Week InReview

Twas the night after Christmas.

The day after Christmas, a hedge fund manager who made the remarkable promise that he would never lose investors' money was accused of stealing from his clients by U.S. regulators.

But then the partial government shutdown hit and the Securities and Exchange Commission's case went into purgatory, with all court proceedings put on hold.

In the ensuing weeks, one of the few SEC cops still on the beat put what seemed to be a reasonable request to the fund manager, Statim Holding's Joseph Meyer. As long as the case was stayed, would Meyer agree not to pull assets from a Statim hedge fund. Meyer refused, the regulator said in a Jan. 17 court filing.

Friday | Jan 25, 2019
INVESTORS briefing
Each week, we publish three briefings:
Monday Week InAdvance
Tuesday  | Rules & Regs
FridayWeek InReview

In addition, we publish three  "upon request" briefings...
Cyber Security
ESG (environmental, social, and governance)

Please contact, with name of briefing(s) you would like to receive:
Matthew Jones, executive director
(202) 712-9050
Junk bonds' nasty year-end offers clues to next downturn
The U.S. corporate debt market has dusted itself off after December's tumble, with junk bonds now on track for their best month in five years. But the sell-off still offers some useful clues to how this vital corner of global markets will react when the economic expansion does ultimately end. (Financial Times | Jan 23)

Wall Street backlash sinks plan to transform swaps market
Faced with criticism from firms such as Citadel Securities and Goldman Sachs Group Inc., Commodity Futures Trading Commission Chair J. Christopher Giancarlo, a former executive at a swaps brokerage, plans to abandon an existing proposal on swap trading and rewrite it after incorporating industry feedback. (The Wall Street Journal | Jan 22)

FX traders 'flying blind' after a month without positioning data
As the partial U.S. government shutdown drags into its 33rd day, analysts are getting creative when it comes to gauging which way certain financial markets are leaning. (Bloomberg Markets | Jan 22)
Mortgage investors await crucial Fannie-Freddie launch
Issuance of first merged UMBS set for June 3
If you would like a copy of the Jan 22, 2019 "Update on the Implementation of the Uniform MBS (UMBS) Initiative on the U.S. MBS Index," please contact Matthew Jones (contact info above).
(Jan 24) -- Mortgage investors will see a combined Fannie Mae-Freddie Mac bond for the first time on June 3, and the success or failure of this so-called Uniform Mortgage-Backed Security (UMBS) could make or break the dreams of many would-be American home buyers.

If the UMBS program sees poor relative liquidity or lower prices on the new securities, it would likely filter through into higher borrowing rates. So home lenders and their customers, as well as investors, will have a lot at stake in how this massive, complex reform plays out in the mortgage market.

Much of its success will depend upon three factors. First, the level of compensation offered to pre-existing holders of Freddie Mac securities to switch into the new bonds. Second, the relative prepayment speeds exhibited by Freddie Mac and Fannie Mae mortgage loans wrapped together into those new bonds. Last, the readiness of firms' back offices to handle the change.

Freddie Mac has already released  compensation grids. These levels need to be enough to make up for the 10-day payment delay difference between the old Freddie Mac MBS and the UMBS.
Binge reading disorder
Hand-curated, chosen with love
The Doomsday Clock is stuck at 2 minutes to 'midnight,' the symbolic hour of the apocalypse
The Bulletin of the Atomic Scientists is keeping the Doomsday Clock set at two minutes to midnight - a metaphor for the end of the world - calling the threats against humankind "a new abnormal."

From suing Goldman to covering Ozzy, SEC band rocks the shutdown
The Securities and Exchange Commission lawyers who took the stage at Washington's Rock & Roll Hotel recently have won accolades for suing Goldman Sachs Group Inc. and writing rules for Wall Street traders. This time, their greatest hits were more of the heavy metal variety. T he SEC workers - who moonlight in a band called G.O.A.T. Rodeo - played a concert for fellow furlough victims to raise some money for a charitable fund that helps federal employees.

The shrinking of the political middle - and what it means
The twin rise of right-wing populism and the left that has rocked the world in the past two years is the product of a single deeper-seated trend: the hollowing out of the political middle. This has hamstrung governments and eroded international cooperation. It's a threat in particular to global business leaders, who benefit most from the market-friendly policies and global openness that centrist parties champion.