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Money markets market may price out ecb cut after inflation warning


´╗┐Short-term euro zone interest rates held steady after the ECB's policy meeting on Thursday but could begin to price out the small probability of it cutting rates this year if Greece's debt swap deal proves successful. The European Central Bank said the bloc's gradual economic recovery might take slightly longer than previously thought and added that inflation might also be more stubborn. For a table of new ECB projections, seeEuribor interest rate futures <0#FEI:> and overnight Eonia rate forwards, instruments usually used to gauge market expectations of moves in ECB benchmark rates, were little changed across the 2012-2013 strip after the comments and analysts said no rate move was priced in for the foreseeable future. Markets have not reacted mostly because they were still nervous ahead of a deadline for investors to swap their Greek bonds for new ones later in the day, a vital exchange for Athens to avoid a chaotic default. But most investors saw that scenario as a marginal risk. A senior Greek government official said on Thursday afternoon that over 75 percent of bondholders with eligible Greek debt had signed up for the bond exchange, meaning the deal is likely to go through. Once that is out of the equation, rates such as Eonia forwards may move higher as analysts leaned towards interpreting ECB President's Mario Draghi's tone at his news conference as somewhat hawkish after his comments on the upside risks for inflation."Money markets have to take it on board that the prospect of a rate cut has gone down over the past hour or so," said David Keeble, global head of fixed income strategy at Credit Agricole.

"Also, they will have to do with the cash that they've got, which is ample."He said fixings of benchmark interbank rates such as Euribor and Libor should continue to grind lower, driven by the bank's injection of around a trillion euros in two rounds of ultra-cheap three-year loans. The three-month euro Libor rate fixed at 0.81429 percent versus Wednesday's 0.82400 percent. The rate has dropped by almost half-a-percentage point this year. Also sensing a slight hawkish bias in Draghi's tone, Societe Generale's head of fixed income strategy Vincent Chaigneau said some of the Eonia forward rates across the 2012 strip might be too low.

"He was probably slightly on the hawkish side ... in particular he upgraded the inflation risks," Chaigneau said. "It would take a better outlook on growth for the curve to steepen, but maybe there's a bit of room in the September Eonia.""0.31 percent is slightly on the low side given that in the February MP (maintenance period) it averaged 0.36 percent. There is still a small probability of a cut priced in ... but the focus now is on the Greek (debt restructuring deal)."Banks are required to keep a certain level of cash with the ECB over the course of a roughly one-month maintenance period.

LIQUID AND CAUTIOUS The ECB has flagged its ample cash injections as a success and said things would have been much worse without the extra funds. But traders say interbank lending activity has not picked up markedly and many remain unconvinced that the worst for the euro zone is now behind."The financial system is incredibly stressed ... you've got to stay ultra cautious, ultra-liquid," said Peter Allwright, head of absolute rates and currency at RWC Partners, which has $4 billion under management. He said the front end of the core European yield curve was going to remain bid as investors remained worried about the risks the euro zone still faced and banks wanted top-quality collateral to secure their liquidity needs."Stay long in the front-end core markets," Allwright said. "It's a good, triple-A, high-quality collateral and there's a massive shortage of that ... I can easily see two-year Schatz yielding negative during the next round of stress."He mentioned poor economic data, high oil prices, the Greek and French elections as future potential crunch points that would increase stress in financial markets.

Rpt fitch affirms sri lankas senkadagala finance at bbb+(lka)


´╗┐(Repeat for additional subscribers)Nov 14 (The following statement was released by the rating agency)Fitch Ratings Lanka has affirmed Sri Lanka-based Senkadagala Finance Company PLC's (SFC) National Long-Term Rating at 'BBB+(lka)' with a Stable Outlook. The agency also affirmed the rating on SFC's outstanding senior unsecured redeemable debentures at 'BBB+(lka)' and assigned an expected rating of 'BBB(lka)(EXP)' to its proposed subordinated debenture of up to LKR1.25bn. The proposed debenture issue is expected to have a tenor of five years, with a fixed-rate coupon. The issue will help improve the company's Tier 2 capital position, and reduce its interest-rate risk. The final rating is subject to the receipt of final documentation conforming to information already received. KEY RATING DRIVERS

SFC's rating reflects its satisfactory credit profile through economic cycles, supported by access to longer-term securitized borrowings and sound credit controls. Timely seizure of collateral on overdue loans enforces collection of outstanding payments and helps keeping loan deterioration in check. These positive factors are counterbalanced by its weaker deposit franchise and lower capitalisation compared to peers. The proposed subordinated debenture is notched one down from SFC's National Long-Term Rating to reflect their gone-concern loss-absorption quality in the event of a liquidation, in line with Fitch's criteria for rating such securities. There is pressure on SFC's asset quality due to a slowing macroeconomic environment. Despite adequate risk monitoring, non-performing loans (including interest in suspense) increased by 58% over the 12 months ending June 2013 and amounted to 4.2% of gross loans at end-June 2013.

Capitalisation as measured by the Fitch core capital ratio (FCC) remained stable at 12.1% at end-September 2013 (11.9% at end-March 2013). The FCC ratio is derived from SFC's balance-sheet equity and reflects provisioning in line with accounting standards. The regulatory Tier 1 capital ratio deteriorated to 10.3% at end-September 2013 from 12% at end-September 2012 with the adoption of International Financial Reporting Standards. SFC has announced a rights issue for December 2013 and Fitch estimates that this would restore the regulatory Tier 1 ratio to about 12%, which is still below its peers'. The proposed subordinated debt would raise SFC's total Capital Adequacy Ratio (CAR) to about 18%. SFC's assets and liabilities are better matched than peers' as the company relies on securitized borrowings. Reliance on such wholesale borrowings explains SFC's lower margins, and exposes it to greater funding volatility. Unencumbered assets stood at an acceptable 1.3x of unsecured liabilities at end-September 2013 (1.2x at end-March 2013). SFC's deposit franchise remained weaker than peers, although deposits increased by 21.7% over 1H14 and funded 28% of total assets at end-1H14.

Fitch expects the slowing credit cycle to put pressure on SFC's net interest margin and return on assets (ROA). The latter deteriorated to 3.3% in 1H14 (4.6% in the year ended March 2013), mainly due to higher provisioning costs and higher operating costs as newly established branches have yet to breakeven. RATING SENSITIVITIES An upgrade of SFC's rating is contingent upon sustained stronger capital and a more robust deposit franchise that would allow the company to expand in a controlled manner. SFC's rating could be downgraded if asset quality continues to weaken, leading to a material decline in capitalisation or excessive asset encumbrance. 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 = $('.related-content.group-one ul'); var $relatedContentGroupTwo = $('.related-content.group-two 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