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Money markets relaxed coeure halts ltro related rise in rates

´╗┐Jan 18 The recent spike in short-term money market rates came to a halt on Friday after a top European Central Bank policymaker played down the chance of banks repaying a massive chunk of their LTRO cash this month. Banks took more than 1 trillion euros of ultra-cheap, three-year loans from the ECB in two separate offers roughly a year ago as it sought to restore order to Europe's crisis-hit financial system. They are allowed to start returning the cash in weekly installments from Jan. 30. and as banks must inform it of their plans a week in advance, the ECB will publish the first repayment amount on Jan. 25. Expectations of the amount to be paid back has increased recently and could be up to 300 billion euros, analysts say, which would effectively halve the amount of excess liquidity in the system. The heavy oversupply of ECB cash has long depressed the rates banks charge each other on lending markets, but the prospect of a significant repayment and a recent cooling of ECB rate cut hopes has triggered a rise in money market rates. The one-year Eonia rate reached a peak of 0.2150 percent on Thursday, its highest since early July, while benchmark Euribor rates hit their highest since mid-October on Friday as they rose to 0.209 percent.

The rise was cut short, however, by comments from Benoit Coeure, the board member in charge of the ECB's market operations, who played down the impact on short-term rates of the early LTRO repayments."Structurally I don't expect the reimbursement to have a very strong impact on Eonia rates, given the excess liquidity in the euro zone, which remains very high," Coeure told reporters. Just a month ago markets were flirting with the idea the ECB could cut interest rates and start charging banks to park their spare cash with it. But things have turned almost 180 degrees since Mario Draghi's surprise revelation last week that a rate cut was not even discussed this month.

PAYBACK TIME "It is all building towards the LTRO payback and whether there will be a big amount repaid," one euro zone-based money market trader who requested anonymity said about the rise in market rates.

"If it is going to be quite modest and less than 200 billion euros it won't really have much of an impact. But if it starts getting up around 300 billion euros, yes, it probably will have a bit of an impact on Eonia."Analysts at Rabobank said that while both Eonia and Euribor rates would rise if there was a large scale LTRO repayment, Eonia would probably rise more due to the different way the rates price counterparty risk. German two-year bond yields were dragged up in the market's slipstream on Friday, rising to their highest in nearly 10 months before falling back again as the day progressed and following Coeure's comments. Shorter-dated bonds were the main beneficiary of the ECB's 1 trillion euros in loans to euro zone banks in late 2011 and early 2012, the cash and record-low official interest rates eventually turning German two-year yields negative. Even if banks do return much of their LTRO money it may not automatically lead to a sharp drop in the 630 billion euros of excess liquidity currently sloshing round the system."It will be interesting to see whether banks pay back a lot of the LTRO money because they want to make it look like they are weaning themselves off central bank support, but then just borrow it back again at the weekly (refinancing operation)," said a trader.

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Press digest australian business news march 28

´╗┐Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy. THE AUSTRALIAN FINANCIAL REVIEW (this site)--Leighton Holdings yesterday went into a share trading halt as it evaluated "revisions to previous guidance" after conducting its quarterly reviews. The market is now preparing for another write-down relating to the A$4.1 billion Brisbane Airport project where work is currently continuing around the clock in an effort to meet the scheduled opening of June 30 this year. Page 17.--Reserve Bank of Australia assistant governor Guy Debelle said yesterday, at an investment conference hosted by the Sydney branch of Morgan Stanley, that foreign investors, who currently hold about 75 percent of the total outstanding government debt, tended to be "buy-and-hold investors don't change their mandates in a hurry." This could lead to tighter liquidity, that may impact the Australian financial system as the new liquidity rules come into effect, Mr Debelle added. Page 17.--ConocoPhillips, the large United States oil company, has stated it supports the Woodside Petroleum proposal to create a gas processing site at James Price Point on the West Australian coast in the Kimberley region. Conoco could send gas from its Canning Basin shale gas operations or its Browse Basin fields, said the president of Conoco's Australian operations, Todd Creeger, who will address the Australian Financial Review's National Energy Conference today in Brisbane. Page 19.--Adelaide-based oil and gas exploration and production company Beach Energy, has announced a capital raising targeting A$345 million as its share price has enjoyed a healthy increase recently. "They have obviously outlined a fairly aggressive exploration and development program over the next two or three years so it's unsurprising  they would take advantage of the run in share price  to pre-emptively get some capital in the door," said Ben Wilson of JPMorgan yesterday. Page 21. THE AUSTRALIAN (this site)--Global mineral resources company Rio Tinto is conducting a strategic review of its diamonds division that may lead to its sale. "We have a valuable, high-quality diamonds business but, given its scale, we are reviewing whether we can create more value through a different ownership structure," said Harry Kenyon-Slaney, chief executive of Rio's diamonds and minerals division, yesterday. BHP Billiton indicated last November that it may sell part or all of its diamond operations. Page 35.

--Youth-oriented fashion apparel retailer Glue has announced it may discard brands that utilise discount online channels for sales. "Once a brand gets into the spiral of discounting and just looking for sales, the value of the brand depreciates and we don't want to be involved with brands that will be entering that spiral," said Hilton Seskin, owner of the Glue chain and chairman of the Australian arm of British fashion retailer Topshop. Page 35.--Theft in retail outlets cost the industry A$7.5 billion in 2011, reported the Australian Retailers Association - a 50 percent rise since 2009. Cuts in staff numbers over the last few years have been identified by Myer and David Jones as a tactical error producing frustrated shoppers who are more likely to leave and take merchandise without paying for it. "If there's one thing that stops people stealing, it's when there are people around the store," said Bernie Brookes, chief executive of Myer which has increased staff numbers significantly this year. Page 35.--The joint venture between large specialist investment manager AMP Capital Investors and United States investment house Brookfield Investment Management has been terminated. Brian Delaney, business director of client product and marketing at AMP, said yesterday that the increasing demand for listed global property and infrastructure securities provided an opportunity for the company to "take control of the platform and in the fullness of time to go into more markets." Page 36.

THE SYDNEY MORNING HERALD (this site)--Housing affordability was deteriorating rather than improving, according to home builder Stockland. The company said one factor is that the deposit conversion rate applying to new home sales has gone down. "Often this is due to buyers going through the finance process and getting knocked back even where we assessed them as being able to get finance," said Matthew Quinn, Stockland chief executive, yesterday. Page B1.--In the Federal Court in Melbourne, shopping centre investment specialist Centro and auditor PricewaterhouseCoopers (PwC) are being sued by investors over the calamitous Centro share price fall of 2007 that followed the discovery that billions of dollars of short-term debt had been classified erroneously as long-term debt. Accountant Paul Belcher, who worked at PwC prior to joining Centro, said the error was not referred to at the September 2007 meeting that reviewed the accounts for final approval. Page B3.--In the Federal Court, 13 councils are claiming misleading or deceptive conduct and negligence by the companies that sold them the constant proportion debt obligations (CPDOs) that collapsed in value during the global financial crisis. Ian Jackman, SC, said the emails sent by Mike Drexler, then an employee of ABN Amro, to Standard & Poor's (S&P) giving information on CPDOs, did not contain deliberate falsehoods but perhaps an innocent mistake or carelessness. S&P gave the products an AAA rating. Page B4.

--BHP Billiton chief executive Marius Kloppers has been rated as one of the top 30 chief executives in the world for the second year running by Barron's, a United States business publication. Mr Kloppers was commended over the role BHP plays in providing raw materials to the developing economy of China. Page B5. THE AGE (this site)--South African mining company AngloGold Ashanti has released budget figures showing A$760 million has been allocated to its Australian operations. These include the Sunrise Dam and Tropicana mines in Western Australia as well as further exploration. Gold could reach "well over US$2200 an ounce in coming years," said AngloGold chief executive Mark Cutifani. Page B4.--In a secret exercise, the Australian Securities and Investments Commission (ASIC) determined that the advice given to 64 consumers by financial advisers, that the recipients rated very highly, was rated as much less impressive by ASIC analysts. "The finance industry needs to lift its game," said ASIC commissioner Peter Kell. Page B5.--Shares in farm chemicals group Nufarm closed lower yesterday after the company reported a drop in sales for the first half of the year and noted there were concerns regarding its business in Europe. "Seasonal conditions in Europe are very mixed, and there is increased business risk associated with economic pressures in a number of European countries," said managing director Doug Rathbone. Page B5.--Jetstar Asia, the Qantas Airways-backed low-cost airline based in Singapore, has announced its new chief executive will be Barathan Pasupathi, who worked as the airline's chief financial officer early last decade and has since worked for an airline in Kuwait and an oil company in Singapore. Mr Pasupathi has "first-hand understanding of our business as well as the aviation sector overall," said Dennis Choo, chairman of Jetstar Asia. Page B7.