Daily Agenda: Layoffs Begin for Wall Street Bond Traders

Morgan Stanley cuts anticipate rate hike, illiquidity; Chinese factory activity weakens; Puerto Rico’s governor to speak on Capitol Hill.


The revelation that Morgan Stanley will commence a round of layoffs in its fixed-income trading division comes as unwelcome news for Wall Street with year-end bonus season around the corner. With an anticipated Federal Reserve interest-rate hike and increasingly patchy liquidity signaling that bond market volatility may increase, many primary dealers are now reconsidering their headcount in the underperforming segment. The Morgan Stanley move follows attrition in trading groups spurred by the passage of Dodd-Frank and other post-crisis legislation that have made it more difficult for major banks to navigate conflicts of interest in securities markets.

Chinese PMI dips lower. Official purchasing manager index levels released today by China’s National Bureau of Statistics revealed the lowest level of manufacturing activity since August of 2012. At 49.6, the headline factory-activity gauge fell below both its prior 49.8 reading in October and consensus forecasts for 49.9. Meanwhile, final Caixin/Markit manufacturing data PMI data drawn from smaller firms registered a contraction at 48.6, which was shallower than anticipated.

European PMI shows signs of life. Markit flash PMI data drawn from manufacturers in the Eurozone released today were better than forecast, with the aggregate headline index for the common-currency region rising to 52.8 in November from a prior 52.3. The news comes on the same day as record low unemployment data in Germany and lower-than-forecast jobless data in Italy.

Mattress merger. On Monday Texas-based Mattress Firm Holding Corp. announced an agreement to acquire for roughly $780 million Hicksville, New York-based HMK Mattress Holdings, which operates retail locations under the brand Sleepy’s. The combined entity will operate more than 3,500 locations across 48 states.

Zurich Insurance leader to depart. Today Zurich Insurance Group announced that Martin Senn will step down as chief executive of the Swiss insurer. The announcement follows a series of high-profile executive departures, a failed bid for U.K.-based RSA Insurance Group and business reversals.

Getting a fix on Puerto Rico. Puerto Rican Governor Alejandro Garcia Padilla testifies before the Senate Judiciary Committee today as the island territory continues to struggle with its crushing debt. Some $354 million in combined principal and interest on existing bonds is due today and Padilla’s statements are expected to focus on why the territorial government has chosen to either make or withhold payments as restructuring negotiations drag on.


BlueCrest to wind down funds. Today BlueCrest Capital Management revealed that it will cease handling assets for outside investors at year end. The firm will reportedly return the more than $7 billion currently under management to focus on managing the investments of partners only.