Yields on short-term US government securities including one-month and three-month Treasury bills turned positive on Monday after hovering around zero during the last days of 2009. Analysts attributed the rebound to an easing in the demand for cash, strongest at year-end, rather than better-than-expected data on manufacturing released on Monday.
-- Euro Libor hits record low
"The mad rush to the front end of the curve around year-end didn't materialise as strongly as people had thought," said Christian Cooper, associate rates strategist at RBC Capital Markets in New York. "There was the idea that people would take negative rates just to get around the turn of the year, but there wasn't a mad grab for paper at any cost. So we got through that time at zero and now we're starting to creep back up." "It's a little bit striking how limited the reaction has been here to the good numbers," said Torsten Slok, senior economist at Deutsche Bank Securities in New York.
"Maybe it tells you that the numbers were not dramatically better than expected." The three-month T-bill rate was trading at 0.071 percent. The one-month T-bill rate traded recently at 0.066 percent. In Europe, copious liquidity in the eurozone banking system kept overnight interbank lending rates near record lows on the first day of trading in the new year, while three-month euro Libor was fixed at a record low.
The three-month London Interbank Offered Rate was fixed at 0.65375 percent by the British Bankers Association earlier, while the dollar equivalent edged off a record low of 0.25063 percent it had been pitched at for three successive days. "The euro rate is continuing to fall in the short term as the market is still flush with liquidity in euros, and the European Central Bank has made things quite clear that this situation is unlikely to change in the short term," said Peter Chatwell, a market analyst at Calyon in London.
Monday's trade suggested a glut of cash pumped into money markets by the ECB is still keeping down bank-to-bank lending costs in an ebbing credit crisis which began 2-1/2 years ago and led to a global economic recession. Traders said there was an increase in the number of lenders as the start of the new year freed up credit lines, but in some cases lending still remained name-specific - indicating banks were cagey about who they lent to - rather than based on price. ECB lending is around its highest since mid-2009 at 775 billion euros and excess liquidity in the banking system was 185 billion euros.
Comments
Comments are closed.