during the darkest days of the market meltdown.In a letter to senators published on the bank's Web site Tuesday, Federal Reserve Bank of Philadelphia President Charles Plosser outlined his preferred path for the central bank as Congress mulls reforming the financial regulatory system. Other Fed officials have also written to Congress about the issue, seeking to influence a process that could see big changes in how the Fed interacts with the banking system, should some sort of reform pass.Plosser's letter gave the official a chance to reiterate and expand on points he has made in past remarks. He said it was important for steps to be taken to deal with banks that are too big to fail, and he advocated changing the bankruptcy codes to deal with failing non-bank financial institutions. As other Fed officials have done, Plosser also said proposals that would take away the Fed's supervision over smaller banks are misguided, and would leave the Fed essentially as a regulator of too-big-to-fail banks.Plosser's most dramatic proposal would basically strip the Fed of the powers most officials believe were key to righting the financial system over the tumult of recent years. The official said he supports taking away or limiting Fed powers that allow 'lending to corporations, individuals and partnerships under 'unusual and exigent circumstances.'''I believe the fiscal authorities should do emergency lending and that the Fed should be involved only upon the written request of the Treasury,' Plosser said. 'With an appropriate bankruptcy process that protects the financial system from the failure of one firm, the need for [emergency] type lending is vastly reduced,' the central banker said.Plosser has long shown some discomfort with the activities of the Fed through the crisis. He has advocated in the past that efforts should be made to move non-Treasury assets off the Fed's balance sheet and over to the Treasury Department. Plosser prefers to see the Fed concentrate its attention on its monetary policy mandate.

2010/04/21 06:51DJ CREDIT MARKETS: Freddie Mac Sells $1 Billion Reference Notes
NEW YORK -The credit markets were more active Tuesday as Freddie Mac sold $1 billion of its reopened 3-year reference notes and Ford looked ready to price an asset-backed security. Meanwhile, financial bonds regained lost ground in the investment-grade market, and the high-yield market was firmer on a $1.6 billion issuance from CF Industries for an acquisition.Investment-Grade CorporatesThe tone was firm Tuesday as more than $8 billion in new issues were on the docket in the high-grade primary market, while trading maintained a brisk pace.The International Bank for Reconstruction and Development, a unit of the World Bank, sold the largest offering: a $3.5 billion, three-year global note that offered a risk premium of 25 basis points over Treasurys.The Province of British Columbia sold $1.5 billion of five-year global notes to yield 2.862% while German agribusiness development agency Rentenbank sold its $1 billion 5.75-year issue with a risk premium of 62.8 basis points over Treasurys.Domestically, Ohio National Financial Services Inc. sold its $300 million offering of 10-year senior bonds while retailer Nordstrom Inc. (JWN) sold $500 million of 10-year bonds. And Thermo Fisher Scientific Inc. (TMO) priced its $750 million five- and 10-year securities.Meanwhile, Goldman Sachs (GS) seemed to shrug off the aftereffects of the SEC probe into some of its trading practices, as the firm's bonds and credit default swaps rallied. The bank also reported its first quarter earnings had doubled from the year before, coming in at $3.46 billion and driven by strength in fixed income trading.The cost to protect Goldman's senior bonds fell Tuesday, implying that investors aren't rushing to insure the bank's debt. The annual cost of protecting a notional $10 million of GS bonds against default for five years is now $118,000, versus $140,000 early Monday.And Goldman's 6.15% bonds due 2018 narrowed by eight basis points to 152 basis points over Treasurys, according to MarketAxess.Citigroup (C), Morgan Stanley (MS) and JPMorgan (JPM) debt also performed well, gaining back some of Monday's losses.Still, financial regulatory changes remain in focus. President Obama is scheduled to speak in New York on Thursday, in part to discuss legislation to change fiscal regulations."Whatever the merits of the SEC civil suit against Goldman Sachs, its disclosure during the debate on financial reform appears timely for the Obama administration," according to analysts at Wall Street Access. They said that, in the long run, "reform will do more harm to Goldman Sachs and other financial institutions through lower profitability."And the benchmark high-grade derivatives index, the CDX IG14, which measures the cost of insuring a basket of investment-grade corporate debt against defaults, was stronger by 2.8 basis points to 85.4 basis points, according to Markit. The index has been tracking stocks, and was lifted by positive earnings reports Tuesday.Junk BondsHigh-yield was up slightly as CF Industries hit the market with a $1.6 billion bond issuance to fund its takeover of Terra Industries, completed last week.CF's deal, led by Morgan Stanley, comprised two $800 million issuances: an 8-year senior note at 6.875%, and a 10-year senior note at 7.125%. The bonds are being used to refinance the loans taken out to buy Terra.There were several deals in the pipeline, as Limited Brands and Phillips-Van Heusen announced offerings and Global Geophysical and Cleaver-Brooks looked ready to price Tuesday evening. Limited's deal is a $300 million 10-year senior note offering to refinance its existing notes due 2012, while Phillips-Van Heusen said it would sell $525 million in unsecured senior notes to pay for its acquisition of Tommy Hilfiger and repay existing debt with approaching maturities.Global Geophysical is out with $200 million in senior notes due 2017 in a deal slated to price Wednesday. The bonds, led by Barclays Capital, are talked in the 11% to 11.25% area. Meanwhile, Cleaver-Brooks' J.P. Morgan-led deal for $200 million in senior secured notes due 2016 was slated to price Tuesday evening.In the loan market, Atrium Companies, maker of residential vinyl and aluminum windows, is out with a $185M six-year term loan as part of its exit financing. Price talk on the deal is at 500 basis points over the London interbank offered rate, the benchmark rate at which banks lend to one another. It is said to have a Libor floor of 2% and an original issue discount of 98.5, according to a person familiar with the deal.Asset-Backed SecuritiesPrice guidance is out on Ford Motor Co.'s $1.09 billion auto loan-backed deal, according to a person familiar with the matter.The deal, dubbed FORDO 10-A, has seven tranches, of which three are triple-A rated.Price guidance on the largest triple-A-rated tranche, worth $382 million, is in the range of 20 to 25 basis points over a benchmark, the Eurodollar synthetic forward.Joint lead managers on the deal, expected to price later this week, are J.P. Morgan Chase & Co., Morgan Stanley and Royal Bank of Scotland.The bulk of recent issuance comprises auto sector deals, including bonds from Mercedes-Benz and BMW Auto Owner Trust.Year-to-date issuance of asset-backed deals stands at about $20 billion and 48.7% is in the auto sector, according to data from Barclays Capital.Last year, auto sector issuance outpaced other sectors. Auto loan-backed bonds worth $52.84 billion were sold, comprising 39.2% of total issuance, according to Barclays.Agency DebtFreddie Mac sold $1 billion of its reopened 3-year reference notes at 12.7 basis points over comparable Treasury yields, to yield 1.75%. The 1.625% coupon now has a total size of $6.6 billion. The bid to cover ratio, used to gauge demand, was 4.13 to 1. The issue will settle Wednesday. Currently, that bond is 1 basis point wider at 15/13, according to Tradeweb data.Agency Mortgage-Backed SecuritiesAgency mortgages, after a brief spurt of selling, saw some buyers come in, tightening to 129 basis points over comparable Treasury yields. Earlier in the day, these securities were wider on selling and light buying. Investors prefer shorter-duration securities versus the longer bonds, said Chad Stephens of Ridgeworth.

2010/04/21 06:23=DJ WORLD FOREX: Currencies Tied To Growth Post Strong Gains
NEW YORK -Currencies closely tied to global growth stole the limelight from the dollar and euro Tuesday as a number of central banks around the world signaled a return to normal market conditions, indicating greater confidence in the pace of the global recovery.Central banks in Canada, Australia, Sweden and India highlighted a global recovery that continues to gain traction, increasing the likelihood other central banks will also begin the path to tighter monetary policy."The global recovery is broadening, and the aggressive monetary easing doled out in 2009 will give way to continued policy normalization in 2010" across major economies, said analysts at Mizuho Corporate Bank in New York.The Canadian dollar soared 1.5% against the greenback in its biggest one-day move since November--with the U.S. currency dipping below parity with the Canadian dollar--after the Bank of Canada stood pat on key interest rates, but signaled monetary policy could soon tighten based on a steadily improving economy. The greenback was quoted at C$0.9993 late Tuesday.The Reserve Bank of Australia pushed the Australian dollar higher after minutes from the central bank signaled further rate hikes lie ahead. Also buoyed by rising commodity prices, the currency rose 0.8% against the dollar. India's central bank also increased key interest rates, helping the Indian rupee strengthen nearly 0.6% against the greenback.In Sweden, the Riksbank left its interest rates unchanged at 0.25% as expected, but said that increases toward a "more normal level" will begin in the summer or early autumn. The Swedish krona gained around 0.3% against the dollar and more than 0.6% against the euro by late afternoon trading.Inching toward policy normalization "goes with what we think is going to be the theme for 2010," said Jacob Oubina, currency strategist at Forex.com in Bedminster, N.J., with the high-yielding currencies of countries that are tightening policy outperforming the euro and yen, whose central banks are expected to stand pat on key rates.The euro surrendered its earlier gains as relief after a better-than-expected auction of short-term Greek debt gave way to longer-term concerns over fiscally strapped euro-zone nations.Late Tuesday, the euro was at $1.3445 from $1.3469 late Monday, according to EBS via CQG. The dollar was at Y93.15 from Y92.38, while the euro was at Y125.23 from Y124.42. The U.K. pound was at $1.5372 from $1.5316. The dollar was at CHF1.0682 from CHF1.0641.The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 81.029 from 81.015.The Bank of Canada firmly stated that rate hikes are coming by explicitly removing its year-old conditional commitment to keep the overnight target rate at the lowest possible level of 0.25%. In a signal it could raise rates in June, the Bank of Canada said that with recent improvements in the economic outlook, the need for its low-rate pledge is now passing and it is appropriate to begin to lessen the degree of monetary stimulus.To see the U.S. dollar's move against the Canadian dollar's, please see:http://dowjoneswebservices.com/chart/view/3855Slow-growth economies and debt-laden peripheral countries continued to weigh on the euro, which earlier hit a peak of $1.3523 after Greece raised EUR1.95 billion of three-month funds with a yield comfortably below its 4% pain threshold, though the yield was much higher than the 1.67% at the previous auction in January.The common currency slipped against the dollar by late afternoon as lingering questions remained over the longer-term prospects for Greek financing and over the mechanics of an International Monetary Fund-European Union bailout plan. EU and IMF officials meet Wednesday in Athens to begin discussions on a rescue package.On a day when global central banks took center stage inching toward monetary policy normalization, the yen declined broadly, as the Bank of Japan is seen as lagging its peers; some officials have suggested the bank will actually loosen policy further to stimulate an economy that struggles with deflation.The dollar gained nearly 1% against the yen, and even the beleaguered euro gained more than 0.5% against the Japanese currency.With the ICE Dollar Index slightly higher, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was down 0.08% from late Monday, while its PowerShares U.S. Dollar Index Bullish was up 0.17%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.

2010/04/21 05:43=DJ Poll: US Consumer Confidence Falls To Previous Low For 2010
U.S. consumer confidence fell again in the past week, tying its previous low for the year, according to an ABC News poll released Tuesday.The consumer comfort index fell three points to -50 in the week ended Sunday, just four points above its all-time low since the survey began in December 1985. That low was reached in December 2008 and January 2009, the depths of the recent financial crisis.The index has declined 7 points in the past two weeks, after rising to -43 in March and again in early April.More than 90% of respondents said the national economy is in bad shape, but just 30% said the economy was getting worse, matching the six-year low. About 25% said the economy is improving.ABC reported 43% of those polled said their finances were in good standing, down from 47% a week earlier. In assessing the buying climate, 76% of respondents said it is a bad time to spend money.The consumer comfort index was based on a random survey of 1,000 respondents nationwide. The index measures typical Americans' confidence in three areas: the national economy, their own finances, and their willingness to spend money, according to the report. The poll has a margin of error of plus or minus three percentage points.The index is derived by subtracting the negative response to each index question from the positive response to that question. The three resulting numbers are added and divided by three. The index can range from 100 (everyone positive on all three measures) to -100 (all negative on all three measures).

2010/04/21 04:54DJ Short-Term Treasurys Fall After Earnings, BOC Statement
NEW YORK -Shorter-maturity Treasury prices fell Tuesday after a series of strong first-quarter earnings reports that lifted investor sentiment and after the Bank of Canada suggested an interest rate hike could come sooner than expected.Longer-term Treasurys though were faring better as market participants--feeling inflation will be tame--put on bets that the yield curve will flatten, by selling short-term Treasurys and buying longer-term ones. The yield curve is the gap between short- and long-term Treasury rates. Tuesday, the benchmark 2s/10s yield curve was at plus 279 basis points, having narrowed from plus 282 basis points on Monday.In recent trade, the two-year Treasury was down 1/32 to 1.012%, the 10-year Treasury was up 2/32 to 3.797%. The 30-year Treasury was up by 14/32 to yield 4.672%.Treasurys maturing in the next two to seven years came under pressure early after Goldman Sachs reported earnings for the first quarter of $5.59 a share versus estimates of $4.01, and revenue of $12.78 billion versus estimates of $11.07 billion.Markets have been focused on the bank since last week after the Securities and Exchange Commission charged Goldman, and one of its directors, with fraud Friday. The broad concern was that other financial institutions could be similarly charged, leading Treasurys to rally and stocks to fall. Tuesday, U.K. regulator Financial Services Authority said it will begin a "formal enforcement investigation" into Goldman related to an alleged fraud that may have resulted in a U.K. bank losing $841 million.Short-term Treasury prices "ran up too far after Goldman," said Tom Tucci, head of government bond trading at RBC Capital Markets, leading to a correction Tuesday.Also Tuesday, Coca-Cola Co.'s (KO) first-quarter profit rose 19%, as the world's largest drink maker saw strong growth overseas; UnitedHealth Group Inc.'s (UNH) first-quarter earnings rose 21%, far exceeding expectations.Treasurys slipped more after the BOC held its benchmark rate steady at 0.25% Tuesday, but dropped a year-long pledge to hold it at that level through the second quarter, noting that it was "appropriate" to lessen the degree of stimulus. The decision paves the way for a June rate hike in Canada, and comes a week ahead of the Federal Reserve's next monetary policy meeting. Investors are not expecting the Fed to change its key target rate anytime soon. Some, however, believe that with economic data in the U.S. continuing to improve, the Fed could continue to pave the way for an eventual exit.Meantime, debt-laden Greece was able to successfully sell some short-term securities, which came as a relief to investors who continue to worry about the struggling country's ability to offload its debt.Treasury market participants were also starting to gear up for supply after a two-week break from Treasury auctions. The government will sell billions in two-, five- and seven-year notes next week. It will announce the sizes of those sales this Thursday.Credit Suisse expects the Treasury will offer $44 billion in two-year notes, $42 billion in five-years, $32 billion in seven year notes."Each day brings us closer to next week's supply, and without too much to concentrate on that's specific to the Treasury market, the thoughts to an auction setup surely must weigh in a bit," said David Ader, head of government bond strategy at CRT Capital Group.Agency MBS WiderAgency mortgages were wider on selling with only light buying. Traders said investors are interested in shorter duration securities versus the longer bonds. Risk premiums on the current coupon were off one to two basis points over comparable Treasurys yields.Swap spreads were little changed. The two-year spread was unchanged at 15.25 basis points. The three-month Libor-OIS spread, a key gauge of liquidity in money markets, traded little changed at 8.5 basis points. The spread widened to a record of 366 basis points October 10, 2008, following the collapse of Lehman Brothers.