MONEY MARKETS-US 4-week bill sale holds rate within recent range

* Rates at U.S. 4-week bill sales rangebound since January
* Repo rates edge higher
* Three-month Euribor rates at all-time low

By Chris Reese
NEW YORK, July 10 (Reuters) - Solid demand for short-term
U.S. debt meant the U.S. Treasury Department's sale of $30
billion of four-week bills on Tuesday was completed at a rate
within a range that has held for several months.
The Treasury sold the bills at a high rate of 0.07 percent,
down from a high rate of 0.075 percent in a similar sale of the
bills last week but up from a high rate of 0.06 percent two
weeks ago. About 83 percent of the bids in Tuesday's sale were
awarded at the high rate.
Four-week bills in weekly sales have brought a high rate of
0.04 percent to 0.11 percent since Jan. 31.
Demand for short-term U.S. debt has remained solid even as
the Federal Reserve sells its short-term debt holdings as part
of its latest stimulus effort, dubbed "Operation Twist." The
central bank is selling its shorter-dated U.S. debt holdings and
buying longer-dated debt in an effort to lower longer-term
borrowing costs like those on mortgages.
As part of Twist, the Fed on Tuesday bought $1.322 billion
of Treasury inflation-protected securities maturing January 2022
through February 2042.
Some analysts expect the dynamics of Operation Twist will
mean U.S. primary dealers will continue to hold large quantities
of short-term debt, which could mean support for overnight repo
rates in general.
"We think the structural trend related to Operation Twist
sales remains in place and that dealer positions in front-end
paper will remain very high going forward," said Michael
Cloherty, head of U.S. rates strategy with RBC Capital Markets
in New York, adding "accordingly, we do not look for repo rates
to drop."
The overnight rate on repos secured by U.S. government debt
was last quoted on Tuesday at 0.24 percent, up from
0.23 percent late Monday, according to Reuters data.
Meanwhile, the European Central Bank's cut of its mainstream
deposit rate to zero last week continued to push European market
rates to fresh all-time lows on Tuesday.
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.
Three-month Euribor rates, traditionally the
main gauge of bank-to-bank lending, on Tuesday hit a new
all-time low of 0.521 percent, down from 0.531 percent, while
overnight rates which do not yet factor in the cut --
it comes into force on Wednesday -- inched down to 0.325 percent
from 0.329 percent.
Three-month dollar Libor rates were unchanged at
0.4576 percent on Tuesday, while three-month sterling rates
fixed at 0.85963 percent versus 0.86463 percent on
Monday.
Both Libor and Euribor rates are currently at the center of
a manipulation scandal after it emerged a number of banks were
falsely submitting the rates they pay to the committee that
aggregates the data.