Sub-investment grade bond yields in Europe have dropped an average of 4.74% from their three-year high in January, on the news of the European Central Bank's upcoming corporate-bond purchases, Bank of America Merrill Lynch index data show. "[ECB President Mario] Draghi's announcement had a massive knock-on effect in the high-yield market," Eden Riche of ING Bank said. "The hot money will continue to chase spreads down."
The Commodity Futures Trading Commission is moving forward with position limits for commodity markets, with exemptions for some swaps and futures trades. "The CFTC has taken a significant step toward finalizing its rules on position limits this year," Chairman Timothy Massad said. The proposal "would ensure that commercial end users can continue to engage in bona fide hedging efficiently for risk management and price discovery."
National Stock Exchange of India has asked the Securities and Exchange Board of India for a second investigation, denying that it had allowed certain traders unfair access to electronic trading, sources say.
The Basel Committee on Banking Supervision's limits on use of the internal ratings-based approach for modeling credit risk are causing headaches for some Asian banks, whose executives say they need more time to prepare. "This is something we still need to engage with the BCBS about," said United Overseas Bank's Frankie Phua.
New Zealand banks are considering becoming direct clearing members, even though the country is not required to mandate clearing. But directional exposure and low volume mean fees might be considerable.
The Foreign Exchange Working Group, established by the Bank for International Settlements' Markets Committee, has released the first phase of a global code of conduct for the foreign-exchange market. Taking ideas from regional codes, the document bans lying, false rumours and other practices that have damaged the market. The first phase will be followed by more stipulations, although no enforcement mechanism appears to exist. GFMA welcomed the proposals. "This is an opportunity for global market participants to demonstrate that they can put the right controls and guidance in place that are consistent with the principles of the code," said GFMA's James Kemp. Read GFMA's media release on the code of conduct.
Shares of Banco Popular Espanol dropped as much as 26% after the bank announced plans for a roughly €2.5 billion rights offering in an effort to replenish capital lost in the collapse of Spain's property bubble. The bank said it would offer 2 billion shares at a 47% discount to its closing share price on Wednesday. The bank is under pressure from regulators to boost its capital and move distressed assets off its balance sheet.
If the UK votes next month to leave the EU, it could harm the growth of the global economy, leaders of the Group of Seven countries said in a statement. "A UK exit from the EU would reverse the trend towards greater global trade and investment, and the jobs they create, and is a further serious risk to growth," the group said in the 32-page document. The statement is consistent with similar warnings from the International Monetary Fund, the Organisation for Economic Co-operation and Development and the Bank of England.
The Bank of England's Financial Policy Committee said it would push ahead with rules requiring banks to ringfence their retail businesses from their investment activities. John Vickers, who was head of the Independent Commission on Banking, has raised concerns about the reforms.
European governments have proposed allowing asset managers to continue marketing constant-value money-market funds to overseas clients in a compromise on regulating the industry. Negotiators are poised to consider the proposal, which could raise concerns in several nations.
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