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Money markets treasury sells bills, ecb rate cut awaited


* Demand robust for U.S. Treasury 6-month bills* ECB rate cut bets remain after EU summit outcome* Rate cut expectations based on weakening economyBy Ellen FreilichNEW YORK, July 2 Demand for three-month bills the U.S. Treasury sold on Monday was in line with bidding over the last three months but demand for six-month bills was more robust than usual. Treasury sold $30 billion in three-month bills at a high rate of 0.10 percent, awarding 12.35 percent of the bids at the high. The value of bids received over those accepted was 4.68. The $27 billion in six-month bills were sold at a high rate of 0.15 percent with 51.35 percent of the bids at the high. The ratio of bids received over those accepted was 4.82."Today's six-month auction drew the most robust bid in several months from the buyside perhaps due to the January 3 maturity date, which bridges year-end," said Thomas Simons, money market economist at Jefferies & Co in New York.

Perhaps the dour Institute of Supply Management report on U.S. manufacturing was constructive for purchases of short-term bills, but Simons said demand from money market funds was the biggest factor keeping bill rates low."Money funds need to keep their weighted average maturity and weighted average life at certain levels so they continue to buy bills and keep rates well below the 25 basis points interest rate on excess reserves," he said. Meanwhile, money markets expect the European Central Bank to cut interest rates this week as the euro zone economy struggles after policy action from last week's European Union summit provided only short-lived relief to volatile sovereign debt markets. Early Monday, Spanish and Italian debt yields fell after euro zone leaders last week surprised markets by agreeing on steps to curb the debt crisis. But eight hours later, the fall in Spanish debt yields lost steam amid concern over potential hurdles to implementation and uncertain global growth.

"The U.S. fiscal 'cliff,' and Europe and the implications of China's new five-year plan to re-orient their economy all throw assumptions into some kind of flux," said Jerry Webman, chief economist at OppenheimerFunds. In Europe, France sold a 51-week Treasury bill at a record low yield at a short-term debt auction on Monday, indicating demand amid concerns about the euro zone's debt crisis ease. France has seen borrowing costs fall in recent weeks to historic lows as investors seek the relative safety of French debt with the promise of richer yields than offered on German bonds. Forty-eight of 71 analysts polled by Reuters expect the ECB will trim interest rates on Thursday, with most predicting a 25-basis-point cut to 0.75 percent, where they will stay until 2014 at least.

The survey was taken before European leaders decided on a more flexible use of euro zone rescue fund last week, but given recent economic data and rhetoric from ECB policymakers, analysts are still betting on more monetary easing."Now the markets will look less to the leaders of the big European countries for direction and more to the European Central Bank which will come out with a statement on Thursday," said James Barnes, senior fixed income portfolio manager at National Penn Investors Trust Company in Wyomissing, Pa. What ECB President Mario Draghi says, whether about possible bond purchases or another long-term refinancing operation (LTRO) "can add to the good news that came out of the summit last week and add more clarity so that the market has a better idea of what to expect going forward," Barnes said. After euro zone leaders made some headway at last week's summit, the "European Central Bank will applaud that and be more open to taking some action on their end," Barnes said. European leaders decided last week that euro zone rescue funds could be used to stabilize bond markets without extra austerity measures and recapitalize banks directly without increasing the country's budget deficit. Goldman Sachs analyst Francesco Garzarelli said ECB policies have reduced the risk of a liquidity shortfall."Investors have 'learned' that the size of policymakers' response will be commensurate to the degree of stress in funding markets," he wrote in a note on Monday. Three-month Euribor rates inched lower on Monday to 0.652 percent from 0.653 percent. That was within range of a record low of 0.634 percent hit in early 2010.

Money markets us commercial paper market shrank in latest week


* Businesses prefer longer term borrowing* Some firms have found alternate funding sources* Euribor rate falls to lowest since July 2010* Euribor/OIS spreads seen stabilizing around 20-30 bpsBy Ellen Freilich and Ana Nicolaci da CostaNEW YORK/LONDON, March 22 The U.S. commercial paper market contracted in the latest week, suggesting a pullback in short-term business borrowing even as data offered evidence of a strengthening economy, according to Federal Reserve data released on Thursday. In the week ended March 21, commercial paper outstanding fell $5.6 billion to $931.2 billion on a seasonally adjusted basis, the Fed said. U.S. non-seasonally adjusted foreign bank commercial paper outstanding fell $300 million in the same week. U.S. non-seasonally adjusted commercial paper outstanding fell $2.3 billion. On Thursday, the U.S. Labor Department said the number of Americans claiming new unemployment benefits dropped to a four-year low last week, offering further evidence the job market was gaining traction. Commercial paper "is just a smaller market than it used to be," said Terry Sheehan, economic analyst at Stone & McCarthy Research Associates in Princeton, New Jersey. "Some companies found alternate funding sources so commercial paper hasn't (recovered from the recession) as much as it might have otherwise."In addition, with the approach of the quarter-end, "risk aversion tends to set in so the declines in commercial paper (issuance) could be related to that," Sheehan said.

Recent upticks in rates might also have encouraged firms to seek longer term borrowing opportunities in order to lock in lower rates when they can, she added, noting that is possible because banks are lending more than they did in the immediate aftermath of the financial crisis. Still, "overall, lending isn't what it was, and that's consistent with the lower level of economic activity that we've seen these last few years," Sheehan said. Overseas, bank-to-bank Euribor lending rates fell on Thursday amid ample liquidity. Analysts said short-term rates could stabilize near record lows since the European Central Bank is expected to keep interest rates steady for a while. Three-month Euribor rates fell to 0.817 percent - the lowest since July 2010 - from 0.824 percent on Wednesday. One trillion euros worth of cheap three-year ECB funding has pulled the rates back from the 1.42 percent level they were at before the central bank's first injection in December. Euribor futures show the three-month rate should fall to around 0.64 percent in June or September - near record lows of 0.63 percent seen in March of 2010.

"It seems that June or September Euribor are pricing a level of Euribor which is as low as it can get if the European Central Bank doesn't cut the deposit rate," Corentin Rordorf of Morgan Stanley said. Since the rate offered at the ECB's deposit facility is currently at 0.25 percent, overnight Eonia rates at 0.35 percent are not expected to ease much further. Given that a three-month borrowing rate has to offer some premium over overnight lending costs, Euribor rates of 0.64 percent, offering roughly a 30 bps premium over the current Eonia rate, cannot fall much further either, Rordorf said. ECB BUFFER

Simon Smith, chief economist at FxPro also saw the three-month Euribor/OIS spread - a measure of counterparty risk - stabilizing around 25-30 basis points, as the ECB is expected to keep borrowing costs on hold for at least the next year. A Reuters poll published last week shows economists expect the ECB to keep interest rates at a record low of 1.0 percent through all of this year and next, after the ECB warned about inflation risks at its last monetary policy meeting."The ECB has been relatively clear, not explicitly saying but giving the impression that it doesn't really have any inclination to move rates lower," Smith added. "There's probably a bit further to run in terms of those short-end contracts but not that much further."The ECB earlier this month raised its forecasts for inflation this year.. Another flare-up in the euro zone debt crisis could cause measures of counterparty risk to widen. Market players are increasingly worried about the fiscal situation in Spain, and they do not rule out further bailouts for Greece and Portugal. Ten-year Spanish/German government bond yield spreads have widened some 40 basis points since the beginning of the week. A widening in the spreads of peripheral debt over their German counterparts could prompt a rise in measures of counterparty risk. But Alessandro Giansanti, senior rate strategist at ING said any impact would be offset by improved funding conditions for banks after the two ECB cash injections, limiting any fall-out. Indeed, excess liquidity in the financial system could take the Euribor/OIS spread as far as 20 basis points, he said."When you know that every bank can access unlimited funding from the ECB, from the national central bank, do you really need (such a big) risk premium in this environment?" he said.

Money markets us rates futures fall on europe worries


* Front-month Eurodollar futures fall, deferreds up * Dollar Libor rises first time in two weeks * Two-year U.S. swap spread broke 200-day moving average By Richard Leong NEW YORK, May 9 Front-month U.S. short-term interest rate futures fell on Wednesday on jitters that Greece's political turmoil and Spain's bank woes will deepen Europe's debt crisis, causing investors to cut lending to the region's already wobbly banking system. Fear that euro zone banks will struggle to raise dollars in the open market manifested itself in the first rise in the London interbank offered rate on three-month dollars in about two weeks. The increase in this benchmark on interbank borrowing cost coincided with a rise in yields on Spanish and other government debt among weaker euro zone countries. Spanish bank shares, led by Bankia were a drag on European stocks. The FTSEurofirst 300 index closed down 0.3 percent on Wednesday. "European financials are under pressure and sovereign debt spreads are also under pressure," said Richard Gilhooly, an interest rate strategist at TD Securities in New York. Eurodollar futures, which gauge traders' view on the future level of dollar Libor, for delivery through mid-2014 were down as much 3.5 basis points in late morning trading. These contracts traded collectively, known as "packs," traded 2 to 3 basis points lower. Weaker front-month packs, together with a higher Libor fixing, spurred heavy selling in U.S. interest rate swaps, traders and analysts said. The interest rate on two-year interest rate swap agreements was last bid at 0.5760 percent, up 3 basis points on the day. The yield premium on two-year interest rate swap contracts over two-year Treasuries, which is seen as a gauge of investor risk aversion and private dollar funding cost, rose 2.50 basis points to a mid-quote of 33.50 basis points. The two-year swap spread touched 34.50 basis points earlier, a level not seen since late February. It broke its 200-day moving average of 34.00 basis points. On the other hand, latter month Eurodollar contracts rose on expectations that the U.S. Federal Reserve and European Central Bank will leave policy rates longer than previously thought and/or embark on more bond purchases to help their economies. So-called "Blue" and "Gold" packs, or Eurodollar packages with contracts for delivery in mid-2015 to early 2017, were up 1.50 basis points to 1.75 basis points from Tuesday's close. Earlier in London, Libor on three-month dollars rose 0.1 basis point at 0.46685 percent. It had not changed in the previous nine sessions. Libor is a rate benchmark for $360 trillion worth of financial products worldwide.

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Press digest australian business news april 10


April 10 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)Export statistics from some of the largest bulk commodities ports in Australia have revealed that miners' exports will vastly improve from the natural disaster-affected first quarter of last year, despite industrial action hampering iron ore and coking coal sales in the three months to March. Glyn Lawcock, analyst at investment bank UBS, said the coking coal export numbers were "disappointing" given that the last 12 to 24 months had seen an expansion in port and rail infrastructure. Page 15.-- The Australian Competition and Consumer Commission is today expected to announce its conditional support of pay television operator Foxtel's A$1.9 billion takeover of rival Austar United Communications. The deal was announced in May last year, but the process slowed when the competition regulator raised concerns about the power of telecommunications giant Telstra, Foxtel's half-owner. Observers said Foxtel would have challenged the regulator in court had it not approved the deal. Page 15.-- A Melbourne-based engineering consultancy firm is assessing a proposed merger with four of the world's largest engineering firms to improve its own plans for growth. "We're undertaking a detailed assessment of the potential for a transformational merger," Dale Bryce, spokesman for Sinclair Knight Merz, said. "Conversations often happen with lots of parties but all we're doing is beginning a process to assess the potential of that merger," he added. Page 15.-- The chief executive of Superpartners, one of the largest superannuation back-office firms in Australia, has announced he will resign when his five-year contract expires later this year. Greg Camm wrote in an email to staff that "the board wants someone to commit to 'steer the ship' for the next four to five years, and given my age and ambitions, I'm not able to make that commitment". Page 17.-- THE AUSTRALIAN (this site)After running for more than 14 years, global funds manager GMO has shut down its local equities funds due to weak markets and a tough economic environment. According to figures from investment researchers Morningstar, GMO's Small Companies Trust had invested A$7.5 million by the end of March and the Australian Equities Trust had A$198 million invested by the same period. Page 17.--

The Federal Opposition is gearing up for a political fight in the Parliament over the country's borrowings amidst revelations that the Federal Government is on the verge of breaching the country's debt ceiling. Labor raised the limit on borrowings to A$250 billion from A$200 billion less than a year ago but is close to exceeding the cap due to a larger than expected deficit. The current pool of commonwealth bonds was A$238.1 billion towards the end of last week. Page 17.-- The founder of Tricom Securities, the brokerage infamous for failing to settle trades in 2008, has returned to the business world by securing a A$200 million contract with the Sydney division of the Catholic Church. Lance Rosenberg, a director of Spring Cove Holdings, has joined a venture organised by developer Philip Wolanski to develop land surrounding a former seminary in Manly, New South Wales. Spring Cove's subsidiary is listed as the builder responsible for the development. Page 17.-- The chairman of Lawson Gold, David Hillier, has secured a deal to search for copper and gold in a joint venture with Mawarid, a conglomerate in Saudi Arabia with links to the country's royal family. "There are a lot of companies (that) will be touting that they have got projects in the kingdom. The big difference is ours are granted mining tenements," Mr Hillier said. Page 18.-- THE SYDNEY MORNING HERALD (this site)

Robert Rennie, chief currency strategist at Westpac Banking Corporation, said investors may begin to "mothball" ventures over concerns about how much larger Australia's pipeline for investment can grow. "The market is beginning to say: I don't think that A$912 billion is going to get any bigger. In fact, I think it's going to start getting smaller," Mr Rennie added. Page B1.-- Senior executives at Westpac Banking Corporation have been informed by new recruit Brian Hartzer, who was a former top executive at rival Australia and New Zealand Banking Group that he expects to begin by the middle of the year. Investors are already beginning to earmark Mr Hartzer as Gail Kelly's replacement to lead the A$63 billion lender. "He's very much on board with the strategy and how we're going to drive this," a member of the bank's management panel said about Mr Hartzer. Page B3.-- The Australian Competition and Consumer Commission has finally resolved a decade-long fight against a series of finance and telecommunications firms that allegedly tricked small businesses into leasing agreements for equipment after the Federal Court last week made declarations against two companies and seven individuals. The regulator brought a case forward in 2008 against 28 parties for allegedly selling telephone bundles which the customers mistakenly believed came with free equipment. Page B3.--

The Australian Competition and Consumer Commission (ACCC) has announced that it will not attempt to block Pact Group from making a A$150 million takeover bid for rival Viscount Plastics. The packaging manufacturer attempted to acquire Viscount in 2008 and 2009 but the proposal was dropped after the competition regulator aired concerns about the transaction. Rod Sims, chairman of the ACCC, however, said last week that the merged entity would have a local rival for plastic pails and face competition from imports. Page B4.-- THE AGE (this site)Politicians and finance figures have criticised the A$1.3 trillion superannuation sector for its high level of investment in the sharemarket, with the local S&P/ASX 200 falling 13.8 percent in the second half of last year. "If governments in the future of either side are faced with extremely unhappy super funds members  that will generate enormous political pressure," former federal finance minister Lindsay Tanner said last week. Page B1.-- The local stockmarket is expected to open lower today following the release of disappointing jobs data from the United States (US). Shane Oliver, chief economist at diversified financial services firm AMP, said futures trading hinted at a more than 1 percent drop in US shares, with the negative sentiment expected to be picked up by the local market. "The combination of a weaker than expected payroll result in the US and higher than expected inflation in China has set the week off on a bad note," Dr Oliver said. Page B3.-- Julie Southern, chief commercial officer of British airline Virgin Atlantic, said in an interview that the carrier has not seen an influx of Australians looking to fly to the London Olympics. The revelation comes as Qantas Airways reduces its number of daily flights to London from five to three in a bid to minimise its exposure to Europe and its financial woes. Page B3.-- Investors in Ten Network will be looking towards new chief executive James Warburton to turn around the broadcaster's fortunes, having recently endured a 40 percent downgrade to net profits and earnings for the six months to February and a share price that fell from A$1.40 to A80 cents. Mat Baxter from media buying firm Universal McCann said he wanted Ten to better maintain ratings. "Ratings are much more volatile than they were five years ago so they need to give people the confidence that they can deliver consistency," he said. Page B5--