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Treasury Announces Marketable Borrowing Estimates
August 30, 2012--The U.S. Department of the Treasury today announced its current estimates of net marketable borrowing for the July-September 2012 and October- December 2012 quarters:
During the July-September 2012 quarter, Treasury expects to issue $276 billion in net marketable debt, assuming an end-of-September cash balance of $60 billion.
This borrowing estimate is $12 billion higher than announced in April 2012. The increase is primarily due to lower receipts, higher outlays, redemptions of portfolio holdings by the Federal Reserve System, and higher issuances of State and Local Government securities.
During the October – December 2012 quarter, Treasury expects to issue $316 billion in net marketable debt, assuming an end-of-December cash balance of $40 billion. During the April – June 2012 quarter, Treasury issued $172 billion in net marketable debt, and ended the quarter with a cash balance of $91 billion. In April 2012, Treasury estimated $182 billion in net marketable borrowing and assumed an end-of-June cash balance of $95 billion. The decrease in borrowing was driven by higher net issuances of State and Local Government Series securities partially offset by higher-than-projected outlays.
Additional financing details relating to Treasury’s Quarterly Refunding will be released at 9:00 a.m. on Wednesday, August 1, 2012.
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Source: US Department of the Treasury
Morgan Stanley-US ETF Weekly Update
July 30, 2012--Weekly Flows: $3.0 Billion Net Outflows
ETF Assets Stand at $1.2 Trillion, up 14% YTD
One ETF Launch Last Week
AdvisorShares Announces ETF Closure
BlackRock Announces Planned Liquidation of Muni Term ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net outflows of $3.0 bln last week, following three consecutive weeks of net inflows
Last week’s net outflows were primarily driven by US Large-Cap ETFs ($4.6 bln in net outflows)
ETF assets stand at $1.2 tln, up 14% YTD; ETFs have posted net inflows 22 out of 30 weeks YTD ($81.6 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $27.3 bln net inflows
Fixed Income ETFs have generated net inflows 49 out of the past 50 weeks ($12.7 bln net inflows over the last 13 weeks)
Commodity ETFs have struggled taking in new money the past 13 weeks exhibiting net outflows of $1.8 bln; specifically the
SPDR Gold Trust (GLD) posted net outflows of $1.8 bln over this time period
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Vanguard MSCI Emerging Markets ETF (VWO) generated net inflows of $979 mln last week, most of any ETF
We estimate that VWO has posted net inflows 25 out of 30 weeks YTD ($8.9 bln in net inflows)
Interestingly, the Market Vectors Gold Miners ETF (GDX) which owns gold mining companies, exhibited net inflows of $221 mln
last week, while the SPDR Gold Trust (GLD) which actually owns the metal, had net outflows of $313 mln (the same dichotomy can be said for the four and 13-week periods)
US-Listed ETFs: Short Interest- Data Updated: Based on data as of 7/13/12
iShares MSCI EM Index Fund (EEM) had the largest increase in USD short interest at $577 mln
- Aggregate ETF USD short interest declined $2.8 bln over the past two weeks ended 7/13/12
For the third consecutive period, SPDR S&P 500 ETF (SPY) short interest declined; SPY’s 205.7 mln shares short is its lowest
level since 12/31/09
The average shares short/shares outstanding for ETFs is currently 4.6%
Retail ETFs have consistently been some of the most heavily shorted ETFs
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research. Data estimated as of 7/27/12 based on daily change in share counts and daily NAVs.
$7.6 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched Active ETFs generated most net inflows at $1.6 bln (specifically the PIMCO Total Return ETF-BOND)
119 new ETF listings and 17 closures YTD
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
Despite being one of the most successful launches over the past year, the ProShares Ultra VIX Short-Term Futures ETF
(UVXY) posted net outflows of $41 mln amid a decline in volatility during the second half of the week
Top 10 most successful launches account for 71% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
Clock Now Ticks for Swaps Compliance
July 30, 2012--The starter's pistol is about to be fired for the swaps industry.
The Commodity Futures Trading Commission is expected to publish on August 2 its recently approved swaps definitions in the Federal Register.
Sixty days later-on October 1-market participants, including asset managers, are expected to comply with the first set of rules related to these definitions.
For example, firms must decide whether they need to register as swap dealers or major swap participants. Other chores include learning and adopting new business conduct codes, such as provisions governing conflicts of interest and monitoring of position limits, and developing systems for recording and reporting swaps transactions.
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Source: Securities Technology Monitor
Statement for the Treasury Borrowing Advisory Committee
July 30, 2012-Economic activity has moderated in recent months, with growth held back by a number of temporary factors, including the run-up in energy prices earlier this year, unusually warm winter weather, and the ongoing sovereign debt crisis in Europe.
Nonetheless, the U.S. economy continues to heal and grow, and evidence of improvement continues to emerge, particularly from the housing sector. While the unemployment rate remains unacceptably high, underlying labor market conditions are recovering gradually. Private-sector forecasters continue to expect growth to strengthen over the second half of 2012 and into 2013, although forecasters expect additional progress in reducing the unemployment rate further this year will be limited. The Administration has proposed a variety of measures to create jobs and boost growth in the near term, including job training, incentives for small businesses to invest and hire, support for state and local governments to keep teachers, firefighters, and police on the job, as well as building and growing our essential infrastructure. The facilitation of mortgage refinancing for troubled homeowners is also expected to support economic activity. At the same time, the Administration remains firmly committed to restoring fiscal sustainability in order to preserve the economy’s long-run growth potential. According to the just-released Mid-Session Review of the FY2013 Budget, the federal budget deficit is projected to decline from 7.8 percent of GDP in FY2012 to 6.1 percent of GDP in FY2013, and then narrow to about 2.6 percent of GDP, achieving primary balance, by the end of the decade.
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Source: US Department of the Treasury
BlackRock Canada Launches a New Suite of Minimum Volatility iShares(R) ETFs Delivering Domestic, International, Developed and Emerging Market Exposure Opportunities
1st suite of its kind in Canada that offers investors variety in minimum volatility investment exposures
July 30, 2012--BlackRock Asset Management Canada Limited (BlackRock Canada), an indirect, wholly-owned subsidiary of BlackRock, Inc., today announced that its iShares business is launching a suite of minimum volatility exchange traded funds (ETFs) to the Canadian marketplace.
This is the first time investors in Canada have access to the full broad market suite of minimum volatility ETFs including Canada, U.S., developed international, global and emerging markets. All five of the iShares ETFs will begin trading on the Toronto Stock Exchange today.
"With the uncertainty in today's markets, investors want to capture potential market upside but still protect their assets," said Mary Anne Wiley, Managing Director, Head of iShares, BlackRock Canada. "To help investors get off the sidelines, we have introduced the new iShares Minimum Volatility Funds which offer investors a unique opportunity to retain equity exposure in their portfolio while seeking to reduce the overall equity risk in these turbulent times. It's a compelling option for investors looking for a contrast or complement to other portfolio management strategies and will also optimize risk-adjusted returns over the long term."
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Source: BlackRock
Citi nudges into US ETF administration market
July 29, 2012--Citi is jumping into the US exchange traded fund administration market and has inked a deal to provide back-office transaction processing to Huntington Asset Advisors' new products.
The bank was named custodian, fund administrator and index receipt agent for Huntington Strategy Shares. The firm’s first ETF, the Huntington EcoLogical ETF, launched last month, and its Rotating Strategy ETF launched last week.
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Source: FT.com
Pragma Research Recommends Market Structure Changes to Reduce Trading Costs for Investors
July 27, 2012-Pragma Securities, an independent algorithmic trading boutique, today announced recommendations for market structure changes which would reduce the amount investors lose in trading costs.
The recommendations are based on recent Pragma research showing that when HFT market makers compete with directional traders, i.e., investors, to earn spreads and rebates by providing liquidity, investors are forced to cross the spread more often, which results in higher costs.
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Source: Pragma Securities
A New Dividend ETF for Schwab, but Has This Trade Become Crowded?
July 27, 2012--Dividend-themed exchange-traded funds have been a popular choice among investors over the past year. The 42 dividend-themed ETFs that we follow raked in $16 billion in flows, nearly a third of every dollar going into equity ETFs, despite the fact that they make up just 5% by count of the 812 equity ETFs available.
With the dividend yield on the S&P 500 Index at 2.1%, well above the 1.7% yield on the Barclays Aggregate Bond Index, who could blame investors for looking to equities? But be cautious when hunting for yield, particularly when moving up the risk ladder from bonds to stocks. Over the past five years, the average dividend ETF has had a volatility of 23%, more than 6 times greater than the 3.6% volatility of the Barclays Aggregate over that same time period.
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Source: Morningstar
IMF Working paper-Latin America: Vulnerabilities Under Construction?
July 27, 2012--Summary: This paper documents developments in mortgage credit and the housing sector in Latin America over the past decade, and compares them with those of other emerging economies. In particular, it examines the real estate and mortgage markets to assess whether (i) growth in mortgage credit is excessive compared to long-term trends; (ii) trends in house prices reflect changes in economic fundamentals;
and (iii) the extent to which household and banking sector vulnerabilities could lead to potential fragilities. Although data limitations hamper a rigorous analysis of trends, our analysis suggests that while there are no imminent misalignments in the real estate and mortgage sectors, they could emerge if current trends persist. Strengthening supervision and addressing data gaps is thus critical to ensure adequate monitoring of risks and vulnerabilities in these sectors.
view the IMF Working paper-Latin America: Vulnerabilities Under Construction?
Source: IMF
ETNs: What You Don't Know Can Hurt You
July 27, 2012--Exchange-traded notes, or ETNs, can easily be mistaken for something else. As unsecured debt securities issued by banks, they look like bonds.
They also can be linked to indexes like exchange-traded funds. But they are neither and it’s worth your time to do a lot of research before you invest in them.
Regulators such as FINRA, which monitors the securities industry, have been warning about the pitfalls of ETNs recently, which usually indicates that investors are running into trouble with them.
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Source: Forbes
