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Money markets us sa commercial paper market grows on week


´╗┐* US seasonally adjusted CP market grows for fifth week * Traders step up bets that ECB action will depress rates * Eonia falling to new lows across curve, below depo rate By Chris Reese and William James NEW YORK/LONDON, May 31 The U.S. seasonally adjusted commercial paper market grew for a fifth consecutive week in the latest week, suggesting business appetite for short-term debt while the U.S. economy grows at a modest pace, Federal Reserve data showed on Thursday. The size of the U.S. commercial paper market grew by $20 billion to $1.029 trillion on a seasonally adjusted basis in the week ended May 30 from a seasonally adjusted $1.009 trillion outstanding a week earlier. The size of the market without seasonal adjustments shrank by $4.1 billion in the latest week, to $1.018 trillion from $1.022 trillion. U.S. not seasonally adjusted foreign financial commercial paper outstanding grew by $5.3 billion to $204.9 billion from $199.6 billion. Meanwhile, bets that the European Central Bank will step in to relieve growing pressure in the euro zone financial markets have driven short-term money market rates to record lows, with traders anticipating a cut in borrowing costs or another flood of cash. A fall to new lows across three-month to one-year rates suggested markets were preparing for fresh monetary easing from the ECB that would push the cost of overnight borrowing lower. Pressure has grown on the ECB to act to calm acute nervousness over whether Greece may have to leave the currency bloc, and whether Spain can afford to save its fragile banks. While "the situation in Europe prevails as it is, the market will continue to keep front-end rates pretty low and under pressure. They're definitely looking for something from the ECB," said Eric Wand, strategist at Lloyds Bank in London. Hamstrung by a lack of trust between banks, the euro zone financial system is already on life support from the ECB. The central bank is currently lending just under 1 trillion euros to financial institutions to provide funding that banks can no longer source at an affordable rate in the market. That huge surplus of cash has pushed the Eonia overnight lending rate down to within a whisker of the 0.25 percent paid on deposits at the ECB. The daily Eonia fixing on Wednesday night was 0.33 percent. The deposit rate was once seen as a floor for Eonia, since there was no incentive to lend to a bank for a lower rate than that available at the ECB. But traders looking to lend at a fixed Eonia rate for six months or longer are now willing to offer a rate below 0.25 percent, gambling that fresh easing would force rates down even further. "With it being extremely unlikely that the daily Eonia fix will rise, traders have a good idea of any potential downside," said Kevin Pearce, senior broker at ICAP in London. "But if the ECB does offer some new form of stimulus in the shape of rate cuts - which I think is unlikely at present - or new lending operations, it could push Eonias lower." Six-month Eonia hit a record low of 0.22 percent on Thursday, while the one-year rate slipped as far as 0.204 percent. The ECB holds its next regular policy-setting meeting on June 6, but forward Eonia prices showed markets believe it was unlikely the ECB would act yet. A 25-basis-point cut in the 1 percent main refinancing rate was only around 10 to 20 percent priced in for June but the probability increased into July's meeting, analysts said. J. P. Morgan research said a cut was fully discounted by September. While there is no clear consensus on the timing of any ECB action, the sharper decline in long-dated rates shows that markets expect central bank support measures to remain in place for an extended period - a gloomy verdict on the region's chances of escaping its current crisis. "Out to two years there's not much higher rates in sight. The ECB is seen more or less staying put at these levels or even lower," said Benjamin Schroeder, strategist at Commerzbank in Frankfurt.

Press digest australian business news jan 12


´╗┐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)Media executives have revealed that the first few weeks of the year have been slow for advertisers, reducing hopes of a rebound in the advertising market in the early months of the year."We are a bit different but I think the retail situation is probably one of the bigger drivers," Rhys Holleran, chief executive at media provider Southern Cross Media, said. Retailers make up approximately 22 percent of all advertising spending, but the industry is struggling from a difficult trading environment, forcing companies to restrain their ad budgets. Page 16.-- Spotless Group yesterday announced it would not grant Pacific Equity Partners (PEP) due-diligence over the specialist support services group until the private equity firm submits an improved takeover offer. The stance comes as some Spotless shareholders threaten to overturn the board if it does not engage with PEP. More than 26 percent of Spotless' shareholders have entered into pre-bid agreements with the private equity group, which is currently offering A$2.68 a share for the company. Page 16.-- James Warburton, the new chief executive of Ten Network , has embarked on another overhaul of the station's evening programming in a bid to revive falling ratings. The network yesterday said it will relocate its news bulletin to the 5pm timeslot, a position it previously held for more than two decades, while current affairs show The Project would be brought forward to the 6pm timeslot."Early evening stripped entertainment programming at 7pm was a space Ten introduced to the landscape and previously dominated," Mr Warburton said. Page 16.-- Observers have predicted that, should its takeover bid succeed, Kohlberg Kravis Roberts could make clothing wholesaler Pacific Brands increase its level of direct sales to consumers in order to head off a move by retailers to replace Pacific Brands' products with their own labels. One analyst added that the private equity group may opt to sell off Pacific Brands' assets individually. "Bonds, Berlei, Dunlop, Sheridan  add up the sum of those brands and they're more than what is being reflected in the share price," he said. Page 33.-- THE AUSTRALIAN (this site)The largest insurance group in Australia, QBE, surprised the market yesterday after it announced that its United States insurance business Balboa was being investigated by the New York Department of Financial Services over fees on its insurance policies. QBE's stock fell 1.14 percent to A$13 following the news, which Ryan Fisher from investment bank Goldman Sachs said could impact upon QBE's profit margins. "This is a major business for QBE  so any ramifications for the pricing of the product would clearly be significant," Mr Fisher said. Page 15.

-- The chief executive of Southern Star, Rory Callaghan, has resigned from the television (TV) production house, although he declined to say who his next employer was after confirming he would remain in local TV production."A new opportunity has come my way  yes, [Southern Star] will be upset when they find out who it is. But I've been up-front with them," Mr Callaghan said. Southern Star currently produce the Hi-5, Deal or No Deal and Big Brother shows for various networks. Page 15.-- Mick McMahon, head of workforce services group Skilled Engineering, yesterday said that Australia was "at risk of missing the benefits of the resources boom" due to skill shortages in some sectors. His comments come as some observers question the legitimacy of the Federal Government's decision to inject more than A$100 million into car producers to maintain the Australian car manufacturing industry, which has received more than A$12 billion in subsidies over the last decade. Page 15.-- Telstra is on the verge of allowing wholesale customers to access its 3G mobile network, although the telecommunications giant is understood to be questioning the merit of the move given that rivals later this year are expected to launch their own fourth generation (4G) networks. Telstra is currently the only operator in Australia with a commercial-ready 4G network, but Michael Malone, managing director of internet service provider iiNet, said "the boat had already sailed" on Telstra's strategy. Page 15.

-- THE SYDNEY MORNING HERALD (this site) The Federal Government's bid to ease the cost of funding for banks by reversing a ban on covered bonds has been undermined by two recent transactions that showed it was more costly to raise money via covered bonds than by issuing unsecured debt half a year ago. National Australia Bank and Commonwealth Bank of Australia paid approximately 100 basis points more than premiums on senior unsecured debt last year than when the pair sold a combined A$3.1 billion in covered bonds, according to research from newswire Bloomberg. Page B21.-- The Australian Bureau of Statistics yesterday revealed that job vacancies slumped to 181,000 in November, their lowest point since May two years ago. Observers say the figure further highlights continued weakness in the labour market, with vacancies in non-mining states such as Tasmania, South Australia and Victoria falling more rapidly than other states."Unemployment is probably drifting slowly upwards," Chris Caton, chief economist at investment group BT, said. Page B21.-- The Law Council of Australia yesterday claimed that plans to increase the power of the Australian Securities and Investments Commission (ASIC) was excessive and gave the regulator too much clout over who could hold a financial services licence. ASIC said the powers are necessary to safeguard investors from rogue operators, arguing that current legislation made it too difficult to void a licence or prevent one from being awarded. Page B22.

-- The Facebook page for Tourism Australia has become the most popular tourism page on the planet, with the authority saying it will significantly increase its marketing budget for social media following the success of the promotion. Nick Baker, executive general manager of marketing for Tourism Australia, said 85,000 people liked the page after a film showing people in Sydney celebrating New Year's Eve was uploaded. "It's always better to have other people telling your story," Mr Baker said. Page B22.-- THE AGE (this site) The S&P/ASX 200 Index recorded a second straight day of gains, with investors buoyed by continued economic data indicating a recovery in the United States (US) economy."some analysts are even redirecting their sentiment and encouraging a 'forget Europe, buy US stocks mentality'," Andrew May, trader at contracts for difference provider CMC Markets, said. Page B10.-- Jeff Olsson, head of technology at the Australian Securities Exchange, is leaving the company after working at the stockmarket operator for 15 years. Elmer Funke Kupper, managing director of ASX, said Mr Olsson would still oversee the collection of the exchange's new data centre in Sydney. ASX added that a replacement for Mr Olsson would be named later this year. Page B13.-- South African heavy minerals and coal miner Exxaro has submitted a A51 cents a share bid for locally-listed miner African Iron, majority owners of an iron ore venture in the Republic of Congo. Analysts believe that major shareholder Equatorial Resources ,EQX. AX> could stymie the bid from receiving more than 75 percent acceptance, at which point the bid would automatically increase to A57 cents a share. Mark Hinsley, analyst at broker Foster Stockbroking, however, said the bid was likely to succeed given its substantial premium. Page B13.-- The fall in the price of aluminium and the strength of the Australian dollar has resulted in 250 workers losing their jobs at two smelters in New South Wales. Halvor Molland from Norwegian aluminium supplier Norsk Hydro said the facility at Kurri Kurri was running at a "substantial loss" and was "cash negative". Rio Tinto has announced it will make 100 people redundant from its neighbouring Tomago smelter, although it said the facility, which produces 530,000 tonnes of aluminium annually, will continue to operate at capacity. Page B16.--