Examiner News – Friday, June 24, 2011

Moodys Credit Comment Weekly Market Outlook . “Swoon by Issuance Hints of Lower Yields Ahead.” The solid run by corporate bond issuance came to an abrupt halt this month, in response to a shakier business outlook and possibly the worst monthly returns from US corporate bonds since November 2010. Nevertheless, though down considerably from May’s record pace, not only do the high yield bond offerings of June-to-date already exceed their suppressed level of June 2010 by 50%, but newly rated high yield bank loan programs have held up quite well compared to their trend of the previous 12 months…. However, do not infer too much positive news about the future from the second quarter’s strong showing by the confidence-sensitive and highly cyclical issuance of high yield debt. “French Banks: Market Signals Differ; Dexia More Sensitive.” Market signals have recently worsened for all of the large French banks. Dexia has fared the worst. The markets perceive that Dexia’s continued reliance on both short-term and secured funding is worrisome. The market is also likely concerned over the fact that the bank is a public sector lender. This was previously viewed as a source of strength, but is less so now as doubts are raised about sovereign and sub-sovereign credits’ asset quality. Dexia’s bond spread and five-year CDS mid-spread have been wider than those of other French banks for more than a year, but in periods of market stress this differential increases. FRB Economic Highlights Home sales weakened in May compared with the same period a year earlier, when the federal housing stimulus was in place. See the latest data on employment and real estate in the new Economic Highlights. http://www.frbatlanta.org/documents/research/highlights/ econhighlights/110622.pdf FRB Financial Highlights Bond spreads between German bonds and those of Greece, Ireland, and Portugal have hit record highs. See the latest data on the corporate and European bond markets, Treasury yields, and mortgage rates in the new Financial Highlights. http://www.frbatlanta.org/documents/research/highlights/ finhighlights/110622.pdf Agencies Extend Comment Period on Swap Margin and Capital Proposed Rulemaking Five federal agencies have approved and will submit a Federal Register notice that extends the comment period on a proposed rule to establish margin and capital requirements for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The comment period was extended to July 11, 2011, to allow interested persons more time to analyze the issues and prepare their comments. Originally, comments were due by June 24, 2011. The proposal was issued by the Federal Reserve Board, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, and the Office of the Comptroller of the Currency. Attachment: Margin and Capital Requirements for Covered Swap Entities – PDF ( PDF Help )