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U.S. Corporate Bond Market: A Review of Second-Quarter 2010
Rating and Issuance Activity
August 9, 2010-Summary
While the impact of U.S. corporate bond upgrades and downgrades remained relatively modest in the second quarter, each affecting roughly 1% of market volume, upgrades, at $35.1 billion, nonetheless topped downgrades of $27.0 billion ? the first quarter to
exhibit such a trend since mid-2007.
Second-quarter upgrades were mostly a product of credit gains at the speculative grade level where upgrades of $24.9 billion readily
topped downgrades of $5.8 billion. Through the first half of 2010, the par value of U.S. corporate bonds affected by upgrades has run nearly even with the dollar impact of downgrades ($71.7 billion and $74.7 billion, respectively). Upgrades are up twofold
from levels recorded in the difficult first half of 2009, while downgrades have contracted to a small fraction (10%) of the comparable period in 2009.
In the wake of the European sovereign debt crisis and renewed risk aversion, new issuance fell 34% in the second quarter to $120.4 billion ? the lowest tally since the fourth quarter of 2008. The drop was mostly on the investment grade side as borrowers,
many flush with cash, opted to wait for more favorable market conditions rather than borrow at wider spreads. Speculative grade issuance was down in the second quarter
but remained firm, and with July’s strong showing is still on pace to set new records in 2010.
Second-Quarter 2010 Highlights
• Upgrades affected 0.4% of investment grade volume in the second quarter ($10.2 billion) and downgrades affected 0.8% ($21.1 billion). On the speculative grade front, the effects of positive and negative rating changes were 3.3% ($24.9 billion) and 0.8% ($5.8 billion), respectively. Speculative grade and investment grade industrials provided $24.0 billion and $10.1 billion, respectively, in upgrades while producing $4.9 billion and $11.3 billion, respectively, in downgrades. According to Fitch’s U.S. High Yield Par Default Index, the trailing 12-month default rate fell to 4.5% at the end of June from 9.1% in March and was down further in July to 4.2%.
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Source: Fitch Ratings
Financial Advisor Survey by iShares and Market Strategies International Finds "Flash Crash" Caused by Issues Related to Market Structure
Advisors Believe Clearer Routing Guidelines, Uniform Circuit Breakers, Key to Improving Structure in the Face of an Ongoing Volatile Market
August 9, 2010--BlackRock, Inc. released research findings on financial advisors' perceptions of and impact from the May 6th market event known as the "Flash Crash," along with advisors' views of current market sentiment. Commissioned by the iShares Exchange Traded Funds (ETFs) business and conducted by Market Strategies International, the survey found that the majority of advisors believe market structure issues were the primary driver of the sharpest single-day point decline in Dow Jones history, followed by an immediate rebound.
Advisors pointed to an overreliance on computer systems and high-frequency trading as the primary drivers that contributed to the extreme market volatility on May 6th. Secondary contributors cited by advisors included the use of stop-loss orders, the support of market makers and questions with exchange routing rules.
The survey also indicated that most advisors' accounts were not impacted by the events of May 6th. In fact, the most common account impact was a stop-loss order triggered by the "Flash Crash" at a significantly reduced value, which happened to about a quarter of advisors.
Universally, according to the survey, advisors are encouraged with the initial recommendations by the SEC to make the needed changes to market structure. The single-stock circuit breaker rule proposed by the SEC is one of the primary solutions advisors endorse to address the causes of the May 6th market decline. Advisors surveyed also favor clearer inter-market routing guidelines to rectify market structure problems and feel strongly towards placing trading audits and expanding the role of the lead market maker.
"The findings of the financial advisor survey around May 6th are noteworthy because they indicate that advisors believe that market structure issues were at the root of the 'Flash Crash' and that the initial recommendations made by regulators to fix structural market problems are a step in the right direction," said Rob Stone, Ph.D., Executive Vice President at Market Strategies International. "In addition, advisors' market sentiment leans towards the view of continued or increased market volatility and, despite the 'Flash Crash,' advisors state that they will use ETFs most often in uncertain markets."
As it relates to the macroeconomic environment, the majority of advisors surveyed expect current market volatility will either increase or remain at today's level over the next six months. Furthermore, those surveyed anticipate an event similar to May 6th will likely occur again, no matter what solutions are adopted. Regardless of the cause -- economic or structural like the "Flash Crash" -- advisors identified ETFs as the best investment vehicles to navigate a volatile market environment followed by bonds and mutual funds.
"We commissioned the 'Flash Crash' Perceptions Study to learn from financial advisors, one of the largest groups of ETF users, what they think about the market event that affected ETFs as a category. We continue to work with regulators by providing insights and observations into ways to further improve the existing market structure so that an event similar to May 6th can be prevented," said Noel Archard, Head of U.S. iShares Product at BlackRock.
Market Strategies International is a full-service market research and consulting firm with extensive experience in the financial services sector. The staff is comprised of consultants, researchers, statisticians, and project managers. Founded in 1989, Market Strategies is the 16th largest research firm in the U.S. according to "Honomichl Top 50," published in the June 2009 issue of Marketing News. iShares commissioned Market Strategies to conduct custom research with financial advisors on the unique events of May 6th 2010. The sample was a random set of 380 Retail Financial Advisors who have used or managed ETFs within the past six months
Source: BlackRock
WisdomTree Lists WisdomTree Emerging Markets Local Debt Fund on NYSE Arca
August 9, 2010-- NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the WisdomTree Emerging Markets Local Debt Fund (Ticker: ELD). The ETF is sponsored by WisdomTree.
The WisdomTree Emerging Markets Local Debt Fund seeks a high level of total return consisting of both income and capital appreciation. The Fund attempts to achieve its investment objective through investment in Local Debt, which includes fixed income securities, such as bonds, notes or other debt obligations, of emerging market issuers that are denominated in a currency other than the U.S. dollar.
Source: NYSE Euronext
ISE Begins Publishing Fee Schedule in New Electronic Format
August 9, 2010--The International Securities Exchange (ISE) announced today that it has started publishing a summary of its transaction fees in Excel format as a complement to the official fee schedule it files with the SEC. The electronic, user-friendly version of the fee schedule provides ISE
members with a summary of ISE transaction fees which they can easily incorporate into their proprietary
systems. To view the new fee summary, visit www.ise.com/feesummary.
“ISE is the first and only options exchange to publish its fee schedule in this manner, making it easier for
our members to maintain accurate information on our fees,” said Boris Ilyevsky, Managing Director of
ISE’s options exchange. “In light of the ever changing fee models within the U.S. options industry, we are
providing our members with an efficient mechanism whereby they can quickly adjust their models to take
advantage of our cost structure.”
ISE’s official Schedule of Fees, all fee notices and the new ISE fee summary are available at www.ise.com/feenotices. For more information, please contact ISE’s Business Development team at bizdev@ise.com.
The new electronic fee summary provides a summary of the transaction charges assessed by ISE. In the
event of any conflict between the fee summary and the Schedule of Fees, the charges noted in the
Schedule of Fees shall prevail.
Source: International Securities Exchange (ISE)
BNY Mellon ADR Index Monthly Performance Review is Now Available
August 9, 2010--The BNY Mellon ADR Index Monthly Performance Review is Now Available.
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Source: BNY Mellon
U.S. International Reserve Position
August 9, 2010--The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets totaled $131,216 million as of the end of that week, compared to $129,162 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
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August 6, 2010 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
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131,216 |
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(1) Foreign currency reserves (in convertible foreign currencies) |
Euro |
Yen |
Total |
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(a) Securities |
9,428 |
15,252 |
24,680 |
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of which: issuer headquartered in reporting country but located abroad |
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0 |
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(b) total currency and deposits with: |
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(i) other national central banks, BIS and IMF |
13,914 |
7,475 |
21,389 |
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ii) banks headquartered in the reporting country |
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0 |
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of which: located abroad |
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0 |
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(iii) banks headquartered outside the reporting country |
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0 |
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of which: located in the reporting country |
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0 |
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(2) IMF reserve position 2 |
12,416 |
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(3) SDRs 2 |
56,804 |
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(4) gold (including gold deposits and, if appropriate, gold swapped) 3 |
11,041 |
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--volume in millions of fine troy ounces |
261.499 |
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(5) other reserve assets (specify) |
4,886 |
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--financial derivatives |
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--loans to nonbank nonresidents |
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--other (foreign currency assets invested through reverse repurchase agreements) |
4,886 |
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B. Other foreign currency assets (specify) |
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--securities not included in official reserve assets |
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--deposits not included in official reserve assets |
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--loans not included in official reserve assets |
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--financial derivatives not included in official reserve assets |
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--gold not included in official reserve assets |
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--other |
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Source: US. Department of the Treasury
CFTC.gov Commitments of Traders Reports Update
August 6, 2010--The CFTC.gov Commitments of Traders Reports for the week of August 3, 2010 are now available.
view reports
Source: CFTC.gov
CFTC.gov Financial Data for Futures Commission Merchants Update
August 6, 2010--Selected FCM financial data as of June 30, 2010 (from reports filed by July 31, 2010) is now available.
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Source: CFTC.gov
Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index
August 6, 2010--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Friday, August 6, 2010:
•Nayarit Gold Inc. (TSXVN:NYG) will be removed from the index.
Pursuant to a business combination agreement, the shares of the company will be exchanged for shares of Capital Gold Corporation (TSX:CGC).
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Source: Standard & Poors
Old Mutual sheds US life unit
August 6, 2010--Old Mutual has sold its US life business to hedge fund Harbinger Capital for $350m (£219m) in a deal that will help the Anglo-South African financial services company pay down debt, as it jettisons businesses that hurt its financial position during the crisis.
The sale would cut Old Mutual’s capital position by about £100m, the company said, but will also reduce significantly its exposure to credit risk by shedding a business that was carrying mark-to-market losses of more than $2bn at the depths of the crisis.
“The sale will reduce our capital surplus by about £100m, but because our risks will be significantly reduced we will target a lower surplus,” said Julian Roberts, chief executive. “Our continuing business is almost entirely capital-light, unit-linked savings products."
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Source: FT.com