Outgoing Greek Prime Minister Alexis Tsipras says if he wins an election expected next month, he will agreed to a debt easing without a write-off, for which he has long sought. "We will have what economists call fiscal space to repay the debt," Tsipras said. "This would be the first step for us to return to the markets and regain their trust, if of course simultaneously we have managed to return to positive rates of growth."
Turmoil that has swept global equity markets makes the case for raising interest rates "less compelling," said William Dudley, president of the Federal Reserve Bank of New York. While Fed governors have stopped calling publicly for a rate hike, Dudley's statement is the first by a Fed official clearly backing away from the idea. Dudley suggested he doesn't want the central bank to raise rates in September but said he'd like to see the Fed start pushing up rates later in the year.
Concerns about global economic growth because of deterioration in energy and metals prices have prompted investors to exit high-yield bond funds. About 200 high-yield mutual and exchange-traded funds have experienced $8 billion in outflow during the past three months, according to Lipper. "With all that's going on in the stock market, it's no surprise we're seeing volatility in high-yield bonds," said Jeff Tjornehoj, head of Americas research.
Policy advisers to the Basel Committee on Banking Supervision are considering easing the leverage ratio, sources say. Industry groups' request to exclude client collateral when calculating banks' total assets had been rejected by regulators. Changes in capital requirements make offering derivatives more expensive, market participants say.
Insurers are worried more last-minute amendments to Solvency II are on the way, according to an EU insurance industry group. The European Insurance and Occupational Pensions Authority has released about 700 guidelines that national regulators are supposed to enforce. Companies are particularly worried about having to comply with reporting requirements on short notice, the trade group says.
The Global Legal Entity Identifier Foundation plans to launch an LEI search engine in October, CEO Stephan Wolf says. "Considering upcoming regulatory action, the strong adoption rates we are seeing today and keeping in mind that all actors demand increased visibility, integrity and stability of the financial markets, we are confident to see widespread adoption of the LEI in due course," Wolf said.
Recon Capital Partners has filed for Securities and Exchange Commission approval of an exchange-traded fund investing in companies listed in Brazil, Chile, Colombia, Mexico or Peru that deliver higher dividends compared with competitors. The BullMark LatAm Select Leaders ETF would buy equities in an index managed by BullMark Financial Group.
Credit derivative indices, which came to prominence before the global financial crisis, are being used as a hedging tool tracking the underlying bond market.
The technological advances behind cryptocurrencies could be used to develop "smart" derivatives, which could calculate and make margin payments, terminate themselves should a counterparty default and complete other advanced moves, write Massimo Morini of Banca IMI and Clearmatics CEO Robert Sams. The "smart" derivatives could remove some of the over-the-counter swaps markets' operational complexities, Sams and Morini write.
The UK Prudential Regulation Authority rule that foreign exchange forwards can't be used in matching adjustment portfolios has some annuity firms concerned about poor liquidity in the cross-currency swaps market. "To comply with matching adjustment rules, we are changing our non-sterling bond-hedging strategy from using liquid interest-rate swaps and currency forwards to cross-currency swaps," says Alex Veys, Partnership's chief investment officer. "However, these derivatives are bespoke and illiquid and so at the behest of bank pricing."
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