17 10 / 2011
MONEY MARKETS-Interbank rates up on bank write-down fear, debt
* Germany dampens hopes on debt crisis planBy Ellen Freilich and Emelia Sithole-MatariseNEW YORK/LONDON, Oct 17 (Reuters) - Demand for safe-haven
short-term U.S. debt eased and some measures of market strain
held steady on Monday, though bank-to-bank lending rates rose
as Germany damped hopes that Europe would soon reach a
comprehensive solution to its debt crisis.The Group of 20 major had economies pressured euro zone
leaders over the weekend to move to act decisively to address
the crisis at a European Union summit on Oct. 23.. However, Germany’s finance minister, Wolfgang
Schaeuble, tempered the expectations on Monday.Analysts said market price action was being driven by
short-term speculation about the proximity, and likelihood, of
an agreement on key elements of a rescue package, including a
recapitalization of the region’s banks.Still, safe-haven demand for short-term U.S. Treasury debt
cooled in two auctions the Treasury conducted on Monday.The U.S. Treasury sold $29 billion in three-month bills at
the highest yield in two months and six-month U.S. Treasury
bills at the highest yield since early September.With short-term interest rates held near zero by the U.S.
Federal Reserve’s pledge to keep short rates near zero at least
until mid-2013, Monday’s three-month bill auction stopped at 3
basis points, still the “highest” yield in two months.Another sign of less heated demand for the shorter-term
U.S. debt was the 4.17 ratio of bids received over those
accepted, down from a record 5.15 a week earlier.The weak buyside bid left dealers with 75.5 percent of the
auction, though their total bid was more than $8 billion less
than last week’s auction, said Thomas Simons, money market
economist at Jefferies & Co in New York.”This does not bode well for the sector going forward,” he
said, but noted the addition of a 52-week bill into this week’s
auction schedule might have weighed on demand in the three- and
six-month bill auctions.The Treasury sold $27 billion in six-month bills with a 6.5
basis-point yield, the highest since Sept. 6.Demand for the six-month bills perked up from a week ago
with a “fairly strong” 4.95 ratio of bids offered over those
accepted, “a decent rebound” from last week’s auction, Simons
said.Dealers still took 62.4 percent of the sale, above average,
but considerably smaller than the previous week’s auction.The indirect takedown rebounded to 29.5 percent of the sale
from last week’s “extremely poor” 14.4 percent, but still well
below the takedowns of late September and the first week of
October, Simons said. Direct bidders took just 8 percent of the
sale, near the bottom of their recent range.As Germany asserted that banks should write down more of
their Greek debt holdings, some gauges of market strain — such
as the three-month premium paid over anticipated central bank
rates — held steady. Interbank lending remained sparse and
limited to very short maturities, traders said.In the unsecured lending market, however, London interbank
offered rates for three-month euros rose to nine-week peaks of
1.50750 percent . The equivalent Euribor rate was
also higher as banking sector tensions outweighed a glut of
excess liquidity swishing in the system.”You have some bilateral trades going on in very small
amounts and no term lending because there’s no trust among
banks. Confidence and trust will have to come from the long
end” of the interbank market, a trader said.”Regaining trust and confidence among banks will take a
long time even if there’s a fantastic set-up and framework from
policymakers by the beginning of December,” he contended.Efforts by euro zone leaders to convince banks to accept
“voluntary” write-downs of up to 50 percent on their Greek
debt, from around 21 percent when a second bailout plan for
Greece was agreed in July, also unsettled money markets.A European Central Bank policymaker, Juergen Stark, warned
that changing the terms of investors’ bonds in the euro zone
made the bloc look like a risky investment.In another sign of banks’ reluctance to lend to each other,
overnight deposits at the ECB — which pays a lower interest
rate — rose to 136 billion euros from 123 billion the previous
day. Highlighting the uncertainty over European banks’ funding
needs, forecasts in a poll for the ECB’s first one-year tender
in almost two years, due to be held next week, ranged from 10
billion euros to 150 billion euros.Still, demand for the bank’s seven-day loans was slightly
off last week’s allotment of 204 billion euros, and money
markets are already well overstocked with ECB funds, which have
been augmented by the re-introduction of three-month and
one-year funds in an effort to ease money market strains and
lower interbank lending rates.Excess market liquidity stands at 229 billion
euros, according to Reuters calculations, just below Friday’s
level, which was the highest since the end of June last year.
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14 10 / 2011
Lockheed robot vehicle headed to Afghanistan
The all-terrain vehicle was on display here during an
annual meeting and arms bazaar of the Association of the United
States Army, held in Washington this week.Lockheed spent more than $20 million of its own funds to
develop the system, dubbed Ox after the beasts that helped lug
previous- generation troops’ loads.Five years in the works, the unit is controlled by a
touch-screen computer that include as “come-to-me” button.
Using laser radar, it can also follow a given soldier or carry
out point-to-point missions.The goal is to sell for less than $250,000 per unit, said
Don Nimblett, the company’s top business development manager
for the project.Lockheed foresees a potential U.S. military market of
nearly $2 billion over the next 20 years, including 3,000 to
5,000 vehicles for the Army, he said.Future applications may include providing security for
borders and oilfields as well as firefighting and dangerous
industrial applications, the company said.
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14 10 / 2011
PREVIEW-Canada Sept inflation rate seen at 3.1 pct
REUTERS FORECASTS Sept Aug ForecastrangeHeadline CPI m/m +0.2 pct +0.3 pctHeadline CPI yr/yr +3.1 pct +3.1 pct +2.8 pctto +3.2 pctCore CPI m/m +0.2 pct +0.4 pctCore CPI yr/yr +2.0 pct +1.9 pct +1.5 pctto +2.1 pctFACTORS TO WATCH:If the forecasts are correct, headline inflation will
remain above the Bank of Canada’s target range of 1 percent to
3 percent. Core inflation, which excludes volatile items like
gasoline and some food, is in the center of the target.In normal times, this would the central bank under
considerable pressure to raise rates to keep inflation from
spinning out of control in coming quarters.But BoC Governor Mark Carney, and markets for that matter,
are more focused on growth than on inflation, given unease over
Europe’s sovereign debt crisis and signs of weak demand for
Canadian goods from the key U.S. market.The bank has signaled it is in no rush to hike rates from
their ultra-low rate of 1 percent, even if inflation looks
high.MARKET IMPACT:With investors focused on Europe and fears of contagion
into the global banking system, it may take a sharp jump in
inflation to alter expectations that the Bank of Canada will
hold its key interest rate unchanged at 1 percent until the
second half of 2012.An unexpected jump in the rate could support the Canadian
dollar and hurt bonds.Lower-than-expected inflation could prompt some to see a
rate cut as a more serious option for the central bank’s next
move, dampening the value of the currency.The overnight index swap market is now pricing in the
possibility of a rate decrease, although economists still
expect the next move to be an increase.
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13 10 / 2011
UPDATE 1- Malaysia’s AirAsia X eyes Khazanah stake sale, IPO in 2012
* Says India routes currently loss making; has lower loads
(Adds quotes, details)By Aniruddha BasuMUMBAI, Oct 13 (Reuters) - The long haul low-cost arm of
Malaysia’s AirAsia is planning an initial public
offering of shares in 2012 and is in talks to sell a 10 percent
stake to Khazanah Nasional before the IPO, a top
official told Reuters.Malaysia’s AirAsia X Chief Executive Azran Osman-Rani on
Thursday said the stake sale to Malaysian sovereign wealth fund
Khazanah could happen by the end of 2011 once both sides reach
an agreement on pricing.Osman-Rani did not give details on the size of the proposed
IPO or venue of the listing.In August, Malaysian Airline System (MAS) and
rival AirAsia agreed to swap shares in a deal valued
at $364 million, an exercise analysts say will eliminate
overlaps and boost both companies’ profit.Under the deal, Khazanah Nasional, would take a 10 percent
stake in AirAsia, the budget carrier which owns 16 percent in
AirAsia X. .”The next step is for Khazanah to also buy a stake in
AirAsia X, and that’s where we currently are,” Osman-Rani said.”If we come to an agreement on price and if my shareholders
are acceptable to it, then they will become a shareholder in
AirAsia X.”The firm had not yet appointed bankers for the proposed
IPO. It has hired Morgan Stanley to advise them on the Khazanah
investment, he said.AirAsia, which placed a record-breaking order for 200 Airbus
A320neo jets, owns 16 percent in AirAsia X, while
billionaire Richard Branson’s Virgin Group, holds 10 percent in
the airline.UNPROFITABLE INDIA ROUTESAirAsia X flies to India’s capital New Delhi and its
financial capital Mumbai, but does not plan to enhance its India
network as the Indian routes were loss making and there was no
definite timeline when the routes could breakeven, Osman-Rani
said.He said demand was skewed towards India outbound flights,
consisting mostly of Indians keen to visit south east Asia, but
a similar buoyancy in inbound demand was lacking.”We had a situation where we offered 5,000 free tickets to
India from Kuala Lumpur, but only 3,800 were taken up. So we
need to work better with the Indian travel industry to make
Delhi and Mumbai more attractive destinations.”He said the lack of alternatives to high premium hotel
rentals in the two major Indian cities was a major deterrent for
foreign travellers.AirAsia X has seen average load factors in the low
seventies in India due to the imbalance in inbound and outbound
flow, compared with over 80 percent in most of its other
markets.India currently accounts for about 10 percent of AirAsia X’s
total business. Neighbouring China contributes more than double
that, Osman-Rani said.”You need a balance to make it stable. Its not going to be
sustainable to only have one way traffic. So that’s something
about which we have to keep engaging with the industry here and
the government.”
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