MONEY MARKETS-December 2011 eurodollar futures at 1-month highs

Thu Jan 20, 2011 1:45am EST
* Implied dollar LIBOR at 0.69% from 0.9% at the start of yr
* China short-term money market rate vaults over 6%
HONG KONG, Jan 20 (Reuters) - December 2011 eurodollar
futures contracts stabilised at one-month highs on Thursday
after weak U.S. housing data prompted some investors to scale
back bets on an interest rate increase this year.

* Eurdollar futures contracts expiring in December 2011
settled at 99.31, implying a dollar LIBOR of 0.69
percent, compared with 0.90 percent at the start of the year.

* U.S. housing starts dropped to an annual rate of 529,000
units in December, the lowest level since late 2009, the
Commerce Department said. .

* Euribor futures expiring in December 2011 paused
after a recent selloff, but remained well within sight of April
2010 lows, after recent hawkish comments from European Central
Bank.

* The ECB kept interest rates on hold at a record low of 1
percent on Thursday, but warned that the euro zone faces
short-term price pressures -- taken by some in financial markets
as a sign it could raise rates earlier than previously thought.

* In China, the benchmark short-term money market rate jumped by 200
basis points (bps) to 6.08 percent
after a 130 bps rise on Wednesday, hit by cash calls for payments to
meet an official increase in bank reserve
requirement ratios and the coming Lunar New Year.

* Elsewhere, three-month dollar funding costs in Singapore rebounded
sharply to 0.30657 percent from 0.30580
percent on Wednesday. (Reporting by Saikat Chatterjee; Editing by Kim
Coghill)
Source: Reuters.Com

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MONEY MARKETS-Short Thai swaps dive as dollar shortage persists

Mon Jan 17, 2011 10:31pm EST
* Negative carry prompts banks to unwind paid positions
* Drop in swaps seen reversing as kimchi fund flows eyed
* Thai c.bank expected to hike rates again in coming months
By Saikat Chatterjee

HONG KONG, Jan 18 (Reuters) - Thai interest rate swaps fell
to 1-1/2 month lows on Tuesday as some banks were forced to
unwind their paid positions due to a persistent dollar shortage
in the local money market.

The dollar shortage erupted in the closing days of 2010,
prompting banks to buy dollars from the spot market and sell
them in the forwards markets, dragging forward points, baht
fixings and consequently swap rates lower .

Six-month baht fixings, which are derived from forward
dollar/baht premia and are the floating leg of IRS contracts,
have dropped by more than 13 basis points (bps) in the last four
days, pulling one-year swaps down by 16 bps to 1.67 percent on
Tuesday.

"With forwards expected to remain low at least in the coming
weeks, there is no incentive to pay swaps, for now, even if you
expect rates to rise, as you could get killed on the negative
carry," said a rates trader at a European Bank in Bangkok.

The drop in forwards has been restricted to the very short
end with overnight forwards dropping to a minus 0.55 points at
the start of the year and currently trading around 0.04 points.
Usually it trades broadly around the 0.1 point mark.

As forwards dropped, the fixings also shifted lower which
meant that receiving short swaps, despite a surprise rate
increase last week, became an attractive proposition.
Outflows from the stock market this month have also kept up
the pressure on onshore dollar liquidity.
Net foreign selling in the stock market so far in 2011
totalled $430 million.

INFLOWS FROM KIMCHI FUNDS EYED
But the slide in short-dated swaps is unlikely to last as y
inflows from so-called maturing "Kimchi funds", or Thai funds
investing in Korean assets, are expected to increase dollar
liquidity and push rates higher.
Source: Reuters.Com

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