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from Breakingviews:
Next economic “It girl” is about to be discovered
By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The next economic “It girl” is about to be discovered. In 2008, the obscure Baltic Dry Index was suddenly the subject of every financial conversation. The TED spread and the ABX also briefly rocketed to fame. Now, as investors try to find a telltale gauge of when interest rates will start rising, the JOLTS report, forward curves and the overnight index swap could soon be in vogue.
Federal Reserve Chairman Ben Bernanke has effectively initiated the search. Simply ending or even slowing the U.S. central bank’s $85 billion of monthly bond buying could usher in tighter policy well before short-term rates get adjusted. That means longer-dated securities, which the Fed has been acquiring for over a year, will feel the effect first.
That’s why fund managers, bankers and others are on high alert for any shift in expectations. While they’re still eyeballing traditional measures like fed funds futures and TIPS breakevens, the extraordinary circumstances have intensified the quest for a more targeted indicator.
from Money on the markets:
Subbarao goes against his panel, again
(Any opinions expressed here are those of the author, and not necessarily those of Thomson Reuters)
Finance Minister P. Chidambaram is not the only one walking alone.
Duvvuri Subbarao, the Reserve Bank of India (RBI) chief, also seems to be on a solitary, and one hopes, contemplative walk.
from Alison Frankel:
Barclays hit with Libor securities class action
There's a new entry in the category of no-brainers: A holder of Barclays American Depository Receipts has brought the first of what is sure to be a string of Libor-related securities fraud class actions. The 47-page complaint, filed by Wolf Haldenstein Adler Freeman & Herz in federal court in Manhattan, asserts that Barclays and its former CEO, Bob Diamond, and outgoing chairman, Marcus Agius, lied to shareholders when they failed to disclose the bank's manipulation of reports to the authorities who calculate the daily London interbank offered rate (or Libor), a benchmark for short-term interest rates.
Barclays told shareholders that it was a model corporate citizen even though since at least 2007 it was "participating in an illegal scheme to manipulate rates in a way that would allow defendants and other bankers to exploit the market," the complaint asserted. On the day Barclays' settlements with U.S. and British financial regulators were announced, the complaint said, the price of its ADRs fell 12 percent; the next day the ADRs tumbled an additional 5 percent. (If you're wondering why the complaint was filed by ADR holders, it's because Morrison v. National Australia Bank bars claims in the United States by common stockholders in the British-listed bank.)
from MacroScope:
Bonds take a dive
U.S. Treasuries have taken quite a battering this week, and there has been no shortage of explanations from market pundits. For some, the downturn reflects an improving economy and the pricing out of expectations for further monetary easing from the Federal Reserve. For others, the market is playing catch up after eyeing firmer inflation numbers and a better if still anemic employment backdrop.
The Fed’s statement this week lent itself to a hawkish interpretation since what few changes were made appeared positive. The bond market responded in kind, adding to a selloff that has seen ten-year note yields rise nearly 40 basis points in just over a week. George Goncalves at Nomura describes the price action:
from Expert Zone:
Will higher interest rates lower growth?
(The views expressed in this column are the author’s own and do not represent those of Reuters)
The Reserve Bank of India (RBI) increased the repo rate by 50 bps on May 3 and there was an outburst of opinions that the rate of GDP growth will drop. The consensus seemed to be that it would drop to 8 pct, a 100 bps less than what we had been used to.
Of course, May 3 was the first time in two years that the RBI raised the repo rate by a hefty 50 bps. In the earlier eight installments, the increase was only 25 bps.
from The Great Debate UK:
Rubbish rates – what is a saver to do?
-Rachel Mason is PR manager at Fair Investment Company. The opinions expressed are her own.-
The base rate is going to be stuck at 0.5 percent for years to come, according to experts, so where does that leave savers?
from Commentaries:
Rates rush may end in tears
Investment banks have made out like bandits over the first half of this year, largely from so-called "flow" businesses, like rates and foreign exchange (FX) that have been unlikely beneficiaries of the credit crisis. This has tempted several other investment banks to enter or
expand in those businesses.
However, the volatility and lack of competition that widened bid-offer spreads are disappearing fast. The underlying business is commoditised and requires massive scale. Only a handful of players will make money, and even then they may not make very much.
from Money on the markets:
Reliance leads Sensex fall
The Sensex fell on Monday as an unfavourable court ruling saw a sell off in shares of Reliance Industries. Investor sentiments were also dampened by weak Asian markets.
The 30-share sensitive index swung from an intra-day high of 15,261 to an intra-day low of 14,808, and finally closed 362 points lower at 14,857. The fifty-share Nifty ended 2.1 percent lower at 4484. 
from Money on the markets:
Sensex closes above 15000
The BSE Sensex seesawed today, erasing early losses of as much as 1.8 percent, and finally closed above the 15,000 mark on hopes of a revival in the economy. Higher European markets also helped lift investor sentiments.
The 30-share sensitive index of the Bombay Stock Exchange swung from an intra-day low of 14,601 to an intra-day high of 15,026, and finally closed 137 points up at 15,008. The fifty-share Nifty ended 0.93 percent up at 4572.
from Money on the markets:
Sensex climbs ahead of interim budget
Hope and optimism ahead of Monday’s interim budget saw the Sensex end the last trading day of the week 1.8 percent higher.
The coalition government, which faces general elections by May, is likely to focus on measures to shore up the flagging economy and stem job losses in the interim budget.
