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MONEY MARKETS-Demand at U.S. bill sales in middle of recent range
* General collateral repo rates ease
* ECB zero rate drives Euribor prices to record lows
By Ellen Freilich
NEW YORK, July 9 (Reuters) - Sales of short-term U.S. Treasury bills on Monday were consistent with results of the last several months while euro zone bank-to-bank lending rates hit all-time lows after last week's interest rate cut by the European Central Bank.
The Treasury sold $30 billion in three-month bills at a high rate of 0.090 percent, awarding 68.57 percent of the bids at the high.
The ratio of bids received over those accepted was 4.58. That ratio, as well as the portion of the auction captured by various categories of bidders, was consistent with recent averages, said Thomas Simons, vice president and money market economist at Jefferies & Co. in New York.
The $27 billion six-month Treasury bill auction went at a high rate of 0.145 percent, with 17.99 percent of the bids awarded at the high and a bid-to-cover ratio of 4.83.
Dealers got 63.4 percent of the issue, in the middle of the recent range, Simons said.
Meanwhile, the rate of interest, or repo rate, on general collateral (the broad class of Treasury securities) ended lower at 5 basis points on Friday and opened on Monday at 19 basis points, said Roseanne Briggen, an analyst at IFR, a unit of Thomson Reuters. This was still below where repo rates traded going into quarter-end and early in the third quarter.
The repurchase market plays a role in the financing and hedging activities of primary dealers, the firms charged with underwriting U.S. Treasury auctions.
The Treasury will sell three-year notes, as well as 10-year notes and 30-year bonds this week. The latter two sales are reopenings, when the Treasury sells more of an existing bond, increasing the amount of the issue outstanding.
The 10-year Treasury notes and bonds remained "on special" on Monday - meaning the repo rate was below the rate on its related general collateral - as traders prepared for supply, Briggen said.
ECB RATE CUT WEIGHS ON BANK-TO-BANK RATES
Three-month Libor fixed unchanged at 0.45760 percent, but euro zone bank-to-bank lending rates hit all-time lows as the money market adjusted to the European Central Bank's decision to cut euro zone interest rates to a historic low of 0.75 percent and its deposit rate to zero.
The ECB's overnight deposit rate acts as a floor for money market rates as banks only lend to rival banks if they are able to earn a better rate of interest than at the ECB.
The central bank hopes its unprecedented move, which means banks will now get nothing if they park their spare cash with the ECB, will nurture a return of more significant interbank lending by forcing banks to look for more profitable options.
Though some money market experts fear the cut could backfire and kill off parts of the market, the move immediately lowered euro zone bank-to-bank lending rates.
Three-month Euribor rates, traditionally the main gauge of bank-to-bank lending, saw their biggest fall on record on Friday and hit an all-time low again on Monday, fixing at 0.531 percent, down from 0.549 percent.
Other key rates saw similar drops. Six-month Euribor rates fell to 0.817 percent from 0.831 percent, and shorter-term one week rates fell to 0.174 percent from 0.208 percent.
Overnight rates that do not yet factor in the benefit of the ECB's cut - it comes into force on Wednesday - inched down to 0.329 percent from 0.332 percent.
Euribor rate, like counterpart Libor bank-to-bank rates , are currently at the center of a manipulation scandal.
Dollar-priced three-month bank-to-bank Euribor lending rates fell on Monday, dropping to 0.990 percent from 0.991 percent while the overnight rates climbed to 0.350 percent.
There is a marked difference between Euribor and Libor rates at present. One reason is that Euribor figures include prices from more of Europe's struggling banks than Libor.
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