alshellah blog

Sunday, November 13, 2011

MONEY MARKETS-Foreign U.S


 

Total foreign financial commercial paper supply falls
* But foreign bank commercial paper supply rises in week
* Euro zone banks seen leaning on ECB, forex market

By Richard Leong
NEW YORK, Nov 10 (Reuters) - U.S. commercial paper supply
from foreign financial companies fell in the latest week as
investors shied away from issuers which are vulnerable to a
further worsening of the euro zone debt crisis.
The outstanding amount of commercial paper from foreign
banks and other financial institutions fell $3.4 billion to
$184.1 billion on a non-seasonally adjusted basis in the week
ended Nov. 9, Federal Reserve data released on Thursday
showed.
"All foreign banks' dollar funding has gone done
significantly on the uncertainty about Europe," said Mike Lin,
director of U.S. funding with TD Securities in New York.
But foreign banks' commercial paper supply rose $1.6
billion in the latest week. Commercial paper supply from
foreign non-banks fell $5 billion, according to the Fed.
The Fed does not offer a regional breakdown on its data on
foreign issuance of these short-term debt, which helps them to
finance their loans and other daily operations.
Recent data showed U.S. money market funds and other cash
investors have reduced their exposure to euro zone bank debt
since the flare-up of the region's debt problem this spring.
"No one really knows what these bank holdings are," TD's
Lin said.
Investors' anxiety about Greece and Italy has intensified
in recent days. The political turmoil in these heavily-indebted
nations shook confidence about their ability to implement steep
spending cuts and repay their debt. Investors worry they could
drag down France and Germany, whose banks are big lenders to
them.During this period, prime money funds cut their holding of
euro zone bank commercial paper and CDs by $212 billion to $117
billion at the end of October, J.P. Morgan analysts said.
As they have pulled cash from euro zone debt, money funds
and other investors shifted money into bank accounts, Treasury
bills, agency discount notes and other perceived safehaven
assets, analysts said.
For euro zone banks, they are relying more on the European
Central Bank and costlier borrowing in the foreign exchange
market to fund their dollar operations.
The three-month euro/dollar cross-currency basis swap edged 5 basis point wider to minus 117 basis
points, matching its widest level in almost three years hit on
Nov. 3, just before the ECB rate cut.
The five-year equivalent hit its widest
since early 2009 at minus 47.5 basis points, versus minus 45.4
basis points on Wednesday.
Separately, the U.S. bond market will be closed on Friday

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