MONEY MARKETS-Most rates march downward

Tue Mar 6, 2012 4:53pm EST

* Good demand for U.S. 4-week, one-year bills
    * 3-month Euribor rates fall to lowest since Sept 2010
    * ECB overnight deposits hit high of 827.5 bln euros


    By Ellen Freilich	
    NEW YORK, March 6 (Reuters) - Demand was strong for
U.S. Treasury bills on Tuesday while bank-to-bank Euribor
lending rates fell to their lowest levels in a year and a half
after the European Central Bank lent money at low rates last
week to fortify the European banking system. 	
    The value of bids received was four-and-a-half times the
value of bids accepted for the $40 billion in four-week bills
the Treasury sold. The Treasury awarded more than half - 55.8
percent - of the bids at the high rate of 0.060 percent. 	
    Demand was also robust for the $26 billion in one-year bills
the Treasury sold with 4.74 ratio of the value of bids received
for the securities over the value of bids accepted. 	
    The Treasury sold the $26 billion in one-year bills at a
high rate of 0.17 percent, awarding 35.46 percent of the bids at
the high. [ID: nEAP10D601] 	
    In the four-week sale, dealers made their biggest bid since
Dec. 20 when year-end was generating a "massive bid" for
short-dated bills, said Thomas Simons, money market economist at
Jefferies & Co. 	
    Despite their big bid, however, dealers got just 49.2
percent of the auction, their smallest portion since July 26,
due to an aggressive bid from the buyside, he said. 	
    Elevated repo rates deterred aggressive bidding at auctions
in February, but did not seem to have a similar impact on
Tuesday's auctions, Simons said. 	
    General collateral rates rose on the large cash drain caused
by the February 29 settlement of the three-, 10-, and 30-year
Treasury auctions comprising the February refunding and the bill
auction settlements on March 1. 	
    "More collateral combined with less cash equals higher rates
and it looks like the market is working through this," Simons
said. 	
    The sale of 52-week Treasury bills offered the highest
yields - 17 basis points - in a year-bill auction since July 26
and the auction's $26 billion size was the largest since May
2010. But despite increased supply in recent weeks and less
favorable financing conditions due to the higher repo rates, the
auction went "fairly well," Simons said. 	
    In Europe, meanwhile, Euribor rates were expected to keep
falling after the European Central Bank's second injection of
low-cost funding last week. 	
    The ECB added another 530 billion euros of funding to the
489 billion euros that banks took up in December. 	
    Three-month Euribor rates fell to 0.920
percent from 0.934 percent, their lowest since late September
2010. The huge cash boost for euro-zone banks prompted
economists to reverse their forecasts for interest-rate cuts
this year in a Reuters poll published last week. The ECB is now
expected to keep rates on hold at 1.0 percent until deep into
2013, the poll showed. 	
    A Reuters poll of traders predicted that the broader euro-
zone economy would get only limited benefit from the ECB's
funding bonanza because banks were hoarding the money rather
than lending it to businesses and consumers. 	
    ECB President Mario Draghi recently urged banks to help
strengthen economic growth by lending the money they borrow from
the central bank at very low rates to euro-zone households and
businesses.
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