Greek repo market remains dry

The Greek repo market remained largely frozen on Thursday, winning little respite from news the European Union had struck a deal to bail out debt-laden Greece as edgy traders waited further details of the plan. Risky assets rallied earlier after EU president Herman Van Rompuy said European leaders had agreed to give aid to Greece but some of the gains were scaled back as the details of the deal were still unclear.
EURO LIBOR UNCHANGED AT RECORD LOW LEVELS Higher-yielding eurozone government bond prices rose, with the premia investors demand to hold them dropping and the cost of insuring most of them against a debt default.
The relief rally did not spill over to the Greek repo market, however, where flows have been almost non-existent in recent weeks as worries over the country's fiscal problems shattered investor confidence in Greek sovereign credit. "The prospect of a deal to support the Greek government being hammered out at today's EU summit is certainly not yet showing any signs of helping Greek domestic banks raise funds in the open market.
Some analysts said there was ample demand for liquidity in Greek collateral repos coming in at 40-50 basis points above benchmark but there were no offers. That compares with the one-month Eurepo rate of 0.341 percent. Meanwhile, the three-month euro London interbank offered rate (Libor) fixed unchanged at a record low 0.559719 percent.
The equivalent dollar rate also held steady at 0.25 percent, with little change too across the rest of the Libor curve a day after Federal Reserve Chairman Ben Bernanke said the US central bank would eventually reverse its loose monetary policy.
Bernanke gave his most detailed description to date of how the Fed aims to dismantle the extensive emergency support facilities it put in place to bolster the economy, although he stressed it was not yet time for such measures. In other markets, swap rates in Australian swap rates rose across the board on Thursday and bill and interbank futures fell after unexpectedly strong jobs data had the market pricing in a higher chance of an interest rate increase next month.