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It could take three years for the US economy to recover from COVID-19
March 30, 2020--The US and Eurozone's economies could take until 2023 to recover from the impact of the COVID-19 coronavirus crisis, according to a new report from consultancy McKinsey & Company.
If the public health response, including social distancing and lockdown measures, is initially successful but fails to prevent a resurgence in the virus, the world will experience a "muted" economic recovery, says McKinsey. In this scenario, while the global economy would recover to pre-crisis levels by the third quarter of 2022, the US economy would need until the first quarter of 2023 and Europe until the third quarter of the same year.
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Source: World Economic Forum (WEF)
Active managers welcome non-transparent ETFs
March 29, 2020--A new breed of fund aims to combine investor appeal with proprietary knowhow
Since the Securities and Exchange Commission gave the green light to non-transparent active ETFs last year, several providers have applied for approval to launch them.
The new model allows managers to establish ETFs that do not disclose what is in their basket of investments, a move that challenges the status quo in the sector.
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Source: FT.com
Distressed Debt Balloons to Almost $1 Trillion, Nears 2008 Peak
March 25, 2020--Oil & gas sector leads with $161 billion of distressed debt
Investment-grade issuers such as Ford trade at deep discount
The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion, reaching levels not seen since 2008 as the collapse of oil prices and fallout from the coronavirus shutters entire industries across the globe.
In total, the tally has ballooned to $934 billion of U.S. corporate bonds that yield at least 10 percentage points above Treasuries and loans that trade for less than 80 cents on the dollar, according to data compiled by Bloomberg. That's nearly double the amount from less than a week ago.
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Source: bloomberg.com
CFTC Issues Final Interpretive Guidance on Actual Delivery for Digital Assets
March 24, 2020--The Commodity Futures Trading Commission today announced the Commission voted unanimously to approve final interpretive guidance concerning retail commodity transactions involving certain digital assets.
Specifically, the guidance clarifies the CFTC's views regarding the "actual delivery" exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of digital assets that serve as a medium of exchange, colloquially known as "virtual currencies."
"Providing clarity to market participants is one of the CFTC's core values," said CFTC Chairman Heath P. Tarbert." This interpretive guidance not only fulfills that commitment, but it reflects my belief that the U.S. must be a leader in the digital asset space. These efforts are also especially critical when the hard-earned income of everyday Americans is at stake. Under my leadership, the CFTC will continue to do its part to encourage responsible fintech innovation through sound regulation."
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Source: CFTC.gov
Bond ETFs Flash Warning Signs of Growing Mismatch
March 23, 2020--ETFs of BlackRock, Vanguard and others traded at large discounts to net asset value in recent days as coronavirus roiled markets
A broad set of bond exchange-traded funds are trading out of sync with their underlying assets, testing investors' faith in a fast-growing part of the investment world.
Bond ETFs of BlackRock Inc., Vanguard Group and others traded at historic discounts to the net asset value of their underlying bonds in recent days. BlackRock's iShares iBoxx USD Investment Grade Corporate Bond ETF closed down at a discount of over 5% late last week, a record since 2008.
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Source: wsj.com
Federal Reserve issues FOMC statement
March 23, 2020--The Federal Reserve is committed to use its full range of tools to support the U.S. economy in this challenging time and thereby promote its maximum employment and price stability goals.
The Federal Open Market Committee is taking further actions to support the flow of credit to households and businesses by addressing strains in the markets for Treasury securities and agency mortgage-backed securities.
The Federal Reserve will continue to purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions. The Committee will include purchases of agency commercial mortgage-backed securities in its agency mortgage-backed security purchases. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will continue to closely monitor market conditions, and will assess the appropriate pace of its securities purchases at future meetings.
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Source: federalreserve.gov
Junk bond ETFs are again defying doubters and liquidity fear
March 16, 2020--On a day when the whole world seemed to be jettisoning junk bonds, Geof Marshall had a plan to buy.
The idea was that, as exchange-traded funds struggled to keep up with a wave of redemptions spurred by crashing oil and coronavirus fears, he was going to swoop in and buy bonds from the ETFs on the cheap.
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Source: bloomberg.com
Fed cuts interest rate to zero, launches $700bn QE programme
March 16, 2020--The Fed's March 15 move is its second emergency rate cut in less than two weeks
The US Federal Reserve has cut its key interest rate to virtually zero and launched a massive $700 billion quantitative easing programme.
Citing "the coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States," it announced drastic emergency measures to shore up confidence and keep the financial sector running.
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Source: moneycontrol.com/
Federal Reserve issues FOMC statement
March 15, 2020--The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected. Available economic data show that the U.S. economy came into this challenging period on a strong footing.
Information received since the Federal Open Market Committee met in January indicates that the labor market remained strong through February and economic activity rose at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending rose at a moderate pace, business fixed investment and exports remained weak. More recently, the energy sector has come under stress. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.
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Source: federalreserve.gov
SEC Takes Targeted Action to Assist Funds and Advisers, Permits Virtual Board Meetings and Provides Conditional Relief from Certain Filing Procedures
March 13, 2020--SEC Is Closely Monitoring the Impact of the Coronavirus on Investors, Funds, and Advisers
The Securities and Exchange Commission today announced regulatory relief for funds and investment advisers whose operations may be affected by the coronavirus. The relief provided today covers in-person board meetings and certain filing and delivery requirements for certain investment funds and investment advisers.
The impacts of the coronavirus may delay or prevent funds and advisers operating in affected areas from meeting certain regulatory obligations due to restrictions on large gatherings, travel and access to facilities, the potential limited availability of personnel and similar disruptions. Today's relief is designed to enable funds and advisers to meet those obligations and to continue their operations, while recognizing that there may be temporary disruptions outside of their control.
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Source: SEC.gov
