MONEY MARKETS-Japan swaption premium rises, dollar funding dips

SINGAPORE, Nov 9 (Reuters) - Lingering worries over Japan's fiscal deficit and its ability to fund it caused a renewed spike in the swaptions market on Monday, with medium and longer term option premiums climbing.

* Japanese government bond yields have surged over the past week - the 10-year yield hit a 4-½ month high on Monday -- on worries over issuance and the fiscal deficit blowing out as the new government pumps up spending.

* Japan credit default swaps have widened. Implied volatilities on options to enter into interest rate swaps, or swaptions JPYSWPTNS=TTKL, spiked higher in late October, fell last week and seemed to be creeping higher again this week.

* Premium on 5-year options to enter into 5-year swaps were at 510 bps on Monday, recovering from a 470 trough last week and close to a 521 bps high seen on Oct 27.

* In dollar funding markets, costs in shorter tenors continued their gradual descent, a trend that could extend into the weeks ahead until the customary year-end positioning and cash needs get in the way.

* In Singapore, 3-month dollars SIUSDD=ABSG are quoted at an average 0.28167 percent, a fresh low.

* The spread between LIBOR LIBOR= and overnight-indexed swaps (OIS), the latter a measure of market expectation of policy rates, has also barely changed in months, and is quoted at 14 bps.

* In local markets, the Korean benchmark certificate of deposit rate KRCD=KQ is at 2.79 percent and has not changed since mid-October.

* The swaps curve steepens as does the bond curve, led by a drop in short term yields as traders prepare for policy to be kept on hold when the Bank of Korea meets on Thursday.

* Korean one-year swap KRWIRS was 3.51 percent, 11 bps lower than levels seen in the middle of last week.

* Singapore interbank 3-month rates SGDDFIX=ABSG are at 0.56 percent, extending a slow grind higher since October. (Reporting by Vidya Ranganathan; Editing by Kim Coghill)