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Fed Opens Lending Program for New Issuance of Corporate Debt
June 29, 2020-Effort is part of emergency programs the Fed is running to backstop lending markets reeling from coronavirus
The Federal Reserve formally opened Monday its $500 billion lending program to support issuance of new debt by large corporations, the last of nine emergency programs it is running to backstop lending markets reeling from the coronavirus pandemic.
The Fed began purchasing earlier this month individual bonds of large companies that were highly rated as of March 22, but it hadn't yet said when it would initiate a companion effort to purchase newly issued securities by those companies.
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Source: wsj.com
Fed Becomes No. 3 Holder of World's Biggest Corporate-Bond ETF
June 29, 2020--It has purchased over 13 million shares of LQD through June 16
Central bank is likely to slow the pace of ETF buying: Tchir
The Federal Reserve became one of the top holders in some of the world's largest credit ETFs less than two months after stepping into the market.
The central bank owns more than 13 million shares of the $54 billion iShares iBoxx $ Investment Grade Corporate Bond exchange-traded fund (LQD) as of June 16, making it the third-largest holder, according to data compiled by Bloomberg.
Only Bank of America Corp. and Fisher Asset Management--both of whom have yet to file their second-quarter holdings--own more shares than the U.S. central bank.
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Source: bloomberg.com
Wall Street banks net record fees for pandemic fundraisings
June 29, 2020--Investment banking fees soared to a record $57bn in the first six months of the year, boosted by a series of lucrative debt sales as companies grabbed cash to tide them through the coronavirus crisis.
Emergency financings by carmaker Ford, cruise line operator Carnival and aerospace and defence group Boeing were among the fundraisings that provided multimillion-dollar paydays for Wall Street banks that found investors willing to stump up the money.
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Source: FT.com
SEC Updates Filing Threshold to Rule 17h Reporting Requirements for Broker-Dealers
June 29, 20202--The Securities and Exchange Commission today issued an order to update the filing threshold for broker-dealers' Form 17-H filings made pursuant to Exchange Act Rules 17h-1T and Rule 17h-2T.
The threshold, which had not been updated in nearly 30 years, will exempt certain smaller broker-dealers from the reporting requirements of the rules while continuing to provide important information to the Commission on the financial condition of covered broker-dealers and their affiliates.
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Source: SEC.gov
The Fed reveals which companies make its corporate-bonds shopping list
June 29, 2020-The Federal Reserve on Sunday released a list of roughly 750 companies, including Apple, Walmart and ExxonMobil, whose corporate bonds it will purchase in the coming months in an effort to keep borrowing costs low and smooth the flow of credit.
The central bank also said it has, so far, purchased nearly $429 million in corporate bonds from 86 of those companies, including AT&T, Walgreen's, Microsoft, Pfizer and Marathon Petroleum.
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Source: fortune.com
The Shift from Active to Passive Investing: Potential Risks to Financial Stability?
June 29, 2020--Abstract:
The past couple of decades have seen a significant shift from active to passive investment strategies. We examine how this shift affects financial stability through its impacts on: (i) funds' liquidity and redemption risks, (ii) asset-market volatility, (iii) asset-management industry concentration, and (iv) comovement of asset returns and liquidity.
Overall, the shift appears to be increasing some risks and reducing others. Some passive strategies amplify market volatility, and the shift has increased industry concentration, but it has diminished some liquidity and redemption risks. Finally, evidence is mixed on the links between indexing and comovement of asset returns and liquidity.
view the paper-The Shift from Active to Passive Investing: Potential Risks to Financial Stability?
Source: federalreserve.gov
National Bureau of Economic Research-Working paper-Corporate Bond Liquidity During the COVID-19 Crisis
June 28, 2020--We study liquidity conditions in the corporate bond market since the onset of the COVID-19 pandemic. We find that in mid-March 2020, as selling pressure surged, dealers were wary of accumulating inventory on their balance sheets, perhaps out of concern for violating regulatory requirements. As a result, the cost to investors of trading immediately with a dealer surged.
A portion of transactions migrated to a slower, less costly process wherein dealers arranged for trades directly between customers without using their own balance sheet space. Interventions by the Federal Reserve appear to have relaxed balance sheet constraints: soon after they were announced, dealers began absorbing inventory, bid-ask spreads declined, and market liquidity started to improve. Interestingly, liquidity conditions improved for bonds that were eligible for the Fed's lending/purchase programs and for bonds that were ineligible. Hence, by allowing dealers to unload certain assets from their balance sheet, the Fed’s interventions may have helped dealers to better intermediate a wide variety of assets, including those not directly targeted.
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Source: nber.org
A new trend is shaking up the ETF industry: active management
June 28, 2020-Traditional fund groups are fighting back by launching ETFs that buy assets without following an index
Entering client meetings and conference halls like conquering noblemen, the champions of the exchange-traded fund industry denounced stock pickers, brokers and fund gurus for their greed.
Clutching books by Jack Bogle and William Sharpe, they warned that every dollar paid in fees was a dollar less for widowers and grandmothers.
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Source: FT.com
Financial Regulators Modify Volcker Rule
June 25, 2020--Five federal regulatory agencies today finalized a rule modifying regulations implementing the Volcker Rule's prohibition on banking entities investing in or sponsoring hedge funds or private equity funds-known as covered funds. The final rule is broadly similar to the proposed rule from January.
The Volcker Rule generally prohibits banking entities from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.
Like the proposal, the final rule modifies three areas of the rule by:
Streamlining the covered funds portion of the rule;
Addressing the extraterritorial treatment of certain foreign funds; and
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Source: CFTC.gov
Toews Corporation Debuts Agility SharesTM Family of ETFs
June 25, 2020--Money Manager With Multi-Decade Track Record of Risk-Managed Investing Introduces Inaugural ETFs
Risk-averse investors have some new tools in the never-ending quest to build portfolios for the long term.
Toews Corporation, the investment management firm founded in 1996 by Philip Toews, is bringing its brand of risk-managed investing into the ETF arena. With approximately $1.8 billion in assets under management, Toews Corporation will serve as the adviser to the Agility SharesTM lineup of ETFs, beginning with today’s launch of the brand's first two ETF products: the Agility SharesTM Managed Risk ETF (MRSK) and the Agility SharesTM Dynamic Tactical Income ETF (THY).
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Source: Agility Share
