July 20, 2017

Critical updates from the Federal Reserve, Treasury and more

In the Spotlight

On July 14, 2017 Randy Snook Testified at the House Subcommittee Fixed Income Market Structure Hearing
Randy Snook, Executive Vice President at SIFMA, testified before the House Committee on Financial Services Subcommittee on Capital Markets, Securities, and Investment in a hearing entitled "A Review of Fixed Income Market Structure," with the full written testimony submitted for the record.
Written Testimony

U.S. Department of the Treasury Releases Treasury International Capital Data for May
The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for May 2017.  The next release, which will report on data for June 2017, is scheduled for August 15, 2017.

The sum total in May of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $57.3 billion.  Of this, net foreign private inflows were $87.2 billion, and net foreign official outflows were $29.9 billion.

Foreign residents increased their holdings of long-term U.S. securities in May; net purchases were $95.5 billion.  Net purchases by private foreign investors were $119.7 billion, while net sales by foreign official institutions were $24.2 billion.
U.S. residents increased their holdings of long-term foreign securities, with net purchases of $3.6 billion.

Taking into account transactions in both foreign and U.S. securities, net foreign purchases of long-term securities were $91.9 billion.  After including adjustments, such as estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities, overall net foreign purchases of long-term securities are estimated to have been $77.4 billion in May.
Press Release

U.S. Department of Treasury Announces Agenda for the August 2017 Refunding Treasury Dealer Meetings
Discussion Topics
1. Please discuss your latest economic and fiscal forecasts for FY2017 and FY2018. Do you believe the current financing schedule is well-suited to meet Treasury’s financing needs though the end of FY2017? FY2018?
2. Please comment on Treasury’s issuance of indexed products, specifically TIPS and FRNs. Are these products meeting investor needs in their current form or are there any changes to the TIPS or FRN programs that Treasury should consider such as auction size or security structure? If so, please elaborate.
3. The Federal Reserve has signaled that it is considering reducing Treasuries held in the System Open Market Account (SOMA). The Treasury Department’s Office of Debt Management (ODM) would like additional perspectives on the potential reductions of Treasuries held in the SOMA and the additional funding needed to meet redemptions from the SOMA. This information would be used to help test ODM’s debt-issuance modeling assumptions (See Hyperlink for SOMA related questions).
Meeting Agenda

SIFMA’s Factsheet on Repo Market
View Factsheet

SIFMA’s Factsheet on TBA Market
View Factsheet

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Global Highlights

European Central Bank Releases Monetary Policy Decisions: July 20, 2017
At today’s meeting, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.
Press Release

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U.S. MARKET HIGHLIGHTS

Federal Reserve Publishes Beige Book: July 12, 2017
Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.
Report

Semiannual Monetary Policy Report to the Congress
Chair Yellen discussed the current economic situation and outlook touching upon the continually strengthening labor market, the FOMC raising the target range for the federal funds rate, and the process the fed will follow in order to normalize the size of their balance sheet in coming months.
Yellens Testimony

Trace Fact Book Now Available
The second-quarter data tables for the TRACE Fact Book are now available. The tables include aggregated information for securitized products as well as corporate and agency debt securities, including trades reported, the top 50 issues by trades and by par value, the average daily par value traded, customer buy vs. customer sell ratios and more. View the 2Q 2017 TRACE Fact Book tables. For additional information, contact us by phone at (888) 507-3665 or by email at TRACEDataServices@finra.org.

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SIFMA NEWS

SIFMA Testifies at House Subcommittee Fixed Income Market Structure Hearing
Randy Snook, Executive Vice President at SIFMA, testified before the House Committee on Financial Services Subcommittee on Capital Markets, Securities, and Investment in a hearing entitled “A Review of Fixed Income Market Structure.” The U.S. fixed income markets are truly without parallel with total outstanding debt of nearly $40 trillion dollars. On average $775 billion of securities are traded each and every day. SIFMA believes that policymakers have the ability to enhance economic activity through tailored recalibration of regulations affecting our capital markets. “The cumulative impact of post-crisis reforms must be studied and reconsidered to ensure that our capital markets are providing funding in the most efficient way possible,” said Snook in his testimony. “This is particularly important since private credit extended to households and nonfinancial businesses has grown at a slower pace than in all recoveries in the past 60 years.” This recalibration could help jumpstart the economy without sacrificing financial stability.
Written Testimony

SIFMA Testifies at DOL Fiduciary Rule Hearing
Jerry Lombard, President of Janney Montgomery Scott LLC's Private Client Group testified on behalf of SIFMA before the House Committee on Financial Services Subcommittee on Capital Markets, Securities, and Investment in a hearing exploring the impact of the DOL Fiduciary Rule on the capital markets. Lombard explained that the right answer for investors is a consistent best interest standard that applies across all types of accounts, but does not have the additional onerous conditions created by the DOL rule. A best interest standard done right by the SEC, the expert agency responsible for broker dealer standards of conduct, would provide protection for retail customers without a bifurcated compliance regime imposed on the same market participants by different regulators. “How switching small retirement savers from a full-service advisor to a "no advice" service desk is in their best interest, I will never understand,” he said.
Oral Statement
Written Testimony
DOL Fiduciary Resource Center

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Events

Last Chance to Register: SIFMA's Senior Investor Protection Regional Workshop
There are only a few weeks left to register for SIFMA’s Senior Investor Protection Regional Workshop. Join us on July 27 in Denver for a unique opportunity to explore real-life financial crime and cognitive decline scenarios. Also gain practical insights into the current legal and regulatory landscape and more during our hands-on program.

Register Today for C&L San Francisco Regional Seminar
Join SIFMA’s Compliance & Legal Society in San Francisco on August 3 for a regional seminar at Charles Schwab. This year’s program will provide updates on topics currently impacting compliance and legal professionals working in the financial services industry. Register today, at an early bird rate, to connect with securities regulators and network with your fellow industry professionals.

Register Today for SIFMA's Senior Investor Protection Seminar on FINRA Rules 2165 and 4512
Join SIFMA on September 13 for a half-day event as the industry prepares for the impending implementation of FINRA’s new Senior Investor Protection Rules. Industry experts and regulators will gather to take a deep dive into rules 2165 and 4512, which will provide firms with a safe harbor for temporarily holding suspect disbursements and require firms to attempt to collect trusted contact information from all their clients. With the February implementation deadline fast approaching, participants will have the opportunity to analyze the new rules and discuss the various implementation strategies for firms of all sizes and business models.

Register Today: AFME’s Annual European Compliance and Legal Conference
AFME’s inaugural European Compliance and Legal Conference will take place on 19-20 September 2017 at the De Vere Grand Connaught Rooms in London. Providing the keynote addresses will be Verena Ross, Executive Director of ESMA, Tilman Lüder, Head of the Securities Markets Unit at the European Commission, Mark Steward, Executive Director, Enforcement and Market Oversight at FCA and Catherine McGuinness Policy Chairman at the City of London Corporation. With additional speakers from CONSOB, AMF, CNMVE and Heads of Compliance from Global Banks. The conference will cover a wide range of regulatory topics including MiFID, MAR, GDPR and STS as well as examine trends in enforcement, RegTech and surveillance and the likely impact of Brexit on the European banking sector.


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Economic Calendar

Week of7/24

MONDAY

  • PMI Composite Flash 9:45 AM ET
  • Existing Home Sales 10:00 AM ET
  • 4-Week Bill Announcement 11:00 AM ET
  • 3-Month Bill Auction 11:30 AM ET
  • 6-Month Bill Auction 11:30 AM ET

TUESDAY

  • FOMC Meeting Begins
  • Redbook 8:55 AM ET
  • FHFA House Price Index 9:00 AM ET
  • S&P Corelogic Case-Shiller HPI 9:00 AM ET
  • Consumer Confidence 10:00 AM ET
  • Richmond Fed Manufacturing Index 10:00 AM ET
  • State Street Investor Confidence Index 10:00 AM ET
  • 4-Week Bill Auction 11:30 AM ET
  • 2-Yr Note Auction 1:00 PM ET

WEDNESDAY

  • MBA Mortgage Applications 7:00 AM ET
  • New Home Sales 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • 2-Yr FRN Note Auction 11:30 AM ET
  • 5-Yr Note Auction 1:00 PM ET
  • FOMC Meeting Announcement 2:00 PM ET

THURSDAY

  • Weekly Bill Settlement
  • Durable Goods Orders 8:30 AM ET
  • International Trade in Goods 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Chicago Fed National Activity Index 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Kansas City Fed Manufacturing Index 11:00 AM ET
  • 3-Month Bill Announcement 11:00 AM ET
  • 6-Month Bill Announcement 11:00 AM ET
  • 7-Yr Note Auction 1:00 PM ET
  • Fed balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

FRIDAY

  • GDP 8:30 AM ET
  • Employment Cost Index 8:30 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • Neel Kashkari Speaks 1:20 PM ET

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Featured Data and Resources

View all Rates Reference Data Aggregated by SIFMA Rates Group

Calendars
SIFMA’s 2017-2018 Market Close Recommendations
CME’s Full 2017 Holiday Calendar and Related Notices
FICC’s 2017 Holiday Schedule for GSD

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