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Agent Lending Newsletter - 1Q 2013

It's hard to believe the first quarter of the year is already behind us. The markets have continued to be very strong throughout the quarter, believed to be a direct consequence of central bank intervention. Nowhere has that been more evident than in Japan, where Bank of Japan monetary stimulus drove the Nikkei to a near 20% gain. The U.S. continued to have better momentum, as data suggests improvements in the economy. Cyprus seemed to catch everyone unaware, but not even that could derail general gains in equity markets, though Europe did not see the same level of positivity, as Investors remained cautious about the outlook there .

The quarter remained challenging from a lending perspective and as you will read elsewhere in this newsletter, the level of shorts in the market fell, but there was a small amount of M&A activity, and dividend trading started to commence at the end of the quarter. On the regulatory front, we saw new guidelines from ESMA which impact UCITs, and industry bodies submitted responses to the FSB on its Shadow Banking Recommendations on Repo and Securities Lending on behalf of their members (including J.P. Morgan). During the quarter we also hosted our first Securities Lending Forum, and we would like to thank all who attended. more details >>

So looking ahead to quarter two, we see the following:

  • Following a trend that began in April, we expect to see a reduction in Treasury Bill issuance continuing into May; this reduction in supply should push rebate rates lower.
  • Dividend season will reach its height, with revenue peaking in May.
  • We don't expect any near term improvement in directional trading but do see the potential for more deal activity with the economy continuing to improve.
  • We anticipate a market environment in which many issuers will take short dated levels lower.
  • As European banks repay LTRO funds, we expect demand for longer duration funding to continue.

It is nevertheless a busy time at J.P. Morgan. As you will read in this newsletter, we are progressing well with our multi-year, multi-million dollar technology overhaul, we continue to pursue new market opportunities such as Russia and continue to look at collateral expansion and diversification. Internal to J.P. Morgan, the integration of the Corporate & Investment Bank continues on track and as a result, to better distinguish ourselves, we have rebranded the business Agent Lending. At the same time, Paul Wilson has taken on additional responsibility of Global Product and Portfolio Analysis, while Judy Polzer has assumed a new role as Global Head of Analytics and Research. We hope you enjoy this edition of the newsletter, and we thank you for your continued partnership with J.P. Morgan.

Authors

Paul Wilson

Paul Wilson
Managing Director
Global Head of Agent Lending
Product and Portfolio Analysis
Agent Lending

Judith Polzer

Judith Polzer
Managing Director
Global Head of Analytics
and Research
Agent Lending

Shirley McCoy

Shirley McCoy
Managing Director
Global Head of Fixed Income Trading, Agent Lending

John Shellard

John Shellard
Managing Director
Global Head of Equity Lending Trading,
Agent Lending

Matthew Sarson

Matthew Sarson
Managing Director
Global Head of Asset Management,
Agent Lending

 
 

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