Agent Lending Newsletter - 2Q 2013
The second quarter is always the busiest for the Securities Lending business, with the European dividend season giving rise to increased volumes and revenue generation. This year was no different, although as you will read elsewhere in this newsletter, it was perhaps one of the more challenging in a number of years. Though All-In levels were quite varied and volatile, we feel that we were rewarded by trading and locking in levels at optimal points. This strategy helped us generally maximize earnings as levels tended to deteriorate close to record dates. We have invested a considerable amount in our Operations, with our own metrics showing that this was one of the smoothest and efficient dividend seasons; we hope our clients also noticed this. As we predicted earlier in the year, reduced supply resulted in lower bill issuance and bill maturities gave rise to declining rebate rates, which was positive for our fixed income lending clients. These occurrences may be signaling an improving U.S. economy, also giving rise to improved spreads between term unsecured investments and lending of fixed income collateral.
In our last newsletter we noted the implementation of JGB collateral. This has been effective in delivering additional revenue for those clients who approved the use of this collateral type. As the business across Asia continues to expand, we are pleased to be able to implement same day loans there, which assists borrowers with same day coverage and increased loan opportunities. As we focus on program development, we are also pleased to announce the roll out of J.P. Morgan ACCESS® Securities for Securities Lending. First implemented in late 2012, ACCESS Securities helps enhance how clients assess, manage and leverage investment information. With an intelligent design, intuitive navigation and the ability to personalize views and settings to fit users’ specific responsibilities, ACCESS Securities has proven to be a powerful and easy-to-use online solution for clients. The portal’s expansion to include Securities Lending is designed to deliver the same benefits to you (please see page 6).
As we look ahead, all eyes are on the U.S. Federal Reserve following its June announcement that it may start tapering its QE3 asset purchases later this year, and the impact this will have on the economy and the Securities Lending market. One of the other themes we are seeing is borrowers focusing more than ever on balance sheet usage and RWA (Risk Weighted Assets) as they seek to achieve new Basel III capital standards well ahead of regulatory deadlines. This is giving rise to new and different revenue opportunities for clients with eligible collateral criteria who are willing to commit to term or Evergreen structures. We anticipate more of these types of trade opportunities over the course of the year.
We hope you enjoy this newsletter.