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This article appears courtesy of Institutional Investor

Investors’ conclusions from flattening/inverting yield curves will differ for private, institutional and government buyers, and for issuers. Private investors have no reason to go long, but the others…

Continuing economic rebalancing has allowed many emerging and transition economies issue bonds in local currencies for international settlement. See our list for possible diversification.

The sale of Hotspot has prompted a torrent of speculation about the future of other ECNs. But it seems the rumours about a sale of FXall are true.

FXall, the leading electronic platform in the foreign exchange market, is set for a new ownership structure. Euromoney has learnt that the ECN’s owners, a consortium of leading foreign exchange banks, are locked in discussions about a potential sale of up to 30% of the company to a private equity buyer.

The long T-Bond reappears just as the yield curve looks like inverting, and probably helping that effect. Inversion is probably a sign (but not the cause) of the coming slowdown.

If Japan’s pension reforms ever get under way in earnest, there could be substantial growth of private defined contribution plans, known as 401(k) after the US system. Japan’s pensions market is already very large. “The total size of the market is a little less than $3 trillion, as at March 2005,” says Shuichi Komori, president and CEO of Daiwa SB Investments Ltd. “Around 70% of our assets under discretionary management come from the pension fund industry, mostly in Japan.”

Research from the Levy Institute spells out why the housing bubble must deflate and looks at the likely consequences. Only a repeat of an old warning, but worth taking seriously!

Japan’s National Pension System is designed to cover all Japanese adults between the ages of 20 and 60 but many citizens are falling between the cracks of an already outdated system. As Japan’s corporate system has changed, so have work patterns. Companies are increasingly hiring part-time workers and many younger people have been forced into part-time work as permanent employment prospects have shrunk as a result of Japan’s vicious recession.

Bank of America is expanding its private banking business by targeting US families worth $50 mln+.

The second SVG Capital fund of funds securitization – SVG Diamond 2, again arranged by Nomura, has further developed the concept of private equity collateralized fund obligations. This is a managed deal where the assets are selected over time by SVG to deliver enhanced equity returns. Some €175 million of equity risk in the form of preference shares in the fund was sold to various external investors. This is drawable equity, meaning that this most expensive form of capital is not utilized until it is needed, thus enhancing the efficiency of the CFO. The rest of the financing comprises €328.5 million of rated paper (seven tranches ranging from triple A to triple B).

Eurex’s US woes are continuing. Last month the derivatives exchange’s chief executive, Rudolf Ferscha, stepped down. Ferscha had been behind the launch of Eurex US in Chicago in 2004 but sources say he was not given the support he needed to develop the US effort properly.