The cost of borrowing dollars fell on Wednesday and eurodollar futures rose amid growing market conviction financing rates will remain low for a longer period.
The average cost of 3-month funds in Singapore SIUSD3MD=ABSG fell to a 15-week low of 0.35778 per cent from 0.37611 percent. The rates have fallen every day since July 16, the last time they had risen. Dollar funding costs have fallen by over 10 bps this month.
On Tuesday, the three-month dollar Libor USD3MFSR= eased to 0.35219 percent -- the lowest in over three months -- from 0.36188 percent Monday.
All is good in LIBOR land...credit seems to be trading well, said a Hong Kong-based rates trader.
Eurodollar futures edged higher with the contract expiring in September at a record high. The EDU0 rose to a record of 99.6475. This implies a 3-month dollar LIBOR rate of 0.3525 percent in mid-September.
Finally they are reflecting the ever dropping LIBOR fixings, we should see it fixed another bps lower for the 3-month, said a Singapore-based trader.
The direction is intact, he said while adding the U.S. Federal Reserves' move to buy Treasuries using funds from maturing mortgage bonds would ensure cash would stay ample.
The December contract EDZ0 of the eurdollar future, however, suggested LIBOR rates will rise again by the year end, implying a rate of 0.415 percent.
On Tuesday, the Fed bought $2.55 billion of Treasuries.
The purchase was the first in its effort to maintain the current level of the central bank's balance sheet by buying Treasuries with cash from maturing mortgage bonds it holds.
In China, benchmark seven day repo rates came off three week highs on the confidence the central bank will not allow liquidity conditions to tighten significantly even as it drains excess funds from the system.
The weighted average seven-day government bond repurchase rate CN7DRP=CFXS fell to 1.7688 percent from a three-week high of 1.7942 percent.
Conditions had tightened significantly after the central bank mopped up 234 billion yuan ($34.4 billion) over four weeks in its open market operations. (Editing by Tomasz Janowski)