The United States sold three-month Treasury bills at a high rate of 0.04 percent on Monday, showing demand remains strong for short-dated government debt as a safe-haven investment. US interest rate futures also remained near their highest since November after Friday's payrolls data supported the view that US rates will stay low for the foreseeable future.
The 0.04 percent high rate in the auction of $24 billion of 3-month bills compared with a high rate of 0.08 percent in a similar 3-month bill auction last week, and a high rate of 0.11 percent in a similar auction the week previous. An auction of $25 billion of six-month bills on Monday had a high rate of 0.13 percent, down from a high rate of 0.18 percent in a similar auction of the bills last week.
The US Labour Department said on Friday employers laid off 85,000 workers in December, compared with a revised 4,000 job gain in November. The median forecast in a Reuters poll of analysts had called for no losses last month.
"Last Friday's US payrolls outcome has reinforced the cautious tone reflected in the FOMC minutes, and this stance will likely be echoed by a number of Fed officials due to speak this week," said Calyon rate strategist Orlando Green in London. September Eurodollar futures were last at 99.185, having risen as high as 99.2 on Friday, while benchmark three-month dollar Libor rates were steady at 0.25125 percent.
President of the St. Louis Federal Reserve Bank James Bullard said on Monday the jobs report would not change the Fed's assessment of monetary policy and that the United States could still expect to see positive jobs growth in the first half of the year. In the euro zone, the market was gearing up for the European Central Bank's policy meeting on Thursday.
Ahead of that, three-month euro Libor rates hit a new low at 0.63750 percent supported by abundant liquidity, while September Euribor futures clung to contract highs hit after the US employment data. Overnight deposits at the ECB jumped over 45 billion euros to a five-month high of 227.1 billion, with excess liquidity in the system close to 180 billion euros keeping overnight lending rates pinned around 0.35 percent.
"The fact is that the level of excess liquidity provided by the ECB has reached levels not seen since August of last year - or more precisely, the excess liquidity demanded by the banking sector since it is the latter that is in control of the level of high-powered liquidity at this moment," said Societe Generale economist James Nixon.
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