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MONEY MARKETS-U.S. rate futures fall after JPMorgan loss
2012年5月11日 / 晚上7点53分 / 5 年前

MONEY MARKETS-U.S. rate futures fall after JPMorgan loss

* JPMorgan trading loss raises counterparty concerns
    * Risk seen rising on a steep Moody's cut of JPMorgan
    * No signs of immediate dollar-funding stress for banks


    By Richard Leong	
    NEW YORK, May 11 (Reuters) - Front-month U.S. short-term
interest-rate futures fell and risk premiums on interest-rate
swaps grew on Friday after JPMorgan Chase & Co warned
investors of a $2 billion loss on soured credit derivatives
bets.	
    On the other hand, there was no sign of immediate strain in
the dollar-funding market in the wake of this stunning news late
Thursday from JPMorgan, which is perceived to be the safest
among large U.S. banks, analysts said.	
    Still, this trading loss at JPMorgan raised concerns about
other banks' own derivatives strategies and their exposure to
JPMorgan's book of derivatives, analysts and traders said.	
    Most Eurodollar futures for delivery through
September 2004 ended 0.5 to 3.5 basis points lower for the day,
while deferred contracts ended 1 basis point to 4 basis points
higher.	
    The risk premium on short-dated dollar interest-rate swaps
over Treasuries rose to the highest level since
late February, suggesting investors reduced their holdings of
these over-the-counter contracts, which are often underwritten
by banks.	
    "People have been selling outright, based on swap-spread
wideners," said Jim Lee, head of short-term markets and futures
strategy at RBS Securities in Stamford, Connecticut.	
    The yield spread on two-year interest-rate swaps over
comparable Treasuries was last quoted at 34.50 basis points
mid-market, 2.25 basis points wider than late on Thursday,
according to Tradeweb.	
    JPMorgan's derivatives loss occurred as investors are
fretting once again about contagion on the global banking system
from the debt crisis plaguing the euro zone, they said.	
    Some analysts said the loss increased the chances that
Moody's Investors Service could impose a steep downgrade of the
credit ratings of JPMorgan, the biggest U.S. bank by assets.	
    There are few details at this time on how JPMorgan's bets
soured. 	
    "It validates Moody's review on these global financial
institutions," said Lance Pan, director of research and strategy
at Capital Advisors Group in Newton, Massachusetts. He added
that part of "the rationale is that their books are 'black
boxes.'"	
    Moody's has said it will announce its rating decisions on
European banks, and 17 global institutions, including JPMorgan,
sometime from early May through late June.	
    The rating agency said in February it could lower JPMorgan's
long-term credit rating by up to two notches after its broad
bank review. Moody's currently has a Aa3 long-term rating on
JPMorgan.	
    But JPMorgan's top-notch P-1 short-term rating from Moody's
is not subject to this review.  	
    In the credit default swap market, the five-year cost to
insure against JPMorgan's debt rose to 128 basis points, up from
124 basis points on Thursday and 110 basis points on Wednesday,
according to data firm Markit.	
    "It's a black eye for (JPMorgan chief) Jamie Dimon, but
investors might end up punishing other banks," Capital Advisors'
Pan said.	
    The five-year CDS prices on other U.S. banks rose with
JPMorgan's. For example, Bank of America's five-year CDS
prices rose to 282 basis points, the highest in about a month,
while Morgan Stanley's five-year CDS prices climbed to
399 basis points, the highest since Jan. 2, Markit data showed.	
 	
    NO IMMEDIATE FUNDING STRESS	
    So far, news of JPMorgan's loss did not result in a spike in
short-term borrowing costs for banks and Wall Street firms.	
    Interest rates in the $1.6 trillion tri-party U.S.
repurchase markets, a key source of cash for banks and Wall
Street firms to finance their trades, held steady on Friday.
They mostly traded in a range of 15 basis points to 17 basis
points, matching Thursday's range, investors and traders said.	
    As investors grapple with the longer-term implications of
this loss on JPMorgan and the banking system, investors said
JPMorgan has plenty of capital and a huge deposit base. It is
not reliant on issuing commercial paper and other short-term
debt to raise cash, they said.	
    "It's not a funding issue for them. It is still a sound
company," said Bret Barker, portfolio manager at TCW Group in
Los Angeles, which manages $128 billion in assets.	
    Earlier in London, Libor on three-month dollars 
held again at 0.46685 percent, hovering near its lowest level
since mid-November. 	
    Libor is a rate benchmark for $360 trillion worth of
financial products worldwide.

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