* Dollar funding costs, spreads shrug off Bernanke
* Malaysia front-end yields drop after surprise rate cut
* Thai markets price in rate cut but curve steeper
By Vidya Ranganathan
SINGAPORE, Feb 25 (Reuters) - Rallying stock markets and
the U.S. Federal Reserve chairman's assurance banks will not be
nationalised did little for dollar money markets on Wednesday,
where funding costs crept higher and spreads barely changed.
Ben Bernanke's remarks to the Senate Banking Committee on
Tuesday, expressing faith that banks could be stabilised
without being nationalised, appeared to have appeased investors
worrying about equity dilution and huge write-offs.
Yet, dollar funding rates rose slightly in Asia, while
trading within ranges they have been in all of this month, and
continued to be shackled by worries over deteriorating asset
quality, loan foreclosures and the health of financial
institutions.
In Singapore, 3-month dollars were quoted at
1.24917 percent, just a bit above Tuesday's 1.24357 percent but
still far wider than the 3-month overnight-indexed swap
at 0.22 percent.
The TED spread , a risk measure of the spread
between interbank rates and Treasury yields, was also nearly
steady at around 95 basis points.
"We still have problems to address in the banking sector
and we will have pressure on bank balance-sheets continue for a
while, as long as you have house prices falling and
foreclosures rising," said Jens Lauschke, a strategist at DBS
Bank.
"So the positive sentiment that you might have in equity
markets doesn't translate into easier positions in the LIBOR
interbank market. For LIBOR, my view remains that we are going
to have a substantial risk premium."
YIELDS DROP IN MALAYSIA, THAILAND
Short-term yields dropped meanwhile in Thailand and
Malaysia, the former in anticipation of a rate cut on Wednesday
and the latter reacting to a rate cut on Tuesday.
Malaysian one-year treasury yields have dropped
40 bps to 1.98 percent over the past two sessions.
The rate cut of half a percentage point on Tuesday was not
totally unexpected but still caught many investors off guard,
given that central bank Governor Zeti Akhtar Aziz signalled a
pause in monetary easing when she said earlier this month that
rate cuts had been front-loaded.
"In this environment, to have a sell-off at the front-end
is very unusual," said DBS' Lauschke, referring to the selling
in bonds that followed Zeti's comments.
Meanwhile, fears of increased funding needs for a
government trying to pump-prime the economy kept Malaysian
long-term yields from falling and the spread between one and
10-year yields was 30 basis points wider on Wednesday.
Likewise in Thailand, despite widely held investor
expectations that the central bank will cut its policy rate by
half a percentage point to 1.5 percent on Wednesday, the yield
curve remained steep. The spread between 10 and one-year bonds
<0#THBMK=> is 215 basis points, having widened from 60 at the
start of the year.
Short-term rates however have fallen sharply, with one-year
yields down to 1.45 percent from 1.74 in a week.
(Editing by Jan Dahinten)
- 
- 
- 
Welcome,
Guest!
News
