MONEY MARKETS-Aussie swap rates lower, tightness seen in China

HONG KONG, July 6 (Reuters) - Australian swaps indicated on Monday bets were moderating about when the central bank would raise interest rates while China's money market pointed towards growing tightness in liquidity.

Asian dollar borrowing rates extended their downward path as major central banks continued support for loose monetary conditions, which pushed down bank-to-bank cost of lending to record lows.

Australian job advertisements slid for the 14th straight month in June, painting a grim outlook for unemployment and adding to the case for interest rates to stay at record lows for months to come.

A private gauge of inflation also showed price pressures remained subdued in June, reinforcing expectations the Reserve Bank of Australia (RBA) would keep an easy monetary policy bias at its monthly policy meeting on Tuesday.

While the market is confident the central bank will hold rates steady at the meeting [ID:nSYD516514], there has been a lot of debate about the timing of the next move up.

That view turned slightly dovish on Monday after the data release, with the one year overnight indexed swaps AUD1YOIS= down to 3.01 percent from 3.0275 percent. One year interest rate swaps AUDQM3AB1Y= fell 3 basis points (bps) to 3.29 percent.

"We still think it would be premature to look for rate hikes before the end of the year -- our own forecast is for RBA to keep interest rates low until the second half of next year," said Tony Morriss, senior rates strategist with ANZ.

In China, where the central bank last week allowed auction yields on its three-month bills to rise for the first time in over a year, money markets are bracing for increased tightness.

On Monday, the 90-day bill rate CN3MNFIX=R rose to 1.09 percent from 1.089 percent and is now trading at its highest since early March.

The seven day repo rate CN7DRP=CFXS eased to 1.2297 percent from 1.2442 percent on a weighted average basis but it is still 30 basis points higher than the rates prevailing in mid-June before they started rising partially on IPO-related worries.

In a further sign of tightness, a finance ministry auction of three-year bonds on behalf of the regional governments on Monday was done at a higher yield compared with a previous sale.

"On balance, we see upside risks to domestic sovereign bond supply this year, given the deteriorating fiscal position, which is likely to weigh on the mid- to long-end of the CGB curve," Standard Chartered said in a note.

China government bond yields in the secondary market have edged up in recent weeks amid China's resumption of IPOs with analysts expecting at least 100 billion yuan ($15 billion) worth of share offerings to hit the market this year.

In Singapore, 3-month dollars SIUSDD=ABSG inched down to 0.55958 percent from 0.58286 percent on Friday as confidence grew the world's central banks would keep banking systems flush with liquidity.

Last Friday, the European Central Bank kept its benchmark rate at 1.0 percent and central bank comments helped push bank-to-bank lending rates for euro funds to fresh lows.

The three-month euro London interbank offered rate (Libor) was fixed at 1.03750 percent EUR3MFSR=, while the equivalent rates for dollars and sterling were also eased to all-time lows.

"Any spike in LIBOR has to be a function of risk aversion coming back but I don't see any risk aversion coming back unless there is a big movement down in the dollar," said Suresh Ramanathan, strategist with CIMB Bank, Kuala Lumpur. (Reporting by Umesh Desai; Editing by Neil Fullick)