MONEY MARKETS-Dollar Libor at six-month high in Fed watch

happylux

Tue Mar 30, 2010 2:08pm EDT
* 3-month dollar Libor at fresh six-month highs
* Euro Libor hits record low
* Market eyes take-up of ECB's six-month loans Wednesday (Adds analyst's quote, changes byline, dateline, previous LONDON)

By Chris Reese

NEW YORK, March 30 (Reuters) - Bank-to-bank dollar funding costs rose on Tuesday, again reaching the highest in over six months as investors prepped for the Federal Reserve to eventually move to tighten monetary policy.

The move higher came in contrast to that of euro funding costs, where the three-month euro rate carved out a record low a day ahead of a fresh liquidity injection by the European Central Bank.

The benchmark dollar London interbank offered rate USD3MFSR= rose to a six-month peak of 0.29088 percent as the market braced for the Fed to start withdrawing some of the massive liquidity it has injected into the U.S. economy.

"People are wondering how long (the Federal Reserve) are going to be keeping accommodation at zero," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.

While few analysts expect the Fed to raise interest rates from current levels near zero any time soon, the U.S. central bank is widely believed to be preparing to lay the groundwork for the eventual removal of liquidity.

The Fed has already wound down some of its emergency lending programs and some cash has been removed from the system via special sales of bills from the Treasury Department's Supplementary Financing Program and as Fannie Mae (FNM.N) and Freddie Mac (FRE.N) have bought bad mortgages.

EURO LIBOR PLUMBS RECORD LOW

The three-month euro Libor EUR3MFSR= fell to 0.58 percent from 0.58063 percent, marking an all-time low. For other Libor fixings, please see [ID:nEAP000042].

Money market traders expect banks to take up 70 billion euros of six-month loans at the ECB's longer-term refinancing operation (LTRO) on Wednesday. The bank will also offer three-month funds. [ID:nLDE62L1T4]

"Whatever the demand at the six-month tender, excess liquidity will increase and so the Eonia (overnight rate) will remain at the lows," said Patrick Jacq, strategist at BNP Paribas in Paris.

Excess liquidity will persist until the middle of the year when banks return nearly half a trillion euros of one-year funds to the ECB, more than half the current outstanding liquidity ECBOMO=ECBF.

This should then cause the Eonia overnight rate EONIA= to rise towards the ECB's benchmark 1 percent rate from around 0.3 percent currently.

The speed at which Eonia will climb depends on how much banks bid for the six-month funds, Jacq said. "The more demand at tomorrow's six-month tender, the less pressure there will be at the end of June." (Additional reporting by Ian Chua in London; Editing by James Dalgleish)

Seal

X!nG

Tue Mar 30, 2010 2:08pm EDT
* 3-month dollar Libor at fresh six-month highs
* Euro Libor hits reco ...
happylux 发表于 2010-3-30 13:25

给你张图，这样大家看得明白些：

H@T

给你张图，这样大家看得明白些：
X!nG 发表于 2010-3-30 16:37

   

yaobooyao

给你张图，这样大家看得明白些：
X!nG 发表于 2010-3-30 16:37

The tricky thing about crude oil recently is - any time crude drop to $80,  always a big jump up (average $2 jump) came in from nowhere.  I still don't get it yet.

sooners

回复 1# happylux


   

manhattan

can we interpret this as the demand for dollar is quite high overseas due to Euro mess? or dollar carry trade is unwinding and people are selling JPY, therefore, the rate goes up?