* Repo rates temper buyside bid in U.S. 4-wk bill auction * Fed's front-end sales put upward pressure on repo rates * Markets eye meeting of European leaders on Wednesday * Key 3-month euro zone interbank lending rates fall * Hope for growth-boosting measures cited (Adds 4-week auction details, comments) By Ellen Freilich NEW YORK, May 22 The U.S. Treasury's sale of four-week bills was well-bid o n T uesday, with buyside participation limited by elevated repo rates that make it costly to hold inventory. Tension eased in euro zone money markets before a meeting of European leaders that could come up with some growth-boosting measures. The U.S. Treasury sold $30 billion in four-week bills at a high rate of 0.065 percent. Dealers got 78.7 percent of the sale, leaving just 21.3 percent for the buyside, comprised of the direct and indirect bids. "With the exception of the May 8 auction, the buyside has stayed away from these auctions," said Thomas Simons, money market economist at Jefferies & Co. "Overnight repo rates have been elevated in recent weeks so the cost of carry on these bills is very negative." Overnight repo rates have risen for various reasons, including the Federal Reserve's "Operation Twist" strategy in which the central bank has been selling shorter-dated Treasuries and buying longer-dated Treasuries to keep long-term interest rates low enough to stimulate economic activity. "When the Fed sells short-dated securities, investors end up with more collateral and less cash for repo trading so, if you are lending cash in the market, you'll be able to charge a higher rate," Simons said. "The Fed's purchases at the long end don't have an offsetting effect because off-the-run 10-year notes and 20- and 30-year bonds aren't traded as much in the repo market," he noted. Managers of short-term money market funds are paying attention to euro zone developments, including a meeting of European leaders on Wednesday and a June 17 Greece election that could help decide whether Greece stays in the euro zone. But because money market funds now have limited direct exposure to European bank debt, fund managers are somewhat sanguine about the headlines. "The Greek government is making a very strong push against austerity on the belief that the Germans want to maintain the euro and may be willing to give more accommodative terms than they have to date," said Jerry Klein, managing director and partner at HighTower's Treasury Partners in New York, with $20 billion in assets under management. "Money funds are watching these developments very closely, but they don't see them as a direct threat because money funds have no exposure to Greek banks and their exposure to Europe, especially peripheral Europe, has been reduced dramatically and, in some cases, is down to nothing," he said. What exposure exists is mainly to countries with a stronger banking system, like Germany, Klein said. The idea of issuing euro bonds is expected to come up during Wednesday's meeting of European leaders. Germany has opposed the idea, saying more coordination of budget and public spending policies would be needed before such an instrument could be considered. Another consideration is whether euro bonds could damage Germany's pristine credit rating and, should that happen, whether it would impact Germany any more than last year's U.S. credit downgrade had on demand for U.S. debt. "We are living in a post-crisis world where investors look beyond Moody's or S&P ratings to determine the creditworthiness of their counterparties and that's clear from the performance of U.S. Treasuries post-downgrade," Klein said. "Investors are looking at many factors -- and on a relative basis." Speculation that European leaders would adopt growth-boosting measures brought some relief to euro zone money markets on Tuesday, but tensions are expected to rise again as the June 17 Greek elections draw near. Measures of money market stress have eased this week, after a sharp rise earlier this month on a higher perceived risk of Greece leaving the euro zone. Key euro zone three-month bank-to-bank lending rates eased to two-year lows as three-year funding from the European Central Bank kept the financial system awash in liquidity. Three-month Euribor rates fell to 0.681 percent.
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.
Munish Bhardwaj’s “Moh Maya Money” (roughly translated as Greed, Illusion, and Money) is a taut thriller about a seemingly low-risk corrupt deal that goes horribly wrong. Ranvir Shorey plays Aman, an executive at a real estate firm who wants to get rich quick and fast. He cheats the company and tries to build his dream home with his ill-gotten wealth. The movie was made much before the government’s shock move to scrap 500 and 1,000 rupee banknotes to fight corruption, tax evasion and militant financing, but the suitcase full of money Aman uses to pay for a plot of land drives home the point about the pervasiveness of “black” money in India.
When Aman finds himself in trouble over his shady dealings, he concocts a plan to try and get himself out of his mess and asks his high-flying journalist wife Divya (Neha Dhupia) for help. Divya has secrets of her own and Bhardwaj makes sure they are not revealed too soon. The narrative shifts from Aman’s point of view to Divya’s point of view, giving us varied versions of the same events. This narrative style works wonderfully for the film – up to a point.
Bhardwaj’s story, just like Aman’s plan, seems to spiral out of control after a while and his actors seem to lose interest in their role. There are contrivances galore, like Divya meeting the wife of the man Aman has wronged, and the movie hurtles towards its rather predictable climax.
Of the cast, Ranvir Shorey seems a little too dramatic and wide-eyed, a departure from his otherwise subtle style of acting. Dhupia seems as uninterested in the film as her character is in Aman’s shady deals, which takes away from the urgency of the plot. The subject of the film is timely and there is a good idea in there somewhere. Unfortunately, just like the India’s demonetisation drive, proper implementation is what’s sorely missing in this endeavour.
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)John Borghetti, chief executive of Virgin Australia , yesterday completed his reshuffle of the airline's corporate hierarchy with customer experience and brand management merged into a single role. Mark Hassell, a former executive at British Airways and Qantas Airways will oversee the merged portfolio, while a new executive position has been created to lead the sales team. Page 23.- - - - The investment company owned by the Belgiorno-Nettis family, Transfield Holdings, has been interviewing candidates to run the firm as brothers Guido and Luca Belgiorno-Nettis prepare to take a less active role in management. Tony Shepherd, chairman of Transfield Services, one of Transfield Holdings' investments, however, said the company was not searching for a new chief executive to replace Peter Goode. Page 25.- - - - Energy Resources of Australia yesterday painted a bright long-term picture for uranium yesterday at its annual general meeting. Rob Atkinson, chief executive of the miner, will brief investors in Singapore, Hong Kong and Australia next week while hosting a site visit later this year to demonstrate the company's opportunities for growth. "It is important for investors and analysts to see what it looks like on the ground," Mr Atkinson said. Page 25.- - - - Shareholders in financially strapped firm Apex Minerals have approved the elevation of Ed Eshuys, a veteran of the gold industry, as the company's executive chairman in a bid to restore the company's capital. Mr Eshuys has pledged to concentrate on increasing reserves at the company's Wiluna venture, with shareholders voting to award him 225 million performance rights and 375 million performance rights in Drummond Mining if 100,000 ounces of gold at a spot price of A$1100 an ounce are mined in the 2014 financial year. Page 25.- - - - THE AUSTRALIAN (this site)Peter Anderson, chief executive of the Australian Chamber of Commerce and Industry, yesterday called on the Reserve Bank of Australia to reduce interest rates, saying that it was necessary for business given the recent drop in consumer spending. The lobbying comes as the futures market predicts the central bank to reduce rates by 25 basis points next month. Page 19.
- - - - The group executive of business banking at National Australia Bank, Joseph Healy, yesterday said in an address that local businesses were "sitting on their hands" instead of investing for the future. "The implications for the economy of the ongoing deleveraging and the underinvestment, beyond the resources sector, could potentially be profound in years to come," Mr Healy added. Page 19.- - - - Global miner BHP Billiton has green-lit US$708 million in funding for the second stage of the Mad Dog venture in the Gulf of Mexico. The project is mainly owned by global oil and gas conglomerate BP, with BHP holding a 23.9 percent stake. "The extension of this field will underpin continued valuable liquids production from the Gulf of Mexico and further enhance our growth profile," Michael Yeager, chief executive of petroleum at BHP, said. Page 20.- - - - Iron ore producer Sundance Resources yesterday said it believes it will receive final clearances from the Democratic Republic of Congo and Cameroon governments in around a fortnight for its multi-billion-dollar Mbalam venture. The acceptance will allow Sundance to move forward on a A$1.65 billion ($1.70 billion) takeover offer from Chinese peer Hanlong Mining. Page 20.- - - -
THE SYDNEY MORNING HERALD (this site)The Westpac Melbourne Institute yesterday announced in its latest report that consumer confidence had slumped by 1.6 percent last month due to increasing concerns about household finances and job security. The survey's results have been described as a "disturbing" development by analysts. "The results of this survey should be sending a very clear message to the Reserve Bank [of Australia] that Australia needs lower interest rates," Bill Evans, chief economist at Westpac Banking Corporation, said. Page B1.- - - - A report from investment bank Goldman Sachs has found that local investors have turned off property shares, with foreign investors and offshore superannuation funds becoming the largest net buyers of local real estate investment trusts since late last year. "Domestic investors turned net sellers again, meaning they have been net sellers every month since September 2011," the report said. Page B3.- - - - Aluminium producer Alcoa yesterday announced an unexpected profit for the first quarter of the year yesterday, but chief executive Klaus Kleinfield added that the result did not necessarily bring good tidings for the company's smelter in Point Henry, Victoria. "The 530,000 tonnes that we have taken offline may not be the end ... we continue to look at our Point Henry smelter in Australia, which is very high on the cost curve for a whole host of reasons," Mr. Kleinfield said. The plant employs around 600 workers. Page B3.
- - - - Retailing baron Solomon Lew yesterday had his legal counsel ask the Victorian Supreme Court to suppress reporting on a battle over tens of millions of dollars in a A$621 million family trust fund. The attempt follows a similarly unsuccessful bid by mining magnate Gina Rinehart to block the publication of details about her bitter family feud, which is currently before the New South Wales Supreme Court. Page B3.- - - - THE AGE (this site)The local division of stockbroker Morgan Stanley Smith Barney yesterday announced a A$28.2 million loss for the previous calendar year, despite booking a 23 percent increase in brokerage revenue to A$100.5 million. "We had a good year, even in relation to the challenges of the 2011 for us and the rest of the industry," Harry Parkinson, head of the local operation, said. Page B3.- - - - Telstra is suing the state of Queensland to nullify a two-year-old land regulation on the grounds that it violates federal law and that it discriminates against telecommunications companies. "The rent which the Department of Environment and Resource Management now charges telecommunications carriers for land used for communications sites is significantly higher than rent charged to other Crown land users for other comparable sites," a spokeswoman for the telecommunications giant said. Page B3.- - - - Shares in Flinders Mines plunged by 9.09 percent to A22.5 cents yesterday after a trading halt was lifted on the iron ore junior. The company is facing a A$554 million takeover offer from Russian steel manufacturer Magnitogorsk Iron and Steel Works (MMK), but the process was halted after a minority shareholder secured an injunction in a Russian court preventing MMK from going ahead with the bid. Page B4.- - - - The S&P/ASX 200 Index closed 1.1 percent down at 4246.4 points after a poor day's trading by the major miners and other resources stocks. The majority of the sharemarket's top 20 stocks finished in the red, with QBE Insurance falling by 3.3 percent to A$13.45 and financial stocks AMP and Macquarie Group each closing more than 3 percent down. Page B8.- - - -