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Money markets key dollar funding measure rises as ecb loans expire

* Euro/dollar 3-month FX basis widens, but move seen brief* Euro interbank rates hit fresh 16-month lows* Deposits with the ECB spike as expectedBy Marius ZahariaLONDON, March 2 One measure of dollar funding costs rose on Friday after ECB loans in the U.S. currency expired, but a glut of cash in the banking system should ensure a falling trend resumes. The three month euro/dollar cross currency basis swap , which measures the cost of swapping euro interest payments on an underlying asset into dollars, hit its widest in five weeks at minus 82 basis points. This follows Thursday's expiry of the ECB's first allotment of three-month unlimited dollar loans on Dec. 7, when banks took over $50 billion."The three-month dollar tender is rolling off, this is why we're seeing the move (wider) today, not because of any inherent market tensions," said UBS currency strategist Geoffrey Yu, adding that he expected the euro/dollar basis to resume its tightening trend soon.

The basis is often used as an indicator of how hard it is for European banks to borrow dollars. The cost shot up to its widest in two years at minus 167.5 bp in late November, before the ECB's first offer of cheap 3-year funding calmed market nerves about the euro debt crisis. Yu said he "wouldn't be surprised" if some European banks swapped into dollars some of the half a trillion euros they borrowed at the ECB's second three-year tender on Wednesday, but the volumes would be low. The three-month interbank dollar Libor rate fixed an touch lower at 0.47575 percent from 0.47970 on Thursday. Equivalent euro rates also fell to 0.86114 percent from Thursday's 0.87893 percent, the lowest level in 16 months, driven down by lower demand for cash after the ECB's massive injection.

DEPOSITS AT ECB RISE Most of the new money ended up back with the ECB, with overnight deposits rising to 777 billion euros from 475 billion euros in the previous day, when the ECB cash entered the system.

The increase is similar to the net additional liquidity after Wednesday's three-year cash tender, which analysts calculate at around 310 billion euros. A persistently high figure in the deposit facility would indicate that the new money is not filtering through to the real economy, as the ECB hopes. The number is, however, unlikely to offer convincing clues on how much money banks are spending on short-dated euro zone government bonds, which rallied sharply after the ECB's first liquidity tender, easing concerns about Europe's debt crisis."Even if they started selling these bonds now, the cash proceeds would still be in the system ... and will still show up in the deposit facility," said Benjamin Schroeder, rate strategist at Commerzbank."Only if somebody withdraws it from the system would you see the number falling."Lending to businesses in the real economy depends on how confident banks are that they will be able to find money in the market, rather than at the ECB, whose support is only temporary, analysts say. But their incentive to test their market access is lower now, given that the system is awash with cash. For instance, volumes used for the unsecured overnight Eonia rate fixing dropped to 24 billion euros on Thursday, compared to 32 billion euros on Wednesday and 39 billion euros on Tuesday.

Rpt fitch affirms nordlb covered finance bank sas covered bonds at aa

(Repeat for additional subscribers)Feb 12 (The following statement was released by the rating agency)Fitch Ratings has affirmed NORD/LB COVERED FINANCE BANK S. A.'s (CFB, A/Stable/F1) Lettres de Gage Publiques (LdGPs) at 'AAA' with Stable Outlook following a periodic review of the programme. Key Rating DriversThe rating is based on CFB's Long-term Issuer Default Rating (IDR) of 'A', an unchanged Discontinuity Cap (D-Cap) of 3 (moderate high risk) and the over-collateralisation (OC) Fitch takes into account in its analysis. The Stable Outlook on the covered bonds reflects that on CFB's IDR.

In its analysis, Fitch relies on the lowest OC observed over the past 12 months of 27%, in line with its criteria for issuers with a 'F1' Short-term IDR, but takes into account only 22% This is because in its OC calculation the agency does not give credit to intra-group assets. This level of OC supports a 'AA' rating on a probability of default (PD) basis and allows for a two-notch recovery uplift reflecting outstanding recovery prospects on defaulted covered bonds in a 'AAA' scenario. The unchanged D-Cap of 3 (moderate high risk) results from what Fitch assesses as moderate high risk for the liquidity gap and systemic risk component, reflecting potential termination payments due to defaulted intra-group counterparties ranking pari passu to payments to LdGP holders. Furthermore, the agency assesses the risk on the privileged derivatives component as moderate, and the risk on the cover pool specific alternative management component as low. The asset segregation and systemic alternative management components are assessed as very low risk.

Credit risk remains the main driver for Fitch's breakeven OC. In its asset analysis the agency calculated a default rate of 19% and a recovery rate of 16% for the cover pool in a 'AAA' stress scenario, resulting in a loss rate of 16%. This represents a decline from 19.9% in the previous analysis. This is due to decreased FX risks with the OC in the USD currency bucket now of a similar magnitude (24%) as the overall OC of the total programme (27%). Apart from remaining open FX positions, the cover pool and covered bond profiles are well matched. Fifty-nine percent of the assets and 60% of the covered bonds pay a floating coupon. The weighted average life of the cover assets is 6.9 years, compares with 6.7 years for the covered bonds. As of end-September 2013 the LdGPs amounted to EUR3.3bn and were secured by a cover pool of public-sector assets amounting to EUR4.2bn. The cover pool comprised 347 assets, which Fitch assigned to 139 ultimate debtors in its analysis. The cover pool is geographically well diversified with concentrations in Germany (30%) and the U.S. (24%). The largest borrower groups are US subnational entities (24%), German public sector companies (19%) and Canadian regions and cities (5%).

Rating SensitivitiesIn terms of sensitivity of the covered bonds' rating, the 'AAA' rating would be vulnerable to downgrade if (i) CFB's IDR is downgraded by one or more notches to 'A-' or lower; (ii) the D-Cap falls by one or more categories to 2 (high risk) or lower; or (iii) the OC that Fitch takes into account in its analysis decreases below Fitch's 'AAA' breakeven OC level. The Fitch breakeven OC for the covered bond rating will be affected by, among other factors, the profile of the cover assets relative to outstanding covered bonds, which can change over time, even in the absence of new issuance. Therefore the breakeven OC to maintain the covered bond rating cannot be assumed to remain stable over time. More details on the portfolio and Fitch's analysis will be available in a full rating report, which will be shortly available at this site Fitch may have provided another permissible service to CFB or its related third parties. Details of this service can be found on Fitch's website in the EU regulatory affairs page. var $relatedItems = $('lia "/article/riyad-bank-dividend-idUSD5N1E9002"Saudi\'s Riyad Bank recommends lower cash dividend for H2 2016/a/lilia "/article/idUSFWN1EU0AO"BRIEF-CME Group reached record average daily volume of 15.6 mln contracts in 2016/a/li'), $relatedItems = $relatedItems.slice(0,10), relatedBlockLimit = Number('6'), relatedItemsTotal = $relatedItems.length, $paragraphTags = $('#article-text p'), contentParagraphs = 0, minParagraphs = Number("8"); for (i=0; i $paragraphTags.length; i++) { if ($paragraphTags[i].innerText.trim().length 0) { contentParagraphs = contentParagraphs + 1; } } if (contentParagraphs minParagraphs) { setTimeout(function(){ if (relatedItemsTotal relatedBlockLimit) { $('.first-article-divide').append('div class="related-content group-one"h3 class="related-content-title"Also In Financials/h3ul/ul/div'); $('.second-article-divide').append($('.slider.slider-module')); $('.third-article-divide').append('div class="related-content group-two"h3 class="related-content-title"Also In Financials/h3ul/ul/div'); var median = (relatedItemsTotal / 2); var $relatedContentGroupOne = $(' ul'); var $relatedContentGroupTwo = $(' ul'); $.each($relatedItems, function(k,v) { if (k + 1 = median) { $relatedContentGroupOne.append($relatedItems[k]); } else { $relatedContentGroupTwo.append($relatedItems[k]); } }); } else { $('.third-article-divide').append($('div class="related-content group-one"h3 class="related-content-title"Also In Financials/h3ul/ul/div')); $('.related-content ul').append($relatedItems); } },500); } Next In Financials Dubai Islamic Bank requests proposals for dollar sukuk - sources DUBAI, Jan 4 Dubai Islamic Bank (DIB) has asked banks to submit proposals to arrange a potential U.S. dollar-denominated sukuk issue, sources familiar with the situation said on Wednesday. BRIEF-Colliers International UK acquires hospitality asset management firm * Colliers international uk acquires market leading hospitality asset management firm BRIEF-Dena bank to consider capital planning for FY 2016-17 * Says to consider capital planning for FY 2016-17 i.e. raising of capital through equities and/or bonds Source text: this site Further company coverage: MORE FROM REUTERS window._taboola = window._taboola || []; _taboola.push({ mode: 'organic-thumbnails-a', container: 'taboola-recirc', placement: 'Below Article Thumbnails - Organic', target_type: 'mix' }); Sponsored Content @media(max-this site) { #mod-bizdev-dianomi{ height: 320px; } } From Around the Web Promoted by Taboola window._taboola = window._taboola || []; _taboola.push( { mode: 'thumbnails-3X2', container: 'taboola-below-article-thumbnails', placement: 'Below Article Thumbnails', target_type: 'mix' } ); window._taboola = window._taboola || []; _taboola.push