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Money markets us repo rates elevated before fomc


* Talk of Fed mulling reverse repos lifts repo rates * Analysts see low chances of a Fed "sterilized" bond move * No more ECB aid, T-bill supply as factors on higher rates By Richard Leong NEW YORK, March 12 A key borrowing cost for banks and bond dealers slipped on Monday, but remained at elevated levels ahead of a Federal Reserve policy meeting, which might hint at a move that could push up short-term interest rates. What banks and dealers charge each other on overnight loans secured by U.S. Treasuries fell to about 19 basis points from 21 basis points on Friday. This interest rate on overnight repurchase agreements (repos) is roughly 10 basis points above the recent low seen 2-1/2 weeks ago when investors scrambled for Treasuries in this corner of the funding market worth $1.6 trillion. Since then, the overnight repo rate had risen on a combination of factors including fading expectations that the European Central Bank will inject more cheap funds into the region's banking system and a modest increase in weekly Treasury bill supply since mid-February. "The main source of liquidity in the market, LTROs, over the last few months is now essentially a thing of the past," said Russ Certo, head of rates at Gleacher & Co. in Stamford, Connecticut. Since December, the ECB awarded more than a trillion euros in three-year loans through two long-term refinancing operations (LTROs) in an effort to give them time to raise capital and deal with the soured investments in peripheral sovereign countries. Last week, a Wall Street Journal article added upward pressure on dollar repo rates. It said should the Fed decide to buy more bonds to boost growth, it could borrow back the money it used to buy those bonds for short periods of time at low interest rates. By engaging in "reverse repos," the Fed would take that money out of circulation, or "sterilize" it. Such a Fed move could reduce the amount of the cash in the financial system, resulting in banks and dealers bidding more aggressively for short-term funds. "This could push short-term rates higher," said Raymond Gilmartin, head of repo trading at Bank of Nova Scotia in New York. Wall Street's consensus view is the Fed will stick to its near zero interest rate pledge until at least late 2014 at its policy meeting on Tuesday, but it would refrain from announcing any additional bond purchase program. The Federal Open Market Committee, the U.S. central bank's policy-setting group, is expeccted to release a statement at about 2:15 p.m. (1815 GMT). Some analysts downplayed speculation of a "sterilized" bond purchase program, which the Wall Street Journal story suggested the Fed might consider because it could curb inflationary pressure, as a factor behind the rise in overnight repo rates. They said any more stimulus from the Fed is unlikely after last Friday's better-than-expected U.S. payroll report and other recent encouraging reports on manufacturing. These analysts reckon the increase in repo rates stems more from an expected pickup in borrowing among dealers to fund $66 billion in coupon Treasuries supply this week and money market funds shifting money into riskier assets from their repo and Treasury bill holdings. Meanwhile, the elevated level in repo rates has partly fueled a rise in Treasury bill rates as investors demand higher returns on their short-term cash investments, they said. On Monday, the U.S. Treasury auctioned a combined $64 billion of three-month and six-month bills at higher interest rates than a week earlier despite stronger bids for them. The Treasury sold $33 billion of three-month bills at a rate of 9.5 basis points, up from 8.0 basis points a week ago. It sold $31 billion of six-month bills at a rate of 14.5 basis points, up from 13.0 basis points last week.

Money markets us seasonally adjusted cp grows in week


* US seasonally adjusted CP rises $6.7 bln on the week * Europe's interbank lending rates regularly hitting record lows By Chris Reese and Ana Nicolaci da Costa NEW YORK/LONDON, Aug 16 U.S. seasonally adjusted commercial paper outstanding rose $6.7 billion to $1.020 trillion in the week ended Aug. 15, the Federal Reserve said on Thursday, suggesting some increased use of the market for corporate borrowing. Without seasonal adjustments, U.S. commercial paper outstanding fell $12.5 billion to $989.5 billion. While seasonal adjustments typically smooth volatility, analysts think the gyrations that occurred during the financial crisis - which figure into the seasonal adjustment - actually make the seasonally adjusted commercial paper data appear more volatile than the figures look without the seasonal adjustments. U.S. non-seasonally adjusted foreign bank commercial paper outstanding fell $6.1 billion to $191.9 billion in the same week. Meanwhile, euro zone interbank lending rates have fallen far below their U.S. equivalent on expectations the European Central Bank will ease monetary policy further, drawing closer to the Federal Reserve's near-zero rate policy. Three-month Euribor rates have hit record lows on a regular basis since the last monetary policy meeting when ECB chief Mario Draghi said the bank's policymakers discussed the possibility of cutting rates at their August meeting but had decided it was not the time. Given U.S. rates are already near zero, further monetary easing in the world's largest economy should come in the form of non-standard measures - probably more "quantitative easing" through central bank bond-buying - explaining the growing difference between euro and dollar interbank rates, analysts said. "The divergence between the two ... is mainly due to different monetary policy expectations between the euro zone and the U.S., with markets still pricing the possibility of further policy rate cuts in the euro zone," Giuseppe Maraffino, fixed income strategist at Barclays in London said. "The market is now pricing a high probability of a refi rate cut in the euro zone and also some chance of a deposit facility (rate) in negative territory." Three month euro Libor rates were little changed on Thursday at 21 basis points, half their dollar equivalent at 43 basis points. The three-month Euribor rates, traditionally the main gauge of unsecured bank-to-bank lending, eased to 0.339 percent from 0.341 percent on Wednesday. The ECB is expected to cut its refinancing rate by another 25 basis points to 0.5 percent in September, according to a Reuters poll of economists. Eonia forwards suggested the market expected overnight rates to fall further from current levels, to a trough of 0.068-0.018 percent in November from 0.11 percent currently. Given the deposit rate - currently at zero - serves as a floor for overnight Eonia rates, analysts said this suggested the market was pricing in some possibility of negative deposit rates.

Money markets us sells 4 week bills at lowest rate in 2 months


* 4-week US bill auction garners lowest rate since early April * Markets pricing small probability of ECB rate cut in June * Such bets likely to accumulate in coming days By Chris Reese and Marius Zaharia NEW YORK/LONDON, May 30 The U.S. Treasury sold four-week bills at the lowest interest rate in nearly two months on Wednesday, as investors worried over the implications of Europe's debt crisis continued to buy shorter-dated U.S. debt as a safe-haven. The Treasury sold the $30 billion of four-week bills at a high rate of 0.06 percent, the lowest since a similar auction of the bills on April 3 brought a high rate of 0.055 percent. Still, Wednesday's auction rate trumped the four-week auctions in December and January, when a series of sales brought a high rate of zero. Separately, a Treasury sale of $25 billion of one-year bills on Wednesday brought a high rate of 0.185 percent, unchanged from the two previous weekly auctions. Three-month dollar-denominated London Interbank Offered Rates (Libor) fixed on Wednesday at 0.46685 percent, unchanged from Tuesday. Three-month dollar Libor has held relatively steady since mid-April, after falling from a recent high near 0.58 percent in early January. Meanwhile, bets that the ECB will cut interest rates next week have reappeared in money markets, as Spanish and Italian debt yields approach levels that caused the central bank to introduce unprecedented easing measures last year. The threat that Greece could eventually leave the euro and worries over Spain's banking sector have prompted investors to sell Spanish and Italian debt, bringing the two countries' borrowing costs closer to levels deemed as unsustainable. The sheer size of their debt markets and their deep-rooted connections with other financial systems in the euro zone are reasons for investors to speculate that a policy response is being contemplated. The European Central Bank is seen as the most likely institution to take such measures to cool market jitters because it can act faster than politicians. It has done it before in the past by injecting around 1 trillion euros of cheap loans into financial system in December and February. Euro zone economic data this month has also been poor, supporting expectations that the ECB may soon resume monetary easing, possibly by cutting its key refinancing rate by 25 basis points from a record low of 1 percent. "Data ... have been softer, and then you have the Greece issue continuing to be unresolved and the Spanish issue continuing to be unresolved," said Elaine Lin, a rate strategist at Morgan Stanley, whose economists predict a rate cut. She said the euro overnight Eonia rate forward market was only pricing an over 10 percent probability of a rate cut in June and the chances were higher by another 10-20 percentage points for the July meeting. However, she expected markets to factor in a higher probability in the next few days. A key rate cut, if also accompanied by a cut in the 25 basis points deposit facility rate, could trigger a 5-10 bps fall in the near-term forward Eonia rates toward the 20 bps level seen now in September-October Eonia forward rates, Lin said. The lowest point on the 2012 Eonia curve is December, at 16 basis points, implying an 80 percent probability that the deposit rate would be slashed in half, according to BNP Paribas rate strategist Matteo Regesta. A Reuters poll of economists showed the ECB was likely to resist pressure to cut interest rates in June, but also pointed to a growing probability that it will reduce them later this year. Speculation about ECB monetary easing has also fueled a rally in Euribor futures , implying bets for lower fixings of benchmark euro zone interbank three-month Euribor rates later this year. The December Euribor future has gained back most of its losses made since Greece's inconclusive election on May 6, that sparked fears the country may be exiting the bloc. The fall earlier this month also coincided with unwinding bets that the ECB would have cut rates in May.

Press digest australian business news march 28


Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy. THE AUSTRALIAN FINANCIAL REVIEW (this site)--Leighton Holdings yesterday went into a share trading halt as it evaluated "revisions to previous guidance" after conducting its quarterly reviews. The market is now preparing for another write-down relating to the A$4.1 billion Brisbane Airport project where work is currently continuing around the clock in an effort to meet the scheduled opening of June 30 this year. Page 17.--Reserve Bank of Australia assistant governor Guy Debelle said yesterday, at an investment conference hosted by the Sydney branch of Morgan Stanley, that foreign investors, who currently hold about 75 percent of the total outstanding government debt, tended to be "buy-and-hold investors don't change their mandates in a hurry." This could lead to tighter liquidity, that may impact the Australian financial system as the new liquidity rules come into effect, Mr Debelle added. Page 17.--ConocoPhillips, the large United States oil company, has stated it supports the Woodside Petroleum proposal to create a gas processing site at James Price Point on the West Australian coast in the Kimberley region. Conoco could send gas from its Canning Basin shale gas operations or its Browse Basin fields, said the president of Conoco's Australian operations, Todd Creeger, who will address the Australian Financial Review's National Energy Conference today in Brisbane. Page 19.--Adelaide-based oil and gas exploration and production company Beach Energy, has announced a capital raising targeting A$345 million as its share price has enjoyed a healthy increase recently. "They have obviously outlined a fairly aggressive exploration and development program over the next two or three years so it's unsurprising  they would take advantage of the run in share price  to pre-emptively get some capital in the door," said Ben Wilson of JPMorgan yesterday. Page 21. THE AUSTRALIAN (this site)--Global mineral resources company Rio Tinto is conducting a strategic review of its diamonds division that may lead to its sale. "We have a valuable, high-quality diamonds business but, given its scale, we are reviewing whether we can create more value through a different ownership structure," said Harry Kenyon-Slaney, chief executive of Rio's diamonds and minerals division, yesterday. BHP Billiton indicated last November that it may sell part or all of its diamond operations. Page 35.

--Youth-oriented fashion apparel retailer Glue has announced it may discard brands that utilise discount online channels for sales. "Once a brand gets into the spiral of discounting and just looking for sales, the value of the brand depreciates and we don't want to be involved with brands that will be entering that spiral," said Hilton Seskin, owner of the Glue chain and chairman of the Australian arm of British fashion retailer Topshop. Page 35.--Theft in retail outlets cost the industry A$7.5 billion in 2011, reported the Australian Retailers Association - a 50 percent rise since 2009. Cuts in staff numbers over the last few years have been identified by Myer and David Jones as a tactical error producing frustrated shoppers who are more likely to leave and take merchandise without paying for it. "If there's one thing that stops people stealing, it's when there are people around the store," said Bernie Brookes, chief executive of Myer which has increased staff numbers significantly this year. Page 35.--The joint venture between large specialist investment manager AMP Capital Investors and United States investment house Brookfield Investment Management has been terminated. Brian Delaney, business director of client product and marketing at AMP, said yesterday that the increasing demand for listed global property and infrastructure securities provided an opportunity for the company to "take control of the platform and in the fullness of time to go into more markets." Page 36.

THE SYDNEY MORNING HERALD (this site)--Housing affordability was deteriorating rather than improving, according to home builder Stockland. The company said one factor is that the deposit conversion rate applying to new home sales has gone down. "Often this is due to buyers going through the finance process and getting knocked back even where we assessed them as being able to get finance," said Matthew Quinn, Stockland chief executive, yesterday. Page B1.--In the Federal Court in Melbourne, shopping centre investment specialist Centro and auditor PricewaterhouseCoopers (PwC) are being sued by investors over the calamitous Centro share price fall of 2007 that followed the discovery that billions of dollars of short-term debt had been classified erroneously as long-term debt. Accountant Paul Belcher, who worked at PwC prior to joining Centro, said the error was not referred to at the September 2007 meeting that reviewed the accounts for final approval. Page B3.--In the Federal Court, 13 councils are claiming misleading or deceptive conduct and negligence by the companies that sold them the constant proportion debt obligations (CPDOs) that collapsed in value during the global financial crisis. Ian Jackman, SC, said the emails sent by Mike Drexler, then an employee of ABN Amro, to Standard & Poor's (S&P) giving information on CPDOs, did not contain deliberate falsehoods but perhaps an innocent mistake or carelessness. S&P gave the products an AAA rating. Page B4.

--BHP Billiton chief executive Marius Kloppers has been rated as one of the top 30 chief executives in the world for the second year running by Barron's, a United States business publication. Mr Kloppers was commended over the role BHP plays in providing raw materials to the developing economy of China. Page B5. THE AGE (this site)--South African mining company AngloGold Ashanti has released budget figures showing A$760 million has been allocated to its Australian operations. These include the Sunrise Dam and Tropicana mines in Western Australia as well as further exploration. Gold could reach "well over US$2200 an ounce in coming years," said AngloGold chief executive Mark Cutifani. Page B4.--In a secret exercise, the Australian Securities and Investments Commission (ASIC) determined that the advice given to 64 consumers by financial advisers, that the recipients rated very highly, was rated as much less impressive by ASIC analysts. "The finance industry needs to lift its game," said ASIC commissioner Peter Kell. Page B5.--Shares in farm chemicals group Nufarm closed lower yesterday after the company reported a drop in sales for the first half of the year and noted there were concerns regarding its business in Europe. "Seasonal conditions in Europe are very mixed, and there is increased business risk associated with economic pressures in a number of European countries," said managing director Doug Rathbone. Page B5.--Jetstar Asia, the Qantas Airways-backed low-cost airline based in Singapore, has announced its new chief executive will be Barathan Pasupathi, who worked as the airline's chief financial officer early last decade and has since worked for an airline in Kuwait and an oil company in Singapore. Mr Pasupathi has "first-hand understanding of our business as well as the aviation sector overall," said Dennis Choo, chairman of Jetstar Asia. Page B7.