Monthly Archives: October 2017

U.S. Corporate Debt Issuance on Pace for Record Year

U.S. corporations continue to take advantage of the accommodative conditions created by a protracted period of low interest rates and strong market participant demand.  As of Oct. 1, 2017, U.S. investment-grade corporate debt issuance surpassed USD 1 trillion—three weeks ahead of 2016’s pace.  Additionally, the amount of speculative-grade corporate debt issued through the first three quarters of 2017 is 17% higher than it was after the first three quarters of 2016.  Combined, U.S. corporate issuance is on pace for another record year, which would mark the sixth consecutive year of increased corporate debt issuance (see Exhibits 1 and 2).

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US Treasury report: Changes don’t require new rules

The US Treasury released a report that outlines 91 technical fixes aimed at boosting the financial markets. Rather than proposing legislative changes, the report notes the Commodity Futures Trading Commission and the Securities and Exchange Commission could simply tweak existing rules and not endorse international rules unless they meet domestic objectives.

Treasury flexibility on CLO risk retention welcomed

A new Treasury report on capital markets includes a qualified risk-retention exemption for the Collateralized Loan Obligation market that’s winning plaudits from managers. The exemption appears to respond to industry arguments that requiring fund managers to hold 5% of their deals isn’t fair as it imposes the same restraint on CLO funds as those applied to other products implicated in the financial crisis.

China: Corporate Governance risks for investors

China adopted its first corporate governance code in 2001, ahead of many APAC peers, with updates in 2011 and 2016. As China’s market becomes more accessible to global investors, corporate governance practices will likely face increased comparison to global standards.  Our report references MSCI ESG Research’s rich corporate governance data to examine the opportunities and risks to minority shareholders presented by current corporate governance practices in the MSCI China Index.

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Fed unwind to raise demand for quality assets

As the Federal Reserve begins to unwind its $4.5 trillion balance sheet, market participants should keep an eye on how banks choose to replace the $1 trillion in reserves held by the central bank. The eight US banks designated as systemically important are required to hold about $2.7 trillion in high-quality liquid assets to satisfy post-crisis capital requirements

Delhi Event Invite – Challenges in FRTB Implementation, Oct 27, 7pm

Challenges in FRTB Implementation
Register Now
Date: Friday, October 27, 2017
Time: Registration: 7:00-7:30 PM
Presentation: 7:30-9:00 PM
Networking Reception: 9:00-10:00 PM
Location: Ramada Gurgaon Central
Plot 2 Sector 44, Central Emerald Hall
Gurugram , Haryana , 122003
India
Speaker: Udit Mahajan
Co-Head of Market Risk Projects, Deloitte UK
Synopsis: The Fundamental Review of the Trading Book (FRTB) represents an evolution of Basel regulation impacting Capital Markets with a deep focus on addressing the failings identified in the financial crisis. FRTB is a material overhaul of the Market Risk framework which impacts all core functions in Capital Markets (front office, risk, finance, treasury, and technology).

This session is focused on some of the key challenges faced by front office, risk methodology, and technology teams when adopting FRTB. Out of the many challenges being faced by banks today, five will be covered in detail:

  1. Front Office-Risk-Finance Alignment
  2. External Transactions and NMRF
  3. Multiple Revaluations in IMA
  4. Capital Optimization and Business Strategy
  5. Trading Desk Structure
 This event is organized as Chapter meeting for GARP
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Low rates generate 9-month record in US syndicated lending

US syndicated lending surged 24% year-on-year to a record $1.75 trillion in the first nine months, according to Thomson Reuters. The gain was fueled by still-low interest rates enticing indebted companies seeking to pare borrowing costs and acquire corporate targets.

Rising Fear of Extreme Events

High skew levels indicate heightened fears of “tail risk” – the chances of unlikely but highly consequential events that could sink share prices. Low market volatility largely continued through the summer, but how has options skew behaved – has it fallen to more “normal” levels? Do institutional investors appear to be dropping or keeping their downside protection?

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