MONEY MARKETS-Japanese basis swaps widen on samurai bond glut

* Japan yen/dollar basis swaps move out on samurai pipeline

* New issues of 200-300 bln yen expected next week

* Australian interest rate swaps jump after strong GDP

* Aussie rate cut hopes muted, next move seen up by some

By Umesh Desai

HONG KONG, Sept 1 (Reuters) - Japanese basis swaps moved out on Wednesday extending a recent widening streak as a growing samurai bond issuance pipeline pushes up the cost of swapping yen for dollars.

The sale of Samurai bonds, yen-denominated bonds sold by non-Japanese issuers, total 1 trillion yen so far this year, exceeding 0.92 trillion in the same period last year, according to Reuters data.

The 5-year yen/dollar basis swap JPYCBS5Y=YMPR, the most active segment at the medium end of the curve matching the most popular tenor in samurais, inched 2 bps wider to -48/42 bringing the move in the past two weeks to 8 basis points.

"The market has expected issuances to be announced and they have pushed back the 5 year aggressively in the last 4-5 days," said a Tokyo-based rates trader at a European bank.

"There is positioning for 200-300 yards of flows to hit the street in the next week or so, causing the 3-5 year sector to be better offered."

Traders use the term "yard" when referring to a billion, to avoid confusion with trillion or million, the latter often referred to as a buck.

Issuers such as HSBC (HSBA.L) (0005.HK) and the Indonesian government have expressed interest in selling samurai bonds although no time has been set.[ID:nTOE67T055][ID:nJAK435591]

The movement in the basis, the difference between cross-currency swaps and interest rate swaps in yen, was primarily on account of movements in the cross currency market as the interest rate swap market was deep enough to absorb the Samurai flows.

"The CCS market is very sensitive to flows hitting the street and when the market knows there are flows coming one way its not going to necessarily sit and oppose it," the Tokyo-based trader said.

Japanese cross currency yen/dollar CCS for the 5-year segment JPUS3L5YU=TRDT was at -51 bps compared with Tuesday's -46.5 bps.

That compares with a 1.5 bps rise in the 5-year IRS JPYSB6L5Y=.

AUSSIE RATE CUT HOPES QUELLED

In Australia, interest rate swaps jumped and expectations of a rate cut were pared back after data showed the economy grew at the fastest pace in three years last quarter, handily beating analysts' forecasts.

Government statistics showed gross domestic product (GDP) climbed 1.2 percent in the second quarter, compared to the first when it rose 0.7 percent, outpacing forecasts of a 0.9 percent increase.

This took growth for the year to 3.3 percent, marking Australia's 19th consecutive year without a recession.

Swaps AUDIRS jumped across the curve rising by 5-10 bps in the 1-4 year segment causing some steepening in the short end of the curve as 3-4 years rose faster.

A credit Suisse measure CSRBA=CSAU shows the market is now poised for a 7 percent chance of a rate cut next week, down from a 13 percent chance on Tuesday.

Interbank futures <0#YIB:> are still suggesting a 20 percent chance of a rate cut by the year end.

A Reuters survey of 18 economists found all expected the Reserve Bank of Australia (RBA) to keep rates at 4.5 percent after its monthly policy meeting on Sept. 7. It has already raised its key cash rate by 150 basis points since October.

"We remain of the view that the next move is firmly in the upward direction although the timing is complicated by the still contained inflation at this juncture coupled with a clear loss of momentum in U.S. growth and generally uncertain global outlook," said a client note from RBC Capital Markets.

It has a policy rate target of 5.25 percent by end-2011.