Fed’s new plans fail to depress dollar spreads

SINGAPORE: A steady drift higher in dollar lending rates in Asia revealed that the US government’s new plans to support consumers and the mortgage securities market had done little to soothe money markets. Rather, the near-zero yields on short term US Treasuries confirmed counter-party risks were far from easing, while wide spreads indicated bank-to-bank lending was still constrained. Three-month dollar funding costs, SIBOR, climbed to 2.2050 on Wednesday from the previous day’s 2.19333, continuing a steady rise from 2.15143 percent on Monday and in line with the upward blip in Libor. The spread between 3-month dollar Libor and market expectations of official interest rates, measured by overnight indexed swaps, widened to 176 basis points, 15 basis points above lows hit in mid-November. The US TED spread, the spread between 3-month treasury bills and inter-bank rates, was nearly unchanged at 208 basis points, having come off 163 this week. Most Asian interbank spreads stayed wide. Korean 3-month bill yields were about 134 basis points below the 3-month certificate of deposit rate at 5.46 percent, just a shade lower than the widest spread in three years. Top-rated Indian companies were raising 3-month funds at rates above 9 percent, 150 basis points or more above the central bank’s lending rate. One-month overnight indexed swaps were meanwhile showing expectations of further monetary easing, at rates of 6-6.6 percent for one-month. In Indonesia, interbank rates eased to 13.06 percent for 6-month funds, from 13.18 on Tuesday. But though the currency recovered from last week’s 10-year lows, dollar forwards remained elevated. Implied rupiah rates, the cost of rupiah obtained by swapping dollars, eased very slightly to around 24 percent for 3-month funds from Tuesday’s 25 and compared with interbank rupiah rates of 12.28 percent

PFGBEST.com and Integral Partner on Technologies to Give Forex Brokers and Customers Access to Multi-Bank Liquidity

Not our usual trading news but interesting all the same. (Be lucky)

PFGBEST.com and Integral Development Corp. (Integral) announce their partnership to provide customers with private, branded FX trading technology solutions to access multi-bank liquidity.Integral's technologies aggregate prices from a number of banks, and provide these to PFGBEST.com retail brokers, dealers and customers through the PFGBEST.com MetaTrader4 (MT4) retail trading platform. This platform is bridged to Integral's FX Grid®, global Multi-sided Trading Facility (MTF). The solution is designed to help retail brokerage firms and Introducing Brokers (IBs) gain access to forex market liquidity and then to stream the aggregated prices to their respective clients.

The PFGBEST.com MT4 platform has been used by several hundred retail forex brokers and dealers and to meet strong market demand, was recently made more broadly available to PFGBEST.com brokers and clients.PFGBEST.com President and Chief Operating Officer Russ Wasendorf, Jr., said, "This agreement allows forex brokers to bypass single-source pricing systems in favor of direct market access to multi-bank liquidity from the FX Grid®. Access to that liquidity has universal appeal to most institutions, funds and professional traders. The retail trading platform supplied by PFGBEST.com - MT4 - is highly configurable to work for a whole host of FX trading models."

Read the full article here

Bank deposits at ECB inch down to 222 bln euros.

Banks deposited 222.229 billion euros at the ECB overnight as of Nov. 24, down from the 224.193 billon euros reported on Monday and below the record high of 297.424 billion set earlier in the month. See Reuters information page for full details.The amount is still more that a quarter of the 801.5 billion euros the ECB has outstanding in open market operations as nervous banks continue to hoard money rather than lend in on in interbank markets in fear that a borrower could become the next casualty of the financial crisis.The ECB also said banks had borrowed 1.970 billion euros from its overnight loan facility, down on the 1.893 billion euros borrowed previously.Following this month's 50 basis point rate cut by the ECB, overnight loans now attract an interest rate of 3.75 percent and deposits pay 2.75 percent, compared the bank's main rate of 3.25 percent.
More info here.

Dollar rates up, despite US Citi rescue.

Stock market investors welcomed the U.S. government's rescue of Citigroup, a debt guarantee program for banks and U.S. president-elect Barack Obama's nomination of New York Federal Reserve President Timothy Geithner as his choice for Treasury secretary.
A general if slight easing of money market tensions was signaled by the narrowing in the premium paid for London interbank offered rates (Libor) over anticipated central bank policy rates or Overnight Index Swaps (OIS).
The Federal Reserve started lending to money market funds via its new cash facility, the Money Market Investor Funding Facility (MMIFF), on Monday.
Yet participants in short-term lending markets are nervous that even though central banks have added unprecedented liquidity into the global financial system, year-end pressures may still prove intense as banks hoard cash because of the global financial crisis.
At the British Bankers' Association's daily fixing on Monday, dollar-denominated Libor, the leading global benchmark for short-term loans, rose.
"Three-month Libor is way up versus one-month Libor and that's because one-month Libor is not bridging year end yet," said Ray Stone, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.
However, three-month euro and sterling


Libor rates fell.
The drive to reduce counterparty risk is happening in the run-up to a time when banks traditionally hoard cash to boost balance sheets for accounting purposes, cooling some of the enthusiasm over the U.S. news.
European Central Bank data on Monday suggest banks are still inclined to deposit the extra liquidity provided by central banks back with the central bank, a lower but safer rate of return being preferable to risking lending to another bank.
Overnight deposits at the ECB rose to 224 billion euros as of Nov. 23 from 202 billion euros reported on Friday. .
"For (this) week and those remaining before the end of the year, bank trading desks will be very reluctant to absorb any new risk," ICAP money market strategists said in a note on Monday.
Money markets welcomed the Federal Deposit Insurance Corp's changes on Friday to a debt guarantee program for U.S. banks that could smooth the way for hundreds of billions of dollars of top-rated debt to be issued..
The U.S. government's bailout of Citigroup also soothed some of the more acute concerns in the market.
"This is a bit premature as no individual policy measure is a panacea for this crisis but it has helped keep dollar Libor/OIS spreads in check, producing a technical tightening in credit spreads in the dollar money market even with Libor edging higher today," said Lena Komileva, head of G7 Market Economics at Tullett Prebon.
"So Libor/OIS spreads are set to continue to fall but there is no end to the credit crisis in sight," Komileva added.
(Reporting by Jamie McGeever and John Parry; Editing by Chizu Nomiyama) Keywords: MARKETS MONEY

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Three-month Libor eases on central bank efforts

LONDON/NEW YORK, Nov 18
Interbank lending rates slipped on Tuesday but financial institutions continued to hoard cash ahead of year end and remained dependent on central banks as the de facto sole lender, analysts said.
Three-month dollar Libor rates eased at Tuesday's fixing after posting three days of rises on concerns over comments from U.S. Treasury Secretary Henry Paulson regarding the use of funds in Washington's emergency financial package.

There are concerns and cash is being hoarded despite the TARP (Troubled Asset Relief Program) and the Fed's interest rate actions. If you look at the equity performance of the banks, there is really still not much to be happy about," said Calyon rate strategist David Keeble. Bank-to-bank dollar, euro and sterling interest rates fell, but analysts said banks continued to stockpile cash.
"Lending on the dollar side is starting to dry up ahead of the end of the year and there are very few lenders coming into the market," said Keeble. Euribor bank-to-bank lending rates extended their more-than-month-long series of falls, dropping to a 16-month low..

Central banks were very active with operations designed to pump liquidity into the market and help trim rates. The European Central Bank allotted 338.0184 billion euros of seven-day funds on Tuesday to 851 banks, compared with 334.4 billion euros to 848 banks a week earlier. "Banks will cope with year end for I guess you could say the wrong reason," said Howard Simons, strategist with Bianco Research in Chicago.
"With funds being poured in at a rate far greater than demand for them to go out, they will not have any sort of funding problem and if they do, central banks will step in and take care of them," he said.

The Fed's $150 billion Term Auction Facility of short-term funds offered to banks had a bid-to-cover ratio of 0.70, showing there were more than adequate funds to meet demand from banks at the sale.
But some measures of risk aversion ebbed.
The U.S. 2-year interest rate swap spread narrowed to 106.75 basis points early on Tuesday afternoon, from 108.50 basis points late on Monday.

Egypt pound median o/n rate rate rises to 11.65 pct

CAIRO, Nov 18
The median overnight interbank rate on the Egyptian pound rose to 11.65 percent on Tuesday from 11.569 percent on Monday with the market liquid on the first day of a period for calculating bank reserves, dealers said.
Five out of eight banks reported overnight deals at a range of between 11.60 and 11.75 percent, compared to reported rates of 11.6 percent on Monday.
Tuesday was the first day of a two-week period for calculating bank reserves.Four banks reported one-week deals at a range of between 11.6 percent and 11.95 percent. One bank reported a two-week deal at 11.9 percent.
The Egyptian pound depreciated to 5.5293 to the dollar by 1200 GMT, compared to Monday's closing weighted average of 5.5254.

SME scheme fails to turn banks around on loans

Tuesday, November 18, 2008Despite a government scheme to increase loan guarantees to further help small and medium enterprises and an easing of interbank lending rates, Hong Kong banks remain cautious about lending amid the global economic downturn.

"I don't see banks actively responding to the government's scheme which guarantees loans for SMEs," SME Mentorship Association chairman Anders Wong Siu-leung said.

"Our members do not have high hopes and the scheme may not be as effective as expected."
He said more SMEs are resorting to finance companies despite these firms charging higher interest rates for loans. More finance companies were also promoting loans to SMEs.

First Credit chairman Checkley Sin said the amount of his company's loans increased 30 percent last month from September and "we expect the figure for November to increase 20 percent over October."
The government has said it will increase loan guarantees for SMEs to 70 percent from 50 percent subject to a maximum HK$1 million, half of which can be used as revolving credit.
Strains in the interbank market have also eased with the Hong Kong Monetary Authority injecting liquidity into the banking system since September.

The overnight lending rate rose to 0.05 percent yesterday, from 0.1 percent on Friday. The one-month interbank rate stayed at 1 percent, while the three- month rate was 2.23 percent.
"Even though lending costs are decreasing, banks still need to evaluate the default risks of lending to SMEs as the outlook for corporates may not be optimistic," said Frances Cheung, a fixed- income strategist at Standard Chartered.

Wing Hang Credit, the unsecured lending arm of Wing Hang Bank (0302), said its number of loan applications has increased, but reiterated it was not throwing caution to the wind.
"Banks are still studying whether they should loosen their requirements for lending. They may not be confident in lending as there is a risk of not being able to collect debt amid the economic downturn," said Wing Hang Credit general manager Hilda Ng Kwok-yan.

Li & Fung (0494) chairman Victor Fung Kwok-king, a member of the Task Force on Economic Challenges, said financing in the trading sector has been under pressure, but the government's measures to support SMEs can boost banks' confidence.

Federation of Hong Kong Industries chairman Clement Chen Cheng-jen said it hopes the government will explain how Beijing's stimulus plan, particularly its value-added tax policy change, will benefit Hong Kong enterprises.

He urged the mainland government to reduce the impact of labor laws on the manufacturing sector.

Re falls by 37 paise, heads towards 50-mark

The rupee was headed towards the 50-mark today as it fell by 37 paise to 49.71/72 against the $ in sync with bearish equity markets due to sustained capital outflows.

Traders, however, anticipated intervention by the central bank at the important 50-level.
In lacklustre activity at the Interbank Foreign Exchange (forex) market, the domestic currency resumed weak at 49.55/56 a $ from its overnight close of 49.34/35 a $ and later fell further to 49.71/72 a $ in morning deals.

Forex dealers said the rupee remained under pressure due largely to capital outflows from equity markets which had adverse impact of global financial crisis.
Meanwhile, Finance Minister P Chidambaram said the direction of capital flows may reverse in a month or two.

HK dollar stays strong, interbank rates mixed.

Hong Kong foreign exchange and money markets in late trade on Monday.

Close Mid-day Previous Close

At 0855 GMT At 0426 GMT At 0915 GMT

HK$ SPOT 7.7503/04 7.7505/06 7.7502/03


FORWARDS
Three-month -22/-15 -23/-15 -15/-10

Six-month -30/-15 -30/-15 -20/-10

One-year -30/-10 -30/-10 -30/-10


INTERBANK RATES (PERCENTAGE)
Overnight 0.10/0.40 0.10/0.30 0.10/0.30

One-month 0.90/1.10 0.90/1.05 0.95/1.05

Three-month 2.00/2.15 2.00/2.15 2.00/2.15

Six-month 2.30/2.45 2.30/2.45 2.30/2.50

One-year 2.45/2.65 2.45/2.65 2.35/2.55

FOREX-Yen trims losses, sluggish stocks fuel risk aversion

Yen trims losses, trades in ranges vs dollar, euro

* Tokyo shares erase much of their gains, fuel risk aversion

* G20 fails to ease global recession worries

* Japan slips into recession in Q3

By Satomi Noguchi

TOKYO, Nov 17 (Reuters) - The yen trimmed losses against the dollar and euro on Monday as Tokyo stocks erased much of their earlier gains, fuelling investors' risk aversion.

Investors had initially turned more risk averse after the Group of 20 financial summit at the weekend failed to produce concrete measures to avert a global downturn, underpinning the yen as a safe-haven currency.

The Nikkei share average's rise of more than 3 percent earlier in the day (.N225


NIKKEI 225 INDEX17 November,200817/11/2008 19:36 Sydney, Australia.
Value Change % Change
8522.58 +60.19 +0.71%

Australian indices
International indices
.N225 , 8522.58, +60.19, +0.71%) reduced safe-haven buying of the yen and dollar in reaction to the G20 summit, weak U.S. economic data and late slide on Wall Street on Friday.

U.S. data showed a record fall in retail sales in October. [.N] [ID:nN14423234]

The yen was also hurt by data showing Japan slid into recession in the third quarter along with the euro zone. [JPGD1=ECI] [ID:nSP354083]

But the Japanese currency trimmed losses as the earlier rise in the Nikkei evaporated, with the benchmark index ending the day up 0.7 percent.

"There are a lot of uncertainties over the global econonmy and financial conditions, which may be reflected in the sluggishness of the stock market, and helping to keep intact the safe-haven appeal of the yen," said a senior dealer at a Japanese trading firm.

The euro fell 0.3 percent from late New York trade on Friday to 121.90 yen , off the day's high of 122.86 yen and the low of 120.20 yen hit in early trade on trading platform EBS, with thin liquidity in the market exaggerating price movements.

The U.S. dollar was nearly flat at 96.96 yen , after rising as high as 97.56 yen earlier, but up from an earlier low of 95.87 yen.

The euro eased 0.3 percent to $1.2566 , off the day's high of $1.2596.

"Trading is limited to narrow ranges as the market searches for a clear direction," the senior dealer said.

The G20 leaders from major industralised and developing countries produced lots of pledges of action but no concrete plan to ease global recession worries, which had earlier supported gains in the yen and the dollar. [ID:nG7G8]

"The summit also noted the need for broader policy responses, but mainly left it to individual economies to take the appropriate monetary and fiscal policy measures," noted analysts at ANZ.

Investors had hoped for an overall plan that would stimulate the global economy in the short term.

Market players are now waiting to see if developed and emerging economies will launch more economic stimulus plans, and how quickly such measures would be implemented.

"Speed is the most important part of the policy actions as world economies deteriorate quickly and more investors may need to liquidate risky investments," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.

The Australian dollar initially sank more than 1.5 percent to $0.6363 , but then jumped quickly near $0.65. Dealers suspected the Reserve Bank of Australia was intervening in the market, but the central bank would not confirm it had acted. The Aussie was nearly flat to trade at $0.6460.

The RBA intervened on at least two occasions last week, buying the Aussie around $0.6350 when the market was disorderly and lacking liquidity. (Additional reporting by Wayne Cole in Sydney and Chikako Mogi in Tokyo; Editing by Chris Gallagher)

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