The MSRB Re-Writes History
(Mar 2014)
Kyle Glazier and Lynn Hume's story in the Bond Buyer last week, "Brokers Violate Puerto Rico OS, MSRB Rules with Retail Trades", about small denomination trades in the recent Puerto Rico bond offering in contravention of the offering document set off a firestorm. The Wall Street Journal's "Finra Examining Trading in Puerto Rico Bonds" and Bloomberg's "Finra Says It's Examining Trading in New Puerto Rico Bonds" both reported on Friday that FINRA was looking into the suspect trades.
What did...
Municipal Bond Markups are Still Excessive
(Mar 2014)
Monday's Wall Street Journal article, Muni Bond Costs Hit Investors in Wallet: Investors Pay Twice as Much for Municipal Debt as for Corporate Bonds, points out yet again that investors pay far more to buy and sell municipal bonds than they pay to buy and sell similar quantities of corporate bonds or common stocks. The article cites a recent S&P study that finds investors buying a $100,000 municipal bond pays an average spread of 1.73% or $1,730 - twice as much as the 0.87% average spread...
Goldman Sachs Sued Over Aluminum Storage
(Aug 2013)
We mentioned a couple of weeks ago that Goldman Sachs has been in the business of aluminum metal storage for quite a while. A NY Times investigation found that, through a subsidiary, Goldman Sachs has been artificially inflating the prices of aluminum by magnifying storage costs.
Bloomberg News, the NY Times, and Law360 arereporting that Superior Extrusion Inc., a Michigan-based aluminum processor, has filed a class action lawsuit that alleges Goldman Sachs and theLondon Metal Exchange (LME)...
JP Morgan to Exit the Physical Commodities Business
(Jul 2013)
The Wall Street Journal is reporting that JP Morgan plans to sell their physical commodities assets "amid heightened regulatory scrutiny of Wall Street's ownership of such assets."1 JP Morgan joins several other investment banks, including Goldman Sachs and Morgan Stanley, who are looking to sell or wind down their stakes in physical commodities.
According to the WSJ, the sale by JP Morgan will include trading desks that trade metals, power and fossil fuels. JP Morgan has drawn particular...
Reuters to Stop Sneak Peek of Consumer-Confidence Data
(Jul 2013)
Thomson Reuters will no longer be offering investors an early look at the results of the University of Michigan consumer-confidence survey, the NY Times reported yesterday and the Wall Street Journal is reporting this morning. The move was prompted by an investigation by the NY Attorney General and would likely be temporary while the investigation is ongoing.
We talked about this story a bit last week, emphasizing the in depth analysis conducted by Nanex, LLC on high frequency trading data...
Foreign Exchange Rate Fixing
(Jun 2013)
Bloomberg News recently reported that traders at some of the world's largest banks have been in the business of rigging foriegn exchange (FX) rates. An FX rate essentially tells you how much of one currency you can buy with another currency: for example, currently you can buy about 100 Japanese yen for each US dollar. The rates affect "trillions of dollars of investments" according to Bloomberg, since they are used for the valuation of portfolios, derivatives, and even equity and fixed...
Missouri Action Against Morgan Keegan Over Municipal Bond Issue Also Illustrates Markup Abuse
(May 2013)
On April 3, 2013 Missouri's Secretary of State of the State submitted a Petition for an Order to Cease and Desist and to Show Cause against Morgan Keegan over taxable municipal bonds Morgan underwrote for the City of Moberly in July 2010. The petition and the Offering Circular for the bonds are available to view online. The story has been picked up by The Bond Buyer and Law360.
Setting aside the Petition's allegations, the trading in this set of bonds highlights markup abuse we have found is...
Resurgence of Commercial Mortgage Backed Securities and Decreased Underwriting Standards
(Apr 2013)
Late last week, Reuters reported that the issuance of so-called 'large-loan' Commercial Mortgage Backed Securities (CMBS) has recently spiked and that the increase in volume may be due in part to more lenient underwriting standards. Large-loan CMBS issuance in the first few months of 2013 has already surpassed that of 2012.
CMBSs are created by securitizing a pool of commercial mortgage loans such that an investment in a CMBS is a claim on the future cashflows from the pool of commercial...
