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Money markets funding cost rises on europe worries


´╗┐* U.S. repo rates climb amid Greece, Spain concerns * Japan CP/CD rates edge up, Nordic rates flat * Eurodollar futures fall after Friday's rally * No dollar Libor fixings due to U. K. market holiday By Richard Leong NEW YORK, June 4 The cost to borrow dollars rose on Monday as investors charged higher premiums from banks and bond dealers for short-term loans on contagion worries about Spain's bank troubles and Greece's possible exit from the euro zone. Amid growing concern about Europe's debt crisis, top finance officials and policy-makers leaders of the Group of Seven industrialized nations will hold a conference call early Tuesday, a Canadian government spokeswoman said. Adding to investor worries has been the expected Moody's downgrades of global investment banks, which rely on repurchase agreements and other short-term funding to finance their trades and operations. Moody's downgrades of these banks are expected by the end of June. Friday's disappointing data from United States and China reinforced the view the world's two biggest economies are being dragging down from the fiscal woes hurting the euro zone. "It definitely feels like last year. There are a lot of event risks. Now you have China, and the U.S. is having problems too," said Mike Lin, director of U.S. funding at TD Securities in New York. Over the weekend, Spanish Prime Minister Mariano Rajoy called for the euro zone to set up a new fiscal authority to manage the bloc's finances, while German Chancellor Angela Merkel pressed for tighter fiscal integration among bloc members. These remarks revealed some willingness among euro zone leaders to work toward a long-term solution to improve a fiscal framework for the region, but they offered little immediate relief for cash-strapped Greece and Spain, analysts said. Greece's political turmoil and worries about the Spanish banking system needing a bailout have lifted the interest rates on overnight repurchase agreements 15 basis points since mid-April. In the current climate of rock bottom, long-term investment returns, rising short-term borrowing costs are cutting into the profits of banks and bond dealers. In the $1.6 trillion tri-party repo market, interest rates on overnight loans was last quoted at 0.24 percent, unchanged from late Friday. Overnight repos secured by U.S. government debt traded as high as 0.26 percent earlier, traders said. The overnight repo rate was roughly 5 basis points from the year's high, according to Reuters data. In unsecured lending, trading was light. Money market funds and other investors showed appetite primarily in commercial paper, certificates of deposits and other short-term debt with maturities of a month or less, analysts said. There has been little unsecured activities among French and German banks in the second quarter since a modest revival in the first three months of the year, analysts said. Even investor demand for short-term debt from Japanese banks might be waning. The three-month rates on top Japanese bank CP and CDs were quoted at 0.35 percent on Monday, up from 0.34 percent late on Friday. Many investors had scooped up Japanese bank dollar-denominated paper on their perceived soundness and safety, pushing down their rates. Meanwhile, the three-month rates on dollar-denominated debt from Canadian and Australian banks, which has also been favored among risk-averse investors, was quoted at 0.20 to 0.22 percent, flat from late last week, analysts said. In the derivatives market, Eurodollar futures fell after some rallied to contract highs on Friday. The December 2012 Eurodollar contract fell 4.5 basis points to 99.095 after setting a contract high at 99.195 on Friday. A fall in Eurodollar futures implied a rise in future costs on interbank borrowing costs for three-month dollars. There were no fixings London interbank offered rates on sterling or dollar on Monday because of a market holiday in the United Kingdom. On Friday, the three-month dollar Libor was fixed at 0.46785 percent, rising for the first time since May 16.

Press digest australian business news april 5


´╗┐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)Telstra ,TLS. AX> has told shareholders that it would hold a briefing this week to better explain the telecommunications giant's strategy for implementing and spending the cash payments associated with participating in the national broadband network. Analysts have suggested that Telstra could launch a share buyback worth up to A$1.5 billion over the next two financial years. Page 16.-- Dale Elphinstone, the wealthiest man in Tasmania, yesterday called on the Federal Government to do more to sustain the manufacturing sector."More than anything, I think the government needs to get behind the manufacturing businesses we've got left and work out what needs to be done to make sure they stay here," Mr Elphinstone said. "You have to invest, you have to develop and sometimes that involves changing or redesigning products, systems and processes," he added. Page 16.-- Analysts are predicting that investment bank Macquarie Group's full-year profit, due out alongside its annual accounts later this month, will be substantially lower given that the company's bonuses are likely to have been reduced."The pendulum in the war for talent is now in the hands of the employer  so there is not as much competitive tension," an analyst at an investment bank said yesterday. Page 18.-- Phil Chronican, chief executive of Australia and New Zealand Banking Group yesterday told an American Chamber of Commerce function that fund managers should be held to the same disclosure rules regarding executive pay as followed by companies on the stockmarket."Listed companies have to be transparent and disclose not only how much their executives are paid, but also how performance is measured," Mr Chronican added. Page 18.-- THE AUSTRALIAN (this site)Phil Chronican, chief executive of Australia and New Zealand Banking Group, yesterday said policymakers' response to the eurozone debt crisis was uncoordinated and inconsistent."So we've had a lot of regulatory intervention, but I don't think it's well co-ordinated and I don't think the timetables have been thought through  and that's why we've got different timetables and different pieces of regulation, because everyone's wanting to be seen as doing something," Mr Chronican added. Page 19.--

The president of the Business Council of Australia, Tony Shepherd, yesterday told an audience that the Gillard government should not pursue a budget surplus "at any cost"."You shouldn't strive to achieve a surplus by putting into place policies which in fact hamper the productivity and competitiveness of Australian business," the lobby group's chief executive added. Page 19.-- The incoming chief executive of QBE Insurance, John Neal, who replaces Frank O'Halloran after 14 years in the position, told shareholders yesterday at the insurer's annual general meeting that the company would continue to target acquisitions around the world as its main strategy for growth."Our focus has always been on getting the right bottom-line performance and that will remain the case going forward," Mr Neal said. Page 19.-- Catherine Tanna, the leader of the largest coal-seam gas venture in Australia, has been replaced by Derek Fisher, the Asian head of global gas producer BG Group. BG yesterday announced that Ms Tanna, who is also a member of the Reserve Bank of Australia's board, would leave her current role as managing director to become the chairwoman of BG Australia. She will be mainly responsible for overseeing the group's public image with the various levels of government and the broader industry. Page 19.

-- THE SYDNEY MORNING HERALD (this site)Phil Chronican, chief executive of Australia and New Zealand Banking Group, yesterday commented that it was seen as "excessive" for executives to earn millions of dollars even though "we seem happy and proud to see Australian sports stars and entertainers earn large sums". His remarks come after the bank announced in February that it had made A$1.48 billion in audited profits for the three months to December last year, the same month that it announced a six basis points out-of-cycle rise in mortgage rates. Page B1.-- Official trade figures released yesterday have revealed a 19 percent slump in income from coal exports and a 10 percent drop in revenue from minerals and metal ores exports for the first quarter of the year."The commodity price cycle peaked in the third quarter of the last year  with global growth expected to be below trend and more commodity supply likely to come on stream over the next year or two, it appears likely Australia's terms of trade peaked in the third quarter as well," Paul Bloxham, chief economist at diversified bank HSBC, said. Page B1.-- The Housing Industry Association yesterday announced in its quarterly National Outlook for Residential Building report that housing starts will drop below levels seen in the 2008 global financial crisis should the current trend go unchecked.

Housing starts are tipped to fall to 137,820, or 12.4 percent, this financial year, after shrinking by 5.6 percent the year before. "We have been warning of an outcome of this magnitude for over 12 months," the association said. Page B3.-- According to a special purpose financial report lodged with the Australian Securities and Investments Commission, Vodafone Hutchison Australia posted a A$445 million loss last year. Many journalists reported that the mobile network operator posted a A$350 million loss in 2011 after half-owner Hutchison Telecommunications Australia revealed in February that it had booked a A$175 million loss on the joint venture. The document also revealed that one or both of the joint venture's parent companies injected A$300 million into the business. Page B3.-- THE AGE (this site)Shares in Rio Tinto -controlled miner Ivanhoe Mines have plummeted after the company released a 513-page technical report into its parent's Oyu Tolgoi gold and copper venture in Mongolia. The Canadian firm said the US$6.2 billion project could be struck with higher processing and mining costs, while the grade of the ore mined could also be lower than expected. The global miner refused to comment on the report last night, leading some to question if further tensions have opened between the two companies. Page B4.-- Whitehaven Coal yesterday lowered its production forecasts for this financial year, citing the closing of chemicals and explosives manufacturer Orica's factory in Newcastle, New South Wales and inclement weather during February for the downgrade. The coal producer made the announcement less than a fortnight before shareholders vote on whether to approve a A$5.1 billion merger with fellow miner Aston Resources. Page B4.-- The Australian Competition and Consumer Commission has suspended its clearance process for AGL Energy's attempt to increase its stake in the Loy Yang brown coal power station until it receives more information about the transaction, the energy retailer said yesterday. AGL currently controls 32.54 percent of the power generator and is seeking to acquire the remaining 67.5 percent from Tokyo Electric Power Company, which is strapped for cash following last year's catastrophe at the Fukushima nuclear power plant. Page B4.-- A A$554 million takeover of Flinders Mines has been stalled after a minority shareholder in Russian steel manufacturer Magnitogorsk, the iron ore junior's suitor, successfully won a legal injunction against the bid on the grounds that it could adversely impact the latter's operations and bottom line. Elena Egorova owns less than 0.001 percent of Magnitogorsk, but her actions resulted in a selling frenzy of Flinders' stock, which closed almost 20 percent down at the end of trade yesterday at A24.5 cents. Page B4.--