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.
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