Message from Colin McKechnie

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Hello and welcome to the spring 2012 installment of the Securities Lending Newsletter. We begin with an update from the Equities Desk. The first quarter of 2012 saw equities markets in developed economies improve. Though corporate capital raising was the main driver behind securities lending activity, other factors contributed to a net reduction in lending activity, notably reduced short selling as a result of improving equity markets and increased inventory at prime brokers used to cover a large portion of client shorts. An interesting exception was Core Europe, which remained active as short-selling bans were lifted in Belgium, France, Italy and Spain.

In our update from the Fixed Income Desk, we note the trend of higher funding rates as 2012 began. Improving economic conditions have led to the narrowing of the spread between Treasuries and other asset classes. During the second quarter we will be watching Agency and Agency Mortgage Backed Collateral, as the Treasury Markets Practice Group fails charge which took effect in February is now in place. After a slow start in January, new issuances of Corporates accelerated in February, making it the busiest month for new issuances in almost a year. Finally, international lending remained constant in the first quarter as the spread between core and peripheral European sovereigns narrowed due to the gradual containment of the debt crisis and the approval of several European lending vehicles with a combined ceiling of €700 billion.

I hope you find this newsletter useful and informative. As 2012 progresses, I hope your firm has much success and I thank you for your continued business with J.P. Morgan.

Regards,

Colin McKechnie
Global Business Executive, Trading Services

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