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Money markets us cp market expands in latest week


NEW YORK, July 12 The U.S. commercial paper market expanded in the latest week, suggesting more corporate borrowing despite worries about a global economic slowdown, Federal Reserve data showed on Thursday. The size of the U.S. commercial paper market expanded by $9.4 billion to $981.9 billion in the week ended July 11 on a seasonally adjusted basis, according to the latest Fed data. The data shows there may have been increased risk taking after a large fall the previous week, when investors were expected to be reducing positions in order to tidy balance sheets for quarter end. The market had contracted by $35.7 billion the previous week. Outstanding volumes have largely stayed in the area between $900 billion to $1 trillion this year, and remain below year-end levels of $1.04 trillion at the end of 2010, the Fed data show.

The market size without seasonal adjustments also rose, by $24.4 billion to $995.6 billion in the latest week. Foreign banks' commercial paper outstanding increased $2.5 billion in the latest week to $130 billion on a non-seasonally adjusted basis, the latest Fed data showed.

BANKS SLASH ECB DEPOSITS In Europe Banks slashed the amount of money they parked at the ECB after it stopped paying interest on overnight deposits on Wednesday, but there was no sign they were using it to lend more or buy the bonds of crisis-hit euro zone states.

Banks are reluctant to lend to each other for fear of not getting all their money back, so they have deposited back with the ECB much of the cash from the central bank's 1 trillion euros cash boost in December and February. ECB policymaker Josef Bonnici said the plunge in overnight deposits - to 325 billion euros from more than 800 billion a day earlier - was "encouraging" and said he expected to see a rise in loans to firms and consumers as a result. But ECB President Mario Draghi has said he expects little impact on what banks and other investors do with their spare cash - a view reinforced by them simply moving funds from the deposit facility to their current accounts at the central bank."It's just a shifting of cash from one place to another and ultimately it's a zero-sum game," said Simon Peck, rate strategist at RBS.

Money markets us cp market grows, ecb expected to cut rates


NEW YORK/LONDON, May 2 The U.S. commercial paper market grew in the latest week, suggesting increased interest in lending to finance inventories and payrolls and appetite to fund short-term corporate debt, Federal Reserve data showed on Thursday. The size of the U.S. commercial paper market grew by $14.1 billion to $939.9 billion on a seasonally adjusted basis in the week ended May 2 from a seasonally adjusted $925.9 billion outstanding a week earlier. Meanwhile, the size of the market without seasonal adjustments grew by $3.9 billion in the latest week to $1.0213 trillion from $1.0174 trillion. Meanwhile, dollar-denominated three-month London Interbank Offered Rates (Libor) fixed at 0.46585 percent on Thursday, which was unchanged on the day. Three-month dollar Libor rates have remained virtually unchanged for over two weeks. Three-month euro Libor rates eased to 0.62286 percent on Thursday from 0.62929 percent Wednesday. Three-month euro Libor has been mostly falling steadily since touching a recent high of 1.56 percent in June of last year. In Europe, money markets stuck to expectations the European Central Bank will cut rates this year after the ECB on Thursday neither signaled further monetary easing nor eliminated the possibility of more stimulus. At a press conference in Spain, ECB President Mario Draghi painted an uncertain picture of the euro zone's economy, saying while it was likely to improve this year there were risks of a decline. He said more time was needed to see the impact of cheap three-year financing on the real economy and that any exit strategy remained premature. Euribor futures gave up gains after the comments, as traders took profit on previously held positions. But by late trade, they had come off their lows as some bought back into the dips. "Hopes for a signal from the ECB that further monetary support is in the cards were dashed today, with the central bank still awaiting the full impact of the measures already implemented and stressing once again the need for fiscal consolidation and structural reforms to foster sustainable growth," said Natascha Gewaltig, director of European economics for Action Economics in London. Data this week painted a bleak picture of the manufacturing sector in the euro zone, while double-digit unemployment fueled concerns that austerity in Europe was choking an already sluggish economy. Euribor interest rate futures fell as much as 3.5 ticks across the 2013 and 2014 strip after Draghi's comments, having traded as much as 2 ticks higher when the press conference started. Alessandro Giansanti, strategist at ING, said the June contract was pricing in a close to 50 percent chance of a 25-basis-point rate cut that month, which was little changed compared to before the press conference. One trader said the worsening economic situation in the euro zone had money markets players betting on more monetary easing from the ECB, be it via a cut in interest rates, in the deposit facility rate or by increasing the maturity on long-term refinancing operations. The ECB injected one trillion euros' worth of cheap three-year cash in December and February, providing highly indebted countries with some breathing space as the excess liquidity helped limit a rise in peripheral bond yields. "The reaction was fairly predictable in that people are happy to be long Euribor futures and as a result, because nothing happened today, the pull-back was bought quite quickly," said the trader. "Today's press conference probably didn't surprise us in that nothing happened in terms of changing the monetary stance, but they certainly didn't close any doors." Eonia forwards were suggesting that the overnight rate be at 0.29-0.24 percent by November compared to 0.34 percent currently. The trader said that suggested a 30 percent chance of a 25-basis-point rate cut by that time.

Money markets us isnt japan but rate volatility may fall further


U.S. interest rate volatility has plunged to historical lows as expectations increase that the Federal Reserve may extend its commitment to record low rates beyond its current guidance of 2014. With the euro zone's debt problems continuing to unravel and global economies pointing more and more towards increasingly sluggish growth, U.S. Treasuries yields and volatility may decline still further."If you believe that we are going into a global growth downturn, with incredibly anemic growth globally, then you are looking at multi-year low rates and potentially new quantitative easing," said Mary Beth Fisher, an interest rate strategist at BNP Paribas in New York. For those in that camp Fisher recommends selling volatility through short-to-intermediate-dated swaptions, which are options to enter into interest rate swaps at a future date. These would gain in price value if volatility declines. A worsening economic outlook has increased speculation that the Federal Reserve will launch a third round of quantitative easing later this year, as well as extend its statement that it will hold rates near zero though 2015.

The U.S. central bank said last week that it would extend its Operation Twist program, which involved buying long-dated debt and funding purchases with sales of short-term notes, though the end of the year. Further easing in a deteriorating economic picture would likely send U.S. Treasuries yields to new lows and further dampen rate volatility."Despite the current low levels of volatility, on a relative basis we could go much lower," said Fisher.

To some, the stilted U.S. economy appears to be following the template of Japan, which has seen two "lost decades" of stagnation, deflation and rock-bottom rates. Japan has much lower rates than the United States and shifts in the country's bond yields and interest rate swaps are also more muted, Fisher said. Five-year Japanese swap rates, for example, see moves of around 22 basis points a year while equivalent U.S. swaps may move by over 60 basis points, based on swaption prices.

Two-year Japanese swaps may also shift by only around 12 basis points over one year while U.S. equivalents may increase or decrease by around 35 basis points."To get to where Japan is we would have to get much lower in rates and stay there. We would have to start range trading in narrower and narrower bands, and the moves through those ranges are much less violent," Fisher said. The United States has many key differences to Japan, which has an aging population that poses larger demographic challenges. Japan has also struggled with deflation, which the United States has thus far been able to avoid. That said, the example of Japan shows that even at the U.S. low yields there is still plenty of room to fall further. Fisher recommends selling volatility on options to enter into 10-year swaps in a range of contracts that begin a month from now and extend through to five years.

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.