Economic and Banking | Financial news

Money markets us 4 week bill rates rise as dealers long on supply

* U.S. sells 4-week bills at highest interest rate in 4 weeks * Frozen euro zone money markets see tentative thawing By Chris Reese and Ana Nicolaci da Costa ADVISORY - Reuters plans to discontinue its daily report on the money markets in New York as of Oct. 15. Instead we will include coverage of U.S. money markets in our daily reports on U.S. Treasury bonds. Significant developments in money markets will be reported separately by Reuters. For any comments, please write to: william.this site NEW YORK/LONDON, Oct 2 The U.S. Treasury sold four-week bills at the highest interest rate in four weeks on Tuesday as a Federal Reserve stimulus program, nicknamed "Operation Twist," kept dealers flush with shorter-dated debt. Treasury sold $40 billion of four-week bills at a high rate of 0.1 percent, up from 0.055 percent in a similar sale last week and the highest since a four-week bill auction on Sept. 5. Demand for the bills was diminished as dealers remain long shorter-dated debt while the Fed sells its shorter-dated securities and buys longer-dated Treasuries in an effort to lower longer-term borrowing costs like those on mortgages. "Dealer balance sheets are still loaded to the gills with front-end U.S. Treasuries from Operation Twist sales," said Natan Magid, short-term markets strategist at RBS Securities in Stamford, Connecticut. The bid-to-cover ratio in the sale - a measure of demand - was 3.86, the lowest since May 2011. Meanwhile, euro zone money markets have shown tentative signs of recovery in recent weeks along with improving appetite for risk in the region, but even the optimists say the crisis will have to be past before interbank lending is back to normal. Some analysts say a pick-up in volumes in overnight lending, a fall in the amount banks borrow from the European Central Bank and debt issuance by Spanish banks are indicative of a thawing of money markets, but traders say the interbank markets remain frozen. A sharp narrowing of the gap between three-month interbank lending rates and overnight rates to pre-U.S. crisis levels further shows the start of some return to normality, they say. "(The spread) is trading at very tight levels. That is the best indicator that the stress in the interbank market is coming down," Alessandro Giansanti, rates strategist at ING in Amsterdam, said. The difference between three-month Euribor and overnight Eonia rates - a key measure of counterparty risk - last week fell to 11 basis points, its lowest since mid-2007, and was trading around that level on Tuesday. Appetite for riskier assets has increased since late July when ECB President Mario Draghi first hinted at a plan to buy sovereign bonds, saying the central bank would do what was necessary to preserve the euro. The change in sentiment as well as technical factors have helped to narrow the Euribor/OIS spread. The deposit rate - which serves as a floor to the overnight lending rate - was cut to zero on July 5. Euribor rates have continued to trend down since then on expectations of further monetary easing. Traders say, however, that the reduction in funding risk has so far not translated into greater lending between banks.

No new disclosure in sight for money groups before election

Political advocacy groups pumping millions of dollars into the U.S. elections are about to circumvent a court-ordered deadline on Friday that opponents had hoped would rein them in and shed light on their secret backers. Tax-exempt "501(c)" organizations aligned with both political parties are raising big money this year and having a major impact on the campaigns. Under tax law, their donors can stay anonymous as long as politics is not the groups' primary activity. The groups have become known for dominating the airwaves with nuanced "issue ads" that do not overtly call for the election or defeat of specific candidates but, for instance, talk about their voting records. Critics have said that such ads leave little room for doubt about the groups' political allegiances, however, and argue that the 501(c)s are taking advantage of a regulatory loophole that lets them influence voters while preserving donors' anonymity. Two Republican-allied 501(c) groups - Americans for Prosperity, founded by billionaire brothers David and Charles Koch, and Crossroads GPS, run by former aide to President George W. Bush Karl Rove - have spent more this campaign season than any other outside group. Many Democrats fear their 501(c) backers are losing the money arms race to Republicans, such that it may cost them seats in Congress and even the White House. In March, a federal court ruled that, in the final 60 days before the November 6 elections, groups running "issue ads" must reveal the identities of donors of $1,000 or more. Friday marks the beginning of that 60-day homestretch.

A critical test for the 501(c)s strategy had been expected by campaign finance reformers and by Democrats seeking to curb the strength of Republican groups. But leading advocacy groups made clear this week they plan to carry on and have no intention of revealing their donors' identities. In the absence of a crackdown by the Federal Election Commission and the Internal Revenue Service, the 501(c)s face little immediate risk from forging ahead, effectively doing business as usual, said Rick Hasen, an election law expert and professor at the University of California, Irvine."In this legal environment they aren't really afraid," he said, adding that the worst-case scenario for the groups would be a tax penalty levied well after the November 6 election. GOING EXPLICIT

Groups have found a quick solution in yet another quirk in the law: When the court ruled for more disclosure in March, the ruling did not apply to ads that are explicitly political. Such ads would overtly call for election or defeat of a candidate. By law, these ads qualify as express advocacy and so, according to the law's common interpretation, have to take up less than half of the groups' budgets. Democratic Representative Chris Van Hollen, who was the plaintiff in the case leading to the court deadline, said he hoped that it would push 501(c) groups to breach the amount they can spend on politics and cost them their tax-exempt status."You have a lot of these groups masquerading as educational organizations but really doing political work," Van Hollen said. "This will make it more difficult to do that high-wire act without falling off."

But on Monday, AFP, founded by conservative billionaire brothers David and Charles Koch, launched an 11-state, $6.2 million sweep with an ad calling to "replace Obama."Together, Crossroads GPS and AFP have spent about $106 million this election cycle through the end of August, almost double the ad spending of Republican presidential candidate Mitt Romney, according to Republican media consultancy SMG Delta."We will not be doing any disclosures as we're ending any efforts that would require disclosure," said AFP President Tim Phillips. Crossroads declined to comment. The U.S. Chamber of Commerce, the nation's largest lobbying group for businesses and a traditional backer mostly of Republicans, also plans to push ahead. Chamber Political Director Rob Engstrom said, "Rest assured, the chamber will continue to educate voters on the issues important to the business community."Priorities USA, aligned with Democratic President Barack Obama, and several other liberal groups including Planned Parenthood Action Fund did not return requests for comment.

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Nobel cuts prize money after years of overspending

STOCKHOLM The prize money given to Nobel laureates is to be cut by a fifth, the foundation behind the prestigious awards said on Monday, after a decade of overspending that has stretched its finances. The Nobel Foundation said the money for the awards, given for excellence in the fields of science, literature and peace, would fall to 8 million Swedish crowns ($1.12 million). The capital that forms the base for the awards was donated in the will of dynamite inventor Alfred Nobel and is managed by the foundation, which was set up in 1900.

The foundation said in a statement that costs had exceeded returns from interest and investments on the capital over the past decade, making it necessary to lower the prize money from the previous 10 million crowns."It is the Nobel Foundation that is responsible for the prize money remaining at a high level over the long run," said Chief Executive Lars Heikensten.

"We have made the assessment that it is important to take necessary measures in good time."

The foundation said it had also begun work to cut costs in administration and expenses related to the Nobel Prize celebrations, which take place every December in Stockholm and Oslo. This year's laureates will receive the reduced prize money. ($1 = 7.1626 Swedish crowns)

Press digest sunday british business july 1

LONDON, July 1 British newspapers reported the following business stories on this site SUNDAY TELEGRAPH: INVESTORS TURN ON BARCLAYS CEO DIAMOND Two of Barclays' leading shareholders have demanded the removal of Bob Diamond, the chief executive, and Marcus Agius, its chairman, as the firestorm surrounding the bank intensifies. For more background, see Reuters story from June 30:UK orders bank review, calls Diamond to panelNEW AVIVA CHAIRMAN DRAWS UP SALE PLANS British insurer is considering selling or closing up to a fifth of its business divisions. For more background, see Reuters story from May 17: Insurer Aviva to sell some businesses in overhaulASTRAZENECA FACES ATTACK OVER 2.2 BLN STG U.S. VENTURE Drugs giant will face questions from investors after announcing that it is to pay $3.4 billion towards the buyout of Amylin. For more background, see Reuters story from June 30: Bristol-Myers to buy Amylin for about $5.3 blnVODAFONE CEO HITS BACK AT 'SIMPLISTIC' CRITICISM OVER TAX

Vittorio Colao, chief executive of the British phone group, told the Sunday Telegraph that Vodafone would pay more corporation tax in Britain if the government handed back some of the 5.96 billion pounds the company was required to pay up front for access to mobile spectrum. For more background, see Reuters article on June 26: INSIGHT-Vodafone in new 1 bln stg UK tax 'scandal'GLENCORE COULD ABANDON XSTRATA DEAL Glencore CEO Glasenberg is preparing to walk away from the company's merger deal with rival Xstrata. SEYMOUR PIERCE SALE IS A STEP CLOSER The British investment bank is in the final stages of being sold to a financial institution from the former Soviet Union.

THE SUNDAY TIMES: FBI PROBES BARCLAYS RATES TRADERS Agents at the FBI's Washington headquarters are conducting an inquiry into the group accused last week by regulators of conspiring to rig interest rates. CHINESE SIGNAL INTEREST IN 2 BLN STG INVENSYS TAKEOVER China South Locomotive is understood to be in the early stages of plotting a move for the British engineering company.

GLENCORE IN CRUNCH DEAL TALKS WITH QATAR Glencore's CEO is to hold a 'showdown' meeting this week with Qatar's state investment fund in a bid to save the Xstrata deal. RUSSIAN BILLIONAIRE EYES DR MARTENS Pamplona Capital, an investment fund backed by Russian billionaire Mikhail Fridman, is in the running to pay up to 200 million pounds for British boot maker Dr Martens. THE OBSERVER: THROW OUT BANK CHEATS, CABLE TELLS SHAREHOLDERS British Business Secretary Vince Cable urged shareholders in UK banks to "rise up and purge" their companies of corrupt executives, whom he said had allowed 'systemic abuse' to take root in the banking system. FINANCIAL MAIL ON SUNDAY: BANK RATE FIXERS MAY FACE CRIMINAL CHARGES Andrew Tyrie, head of the British parliament's Treasury Select Committee, said the LIBOR interest-rate fixing scandal could lead to criminal charges against individuals. GLENCORE BOSS EXPECTED TO SWEETEN XSTRATA OFFER Xstrata shareholders expect Glencore boss Glasenberg to increase his offer to more than 3 Glencore shares for every Xstrata share.

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