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Money markets us bill supply may support repo rates rbc

* Rise in US repo rates may compress short-term swap spreads * High yield in 3-month bill sale rises on the week * ECB injection could worsen shortage of Spanish bonds in repo By Chris Reese and Emelia Sithole-Matarise NEW YORK/LONDON, July 13 The interest rate on U.S. repurchase agreements is likely to be supported in coming weeks as the supply of Treasury bills rises, which could in turn compress shorter-dated interest rate swap spreads, according to a strategist at RBC Capital Markets. A recent narrowing of shorter-dated swap spreads may be related to changing expectations for repo rates, said Michael Cloherty, head of U.S. interest rates strategy at RBC in New York. "In the upcoming weeks, a rise in bill supply is likely to keep repo elevated," Cloherty said, noting that "repo rates are highly dependent on bill supply, and bill supply is highly seasonal. "August tends to be one of the months where issuance is high, and we will see an above-average rise in bill supply this month," Cloherty said. The rate on repos secured by Treasuries dipped to 0.22 percent o n M onday from 0.25 percent o n F riday. Repo rates have generally been trending higher since touching a recent low of 0.03 percent over a year ago. Meanwhile, the spread on two-year interest rate swaps over Treasuries narrowed to 19.75 basis points o n Mo nday from 20.5 basis points on Fr iday. The two-year swap spread has generally been narrowing since hitting a recent wide of 54.5 in November, 2011. The U.S. Treasury on Monday auctioned $32 billion of 3-month bills at a high rate of 0.11 percent, up slightly from a high rate of 0.1 percent in a similar auction last week and matching the high rate in an auction two weeks ago. An auction of $28 billion of 6-month bills on Monday brought a high rate of 0.145 percent, up from a high rate of 0.135 percent in a similar auction last week and matching the high rate from an auction two weeks ago. Meanwhile, in Europe, a fresh injection of long-term ECB loans into the banking system could worsen a shortage of Spanish government bonds in the repo market, further squeezing a source of short-term funds for Spain's banks. Traders said a distortion of prices in the Spanish repo market that followed a 1 trillion euro flood of three-year European Central Bank loans in December and February could be exacerbated if the bank repeated the operation. Spanish government bonds have been in short supply in the repo market, where banks commonly use them as collateral to raise funds, since domestic banks parked them at the ECB in return for cash -- particularly the three-year loans. This prompted investors who need the bonds because of their own short positions to pay a premium for the paper. In a normal repo operation, the party needing the cash would pay the premium, but in the distorted Spanish market, it is the other way around. "In Spain there are a lot of short positions in the market ... and we're seeing the repo levels around -3 or -4 percent," a repo market trader said. A negative number means the borrower is effectively being paid to take the lender's cash. "As soon as the repo market gets to be like that, it stops functioning effectively and that has a knock-on effect in the cash market because you can't provide liquidity to clients," the trader said. ECB President Mario Draghi said earlier this month the ECB would discuss loosening its collateral rules further in September and could repeat other measures such as its long-term cheap loans, known as LTROs. "Perversely if another LTRO came in and there was a big take-up by Spanish banks and they put Spanish bonds in, the repo market could get worse," another trader said. "This is contributing to the decline of the cash market because you need the repo to oil the wheels in the cash market." Banks can repay the ECB's initial three-year loans after 12 months. But as the three-year-old sovereign debt crisis rumbles on with Spain now on the front line, analysts expect reliance by peripheral banks on the central bank to remain high. Spanish banks' reliance on ECB loans has increased in recent months, as it has for Italian banks. But unlike Spain, the Italian repo market is still functioning normally, supported by the deeper liquidity in the country's debt market.

Pakistan to raise 495 bln rupees via 1st sukuk in 15 months

Pakistan's central bank will sell 49.5 billion rupees ($503.8 million) of Islamic bonds, the country's first such issuance in 15 months, with pricing to be set on Wednesday. The sukuk will inject a much-needed liquidity management tool for the domestic Islamic banking industry. The appetite for local currency sukuk has grown with Islamic banks posting double-digit asset growth, but the government has been unable to match demand, constraining the sector's financing and investment capability.

Since 2008, the central bank has sold 15 local currency sukuk, with the last one being in March 2013, raising 43 billion rupees. The busiest year was 2012, when there were four sukuk raising a combined 163.5 billion rupees.

Such instruments are highly sought by the country's five full-fledged Islamic banks and 15 others offering Islamic finance services. The sukuk help them manage short-term liquidity needs and support their financing activity. At the auctions for the government's last four sukuk, applications were received for more than double the amount of bonds being sold.

Net investments by Pakistan's Islamic banking industry declined by 17.7 percent or 76 billion rupees in the 12-month period ending in March. This was mainly due to a lack of new government issuance of sukuk, the central bank said in its latest Islamic banking bulletin. The government has not indicated whether it would issue more local currency sukuk this year, although the finance ministry has said it was considering issuing dollar-denominated sukuk. ($1 = 98.2600 Pakistani rupees)

Press digest australian business news april 4

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)--The days of the corner store are numbered, said grocery, liquor and hardware marketing and distribution company Metcash chief executive Andrew Reitzer yesterday as the company announced profit for the 2012 financial year would drop about 45 percent. Metcash "management is doing a very good job," said UBS analyst Ben Gilbert, "but with Aldi and Costco rolling out stores and Woolies and Coles looking at small format stores it does increase the pressure." Page 13.--Scott Charlton will take over as chief executive of Transurban in July when Chris Lynch departs. Mr Charlton is currently chief operating officer at Lend Lease and was chief financial officer for Leighton Holdings . "I've been involved with infrastructure one way or another since I left university  I've worked on almost every toll road in Australia," said Mr Charlton yesterday, and noted that Transurban's future could include: "building out existing assets, cost cutting or connection networks." Page 13.--QR National could make a request of Fair Work Australia to intervene in a dispute between the BHP Billiton Mitsubishi Alliance and the Construction, Forestry, Mining and Energy Union on the grounds the strikes are causing damage to the business of QR, said Simon Dewberry of Allens Arthur Robinson. The Australian Services Union said continuation of the dispute could cause its members to be stood down. QR chief executive Lance Hockridge could not be drawn on the possibility that his company would act. Page 15.--Extreme weather in Western Australia, Queensland and South Australia contributed to operations, maintenance and construction services business Transfield reducing its guidance for profit in 2012, explained chief executive Peter Goode yesterday. The company has dropped its guidance from A$130-135 million to A$105 million. "Credibility of management's attribution to earnings loss because of rain is in question following consecutive annual downgrades," responded Ben Brownette, an analyst at Commonwealth Bank of Australia. Page 15. THE AUSTRALIAN (this site)--Superannuation funds in Australia could be directed by future governments to reduce their exposure to equities, according to former federal finance minister and current advisor to global investment bank Lazard, Lindsay Tanner. "On any measure, your typical Australian superannuation fund is massively overweight in equities," said Mr Tanner yesterday at a conference on corporate governance. "If governments in the future  are facing extremely unhappy super fund members  there is a risk of some kind of government intervention," he added. Page 21.

--An indicative A$299 million bid for Norton Gold Fields has been made by the largest gold mining company in China, Zijin Mining Group. "It is not a formal offer  but we are confident we can move this along and get this to closure," said Andre Labuschagne, managing director of Norton. Zijin already has a 16.98 percent share in Norton, operator of the Paddington gold mine near Kalgoorlie in Western Australia. Page 22.--Perth-based Aquila Resources executive chairman Tony Poli said yesterday that the sale of the company's stake in the Isaac Plains coal project in Queensland for A$430 million put Aquila in a strong position to develop the multi-user port at Anketell Point in the Pilbara region of Western Australia. Obtaining the funding created a "real catalyst" for the China Development Fund to come to the party over finance, and for Aquila to be granted the right to develop the port by the state government, Mr Poli stated. Page 22.--There would be no minimum thresholds imposed on trading in the "dark" equities market, said Australian Securities and Investments Commission deputy chairman Belinda Gibson at a conference in Melbourne yesterday, at least not until more is known about how activity in the dark market is impacting equities trading. Expressing disappointment with the lack of action from the regulator, a spokesman for the Australian Securities Exchange said: "unchecked growth in dark pool activity has the potential to undermine  the lit public market." Page 23.

THE SYDNEY MORNING HERALD (this site)--The Directors' Sentiment Index six-monthly survey released yesterday rated global uncertainty as the major economic challenge facing companies. John Colvin, chief executive of Australian Institute of Company Directors, addressed issues raised by the report and added that if Australia wanted "performance and not conformance" from directors the weight of "700 pieces of legislation making directors personally liable" needed to be lifted. Page B3.--The complex class action in the Federal Court, in which Centro shareholders are attempting to recover losses they suffered when a multi-billion dollar misclassification of debt in the group's financial statements for 2006-07 was made public, continues. Then chief financial officer Romano Nenna said yesterday that he had experienced panic attacks during 2007 while negotiating with a number of banks to refinance the group's debt. Page B3.--In 1990, Iraq defaulted on the A$480 million it owed to the then Australian Wheat Board relating to three years of wheat supplies from over 50,000 farmers. Now a rescheduling of the debt means there will be A$50 million to distribute to the farmers over the next 17 years with about A$4 million to be disbursed this year. Forensic accountants Ferrier Hodgson have the task and partner Greg Meredith reports that they are writing to 52,000 people listed on grower records from 1990. Page B3.

--United States institutional investor Christian Brothers Investment Services (CBIS) has tabled a resolution for the next annual general meeting of News Corporation calling for the roles of chairman and chief executive, currently both filled by Rupert Murdoch, to be separated. The "lax ethical culture and lack of effective board oversight" demonstrated by the "still emerging scandals" needed to be addressed by an independent chairman, CBIS claimed as it ensured all News Corp shareholders would have the opportunity to vote on its resolution. Page B4. THE AGE (this site)--In response to the Australian government's veto on Chinese company Huawei from tendering for national broadband network work, the Chinese ambassador has called for Chinese companies to be treated the same as those from other nations. "We hope that Huawei and all other companies from China will be able to enjoy fair and equal competition opportunities in Australia, as companies from other countries," said Chen Yuming in Canberra yesterday. Page B1.--"The name OneSteel has  been an impediment in recent years  we have found many investors, particularly overseas, have had perceptions that we were solely a steel company due to the name," said OneSteel chief executive Geoff Plummer yesterday in Melbourne as the company became Arrium Ltd. The change of name was supported by major shareholder AXA while Todd Scott, an analyst with RBS, noted that "half the assets and almost 60 percent of the revenues are still Australasian steel." Page B3.--Mandatory "kill switches" will be required in computer trading platforms that enable high-frequency trading as the Australian Securities and Investments Commission (ASIC ) takes steps to prevent a "flash crash" similar to the one that occurred in the United States markets. "These trades now dominate the market," said ASIC deputy chair Belinda Gibson. "That is not, per se, a problem, though it certainly complicates our job of market surveillance," Ms Gibson added. Page B3.--If foreign members of the crew working to lay offshore pipe work for the A$43 billion Gorgon gas project in Western Australia were prevented from working, due to the lack of 417 or 457, visas it could cost the project A$1 million a day, said Richard Hooker, the barrister acting for Swiss contracting company Allseas Construction. In the Federal Court in Perth, Allseas is seeking confirmation from the Minister for Immigration and Citizenship on the status of workers currently in possession of visitors and conference visas. Page B7.

Press digest sunday british business october 26

LONDON Oct 26 The following are the top stories on the business pages of British newspapers. Reuters has not verified these stories and does not vouch for their accuracy. The Sunday TimesSTARBUCKS HIT BY PROBE INTO TAX DEAL WITH DUTCH The European Commission will publish within a fortnight a formal notice of findings into its probe into Starbucks' tax affairs, according to sources. It is thought the commission's antitrust division will claim the Netherlands and Starbucks struck an arrangement to lower the tax rate for the company's subsidiary in Amsterdam. BANKS ORDERED TO RAISE BILLIONS IN CRISIS FUNDS The Bank of England will this week unveil tough new rules aimed at preventing future financial crises, with banks and building societies ordered to beef up their safety buffers with fresh capital. QATARIS OUTBID CHINESE FOR HSBC TOWER IN LONDON The Qatar Investment Authority is understood to have made a 1.1 billion pound ($1.77 billion) offer for the HSBC tower in London, seeing off competition from China Life and Ping An to become preferred bidder in one of the biggest-ever British property deals.

SALAMANDER ENERGY MAY GET RIVAL BIDS FROM OPHIR, CESPA It is understood that Ophir Energy and Spanish rival Cespa are preparing competing takeover bids for Salamander Energy that could value the oil explorer at more than 275 million pounds ($442.42 million). MORRISONS BREAKS PLEDGE ON LOW PRICES Wm Morrison Supermarkets has quietly ramped up prices on certain staple items such as fish and apples less than six months after it promised to lower prices permanently on more than 1,000 everyday products. The Sunday Telegraph

RBS SET TO KEEP ITS IRISH ARM The Royal Bank of Scotland is expected to commit itself to its Irish business this week in a surprise turnaround following a review of the future of Ulster Bank and some expectations that it would seek a sale or outside investment. KING OF SHAVES FOUNDER STEPS DOWN, COMPANY GOES UP FOR SALE British entrepreneur Will King is stepping down as chief executive of King of Shaves, and the razor maker has hired investment bank William Blair to run a sales process that could value the business at more than 50 million pounds ($80.4 million).

BANK OF ENGLAND BOWS TO EUROPE OVER STRESS TEST REPORTING The Bank of England has bowed to the European financial regulator following a difference of opinion over the way in which British banks can display the results of Sunday's Europe-wide stress tests. LYCEUM CAPITAL SAID TO BE EXPLORING SALE OF 2 BUSINESSES Private equity firm Lyceum Capital is understood to be exploring sales of Synexus, which is involved in clinical trials for pharmaceutical companies, and Access Group, a software business. The Mail on SundayTESCO CEO LEWIS SAYS HIS PAY DEAL IS 'UNDER REVIEW' Dave Lewis, the new chief executive of UK retailer Tesco , says the details of his bonuses are being reviewed by senior non-executives following the company's recent accounting scandal.

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