FOREX-Dollar mauled as euro leads vicious short squeeze

1. Dollar speculators squeezed out of crowded positions
2. Euro rallies as EU yields spike, Greek creditors make offer
3. ECB meets later in day, Australia GDP a test for Aussie

By; Wayne Cole

SYDNEY, June 3 (GNN) - The U.S. dollar was broadly lower on Wednesday as hopes for progress in Greek debt talks and a huge spike in European yields combined to give the euro its biggest gain in three months.

The dollar index, which measures it against a basket of six major currencies, was down at 95.943 having shed 1.5 percent on Tuesday in its biggest one-day drop since July 2013.

The euro was enjoying the view at $1.01150, having climbed 2 percent overnight, while the dollar lapsed back to 124.08 yen and away from a 12-1/2-year peak of 125.070.

CitiFX head G10 strategist, Steven Englander, said the violence of the shift reflected just how much speculators had been long of dollars and short of euros.

"Today's EUR move started as a rates move and looks now to be a position unwind. We estimate that a third of the EURUSD move is driven by the change in rates, and 67 percent by positioning unwinds."

The initial catalyst was EU data showing a surprisingly large increase in headline and core inflation which suggested the European Central Bank's latest easing campaign was gaining traction. [TOP/CEN}

German 10-year Bund yields surged 16 basis points to 0.68 percent, the biggest jump in about three years, while Spanish, Italian and Portuguese yields hit 2015 highs.

The central bank holds a policy meeting later Wednesday and will likely reaffirm its commitment to the trillion euro asset purchase programme.

The euro got another leg up when the ECB, the European Commission and the International Monetary Fund agreed on the terms of a cash-for-reform deal to be put to Greece in a bid to conclude four months of debt stalemate.

It was far from clear if the leftist government of Prime Minister Alexis Tsipras would accept the plan, but the market took it as an encouraging step forward.

Dealers said the speed and size of the euro rally argued for consolidation in the very term, while the technical background looked better after a break of the 20-day moving average at $1.1132. The next major chart target was $1.1210/20 and a breach there could trigger a move to the $1.1325/40 zone.

Still, there is a host of U.S. economic data yet to come this week, including the payrolls report on Friday, and any signs of strength could revive dollar bulls.

For now, the dollar's retreat has lifted commodities and related currencies.

The Australian dollar shot to $0.7762, having jumped 2.2 percent on Tuesday, with the New Zealand dollar not far behind at $0.7175.

The Australian currency faces a hurdle in the form of gross domestic product data later in the session, where an outcome of less than the expected 0.7 percent gain could cause a pullback. (Reuters)(Editing by Eric Meijer)

New York regulator Lawsky aims at Deutsche Bank over Libor - FT

(GNN) - Benjamin Lawsky, New York state's financial services regulator, has added himself to the regulators investigating Deutsche Bank AG for manipulation of the Libor benchmark borrowing rate, the Financial Times reported on Sunday, citing unnamed sources.

The New York Department of Financial Services' probe of the German bank marks the first Libor investigation for the regulator. Deutsche Bank is currently negotiating a settlement with the U.S. Justice Department, the newspaper said.

Lawsky's department regulates banks with charters in New York as well as foreign banks with branches in the state. He is not investigation other banks, which have already settled with the government, the Financial Times said.

In a little over two years, regulators have looked into more than a dozen banks and brokerages over allegations they manipulated benchmark interest rates such as Libor and Euribor, which are used to price trillions of dollars of financial products from derivatives to mortgages and credit card loans. (Reuters)(Reporting by Caroline Humer; Editing by Jonathan Oatis)

WRAPUP 4-Greek PM demands EU stop "unilateral actions" as tensions flare

(Updates with vote, Greek deputy PM comments, opinion poll)

* Top euro zone players to hold Greek crisis meeting Thursday

* Greece pushes ahead on "humanitarian crisis" bill

* EU official warns Greece against unilateral moves

* German finance minister says Athens running out of time

* France appeals for restraint to avoid "accident"

By Costas Pitas and Caroline Copley

ATHENS/BERLIN, March 18 (GNN) - Greek Prime Minister Alexis Tsipras lambasted European partners on Wednesday for criticising a new anti-poverty law hours before it was voted on, saying it was the euro zone rather than Athens that must stop "unilateral actions" and keep its word.

Tsipras's impassioned speech to parliament ahead of the vote on his government's first bill marked the latest escalation in a war of words between Athens and its creditors that has raised the risk of a Greek bankruptcy and euro zone exit.

European Council President Donald Tusk called a meeting on Greece for Thursday evening at Tsipras' request on the sidelines of an EU summit with the leaders of Germany, France, the European Central Bank, the European Commission and the chairman of euro zone finance ministers.

The leftist Greek leader is pressing for a political decision to break Greece's cash crunch, while the creditors have insisted Athens must first start implementing previously agreed economic reforms and hold detailed talks on its financial plans.

Most Greeks, nearly 60 percent, are satisfied with their government's negotiations, according to the latest survey by Marc carried out on March 15-17 and published on Thursday.

Tensions over Greek flip-flopping on the terms of a bailout extension agreed last month flared again after an EU official wrote to Athens urging more talks with lenders on the bill before the vote.

The letter told Tsipras's leftist government to hold further talks with the EU on the bill or risk "proceeding unilaterally" against the terms of a Feb. 20 accord that extended the bailout and staved off a Greek banking collapse.

European Economics Commissioner Pierre Moscovici denied the EU was trying to stop Athens from passing the law but that the official had been correct to remind the Greek government to consult with lenders first.

"The European Union as a whole wants Greece in the eurozone," Moscovici said, but added that the February deal must be respected. "Greece must stay in the euro zone... but at these conditions."

An indignant Tsipras defended the so-called "humanitarian crisis" law - which offers food stamps and free electricity to the poor - as the first bill in five years drawn up in Athens rather than ordered by EU technocrats.

"If they're doing it to frighten us, the answer is: we will not be frightened," Tsipras told parliament. "The Greek government is determined to stick to the Feb. 20 agreement. However, we demand the same from our partners. Let them stop unilateral actions, respecting the agreement they signed."

The bill was approved by a majority of lawmakers in the early hours of Thursday, with support from the opposition as well.

Members of the governing Syriza party said the remarks by the head of EU delegation to Greece Declan Costello were "an intervention in the legislative process that is an insult to all of us," in a letter of complaint read out in parliament.

Tsipras continued his attack against "EU technocrats" over the letter.

"The behaviour of some, not all, of our partners and especially some of the technocrats and technocrat teams only confirms the arguments of the Greek side," Tsipras said.

"What else can one say to those who have the audacity to say that dealing with a humanitarian crisis is a unilateral action?"

European Commission President Jean-Claude Juncker said he was concerned about the pace of progress on resolving Greece's debt crisis and urged those involved to "get a grip".

"I'm still worried. I'm not satisfied," he told a news conference. "I'd like everyone to get a grip on themselves."

"TIME RUNNING OUT"

The latest comments come as Greece risks running out of cash in weeks amid a widening rift with its creditors.

Technical teams from Greece and its international lenders started talks last week to try to agree details of reforms, but have made little progress so far.

"We have the impression, and everyone who is dealing with the question shares the impression, that time is running out for Greece," German Finance Minister Wolfgang Schaeuble, said in Berlin, noting that Athens was refusing a third bailout package.

Shut out of debt markets and with financial aid frozen by irate lenders, Athens needs to quickly find new funding.

"We haven't received any (bailout) tranches since August 2014 but we have been meeting all of our obligations," Greek Deputy Prime Minister Yannis Dragasakis told Greek TV on Thursday. "Of course we have a liquidity problem ... We have obligations which, in order for us to meet, we need the good cooperation of the European institutions."

Tsipras will raise the funding problem in talks with EU leaders at this week's summit, his government said.

But EU officials said they did not understand what Greece hoped to achieve by bringing the issue to the summit, where it is not on the formal agenda and could only be discussed on the sidelines and only in broad political terms.

In a small boost for the government, Greece sold 1.3 billion euros ($1.38 billion) of three-month Treasury bills on Wednesday in its third successful auction this month. The sum covered the amount it sought to raise to refinance a maturing issue.

France appealed for restraint to avoid accidentally triggering a Greek euro zone exit.

"France will be do everything it can to avoid an accident and I believe that what we will do will avoid it," Finance Minister Michel Sapin said. "But no one can be categorical on this and this is why, on both sides, people must control their language."

(Reuters)(Additional reporting by George Georgiopoulos, Renee Maltezou, Karolina Tagaris and Angeliki Koutantou in Athens, Alastair Macdonald and Jan Strupczewski in Brussels, Yann Le Guernigou in Paris, Writing by Deepa Babington; Editing by Dominic Evans, Paul Taylor and Ken Wills)

GLOBAL MARKETS-Dollar sags, bonds boom as Fed takes dovish tack

* Dollar extends fall as market sees slower US rate lift off

* Fed lowers projected outlook for growth, inflation, rates

* Stocks, commodities encouraged by thought of extended stimulus

* Japanese shares buck trend as rising yen prompts profit taking

By Wayne Cole

SYDNEY, March 19 (GNN) - The dollar was giving ground in Asia on Thursday as investors priced in a later start and a slower pace for future U.S rate rises, slashing bond yields globally and firing up stocks.

The formerly friendless euro found itself up at $1.0880 , having jumped 2.8 percent on Wednesday, while oil held gains of 5 percent as the dollar retreat benefited commodities.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.3 percent for its best daily performance in five weeks, while Australia's main index jumped 1.4 percent.

The only laggard was the Nikkei which slipped 1.1 percent in reaction to a rising yen.

Short-term U.S. yields had boasted their biggest drop in six years after the Federal Reserve trimmed forecasts for inflation and growth, and said unemployment could fall further than first thought without risking a spike in inflation.

The median projection for the Fed funds rate at the end of 2015 was cut to 0.625 percent, down half a point from December.

Fed Chair Janet Yellen also sounded uncomfortable with the strength of the dollar, saying it would be a "notable drag" on exports and a downward force on inflation.

"There was nothing in the statement to suggest that the Fed is leaning toward a June hike," said Michelle Girard, chief U.S. economist at RBS.

"Developments leave us feeling more comfortable with our official call for the first rate hike being in September."

The market reaction was immediate and violent. Fed fund futures <0#FF:> surged as investors sharply scaled back expectations for how fast and far rates might rise.

Yields on two-year notes nosedived 11 basis points to 0.56 percent as prices rose, the biggest daily rally since 2009.

The drop in yields pulled the rug out from under the dollar, as investors have been massively long of the currency in the expectation its interest rate advantage could only get wider.

Against a basket of currencies the dollar was down a further 0.3 percent, having shed 1.8 percent on Wednesday.

The Swiss franc, sterling and the Australian dollar all enjoyed similar gains, while the New Zealand dollar got an extra boost from upbeat growth data.

The dollar also skidded to 119.80 yen, having been around 121.00 before the Fed's statement.

Wall Street was encouraged by the prospect that policy would stay super-loose for longer and the Dow ended Wednesday up 1.27 percent. The S&P 500 rose 1.21 percent and the Nasdaq 0.92 percent.

Among commodities, gold rallied to $1,173 an ounce, having climbed from $1.145 on Wednesday.

U.S. crude was off 34 cents at $44.32, but that followed a gain of 3 percent on Wednesday. Brent was 5 cents easier at $55.86 a barrel. (Reuters)(Editing by Eric Meijer)

GLOBAL MARKETS-Asia stocks fall as risk aversion prevails, dollar soars

1. * MSCI Asia-Pacific index hits 2-month low
2. * Markets continue digesting possibility of earlier U.S. rate hike
3. * Dollar hits new 12-year high against euro
4. * Japan shares buck trend on upbeat data, Nikkei up 0.5 pct

By Shinichi Saoshiro

TOKYO, March 11 (GNN) - Asian stocks fell to a two-month low on Wednesday as nervous markets recoiled on worries about an earlier U.S. interest rate hike, while such a prospect helped send the dollar to a 12-year high against the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent after touching its lowest since January. Australian and South Korean shares each lost 0.5 percent and Malaysian and Indonesian stocks also declined.

Riskier assets both in the United States and elsewhere have come under pressure after Friday's robust U.S. employment data increased expectations that the Federal Reserve could raise rates as soon as June -a prospect that appeared relatively more remote a few weeks prior.

The possibility of higher U.S. yields siphoning away funds from riskier assets gave the S&P 500, at a record high two weeks ago, its worst decline in two months overnight and emerging market stocks declined to their lowest since early January.

Mexico's peso weakened to a record low and its Malaysian, South Korean, Brazilian and South African counterparts have also suffered heavy hits.

Renewed concern about Greece's debt talks with euro zone partners and deflationary pressures in China have also weighed on emerging markets in general. China will release industrial output, retail sales and investment data later in the day which are all expected to show slowing growth.

Japan's Nikkei bucked the trend and rose 0.5 percent as better-than-expected machinery orders helped offset Wall Street losses.

But the deepening decline in the yen, usually a positive factor for Japanese stocks as it buoys exporters, had some worrying about other consequences.

"The market started to worry about side effects from a further slide in the yen," said Hiroichi Nishi, general manager at SMBC Nikko Securities in Tokyo, adding that there are also concerns that a stronger dollar hurts U.S. multinational companies' earnings.

In currencies, the euro fetched $1.0695 after touching a 12-year trough of $1.0666. Downward pressure on the common currency increased after the European Central Bank kicked of its quantitative easing programme and began its bond-buying on Monday.

"In addition to the ECB's starting its bond buying, Greek concerns are likely to weigh on the euro again this week, when there are several Greek-related events scheduled," said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.

Technical talks between finance experts from Athens and its international creditors are due to start later in the day with the aim of unlocking further funding.

The dollar traded at 121.315 yen, pulled down from an eight-year high of 122.04 scaled overnight as the broad slide in equities favoured the safe-haven yen.

The dollar index remained close to its 11-1/2 year peak of 98.808 climbed the previous day.

Hit by the greenback's broad strength, the Australian dollar hovered close to a six-year trough of $0.7603 reached on Tuesday.

U.S. crude oil bounced modestly after falling sharply overnight on the dollar's appreciation, which makes commodities denominated in the greenback costlier for holders of other currencies.

U.S. crude was up 1.3 percent at $48.93 a barrel after falling 3.4 percent the previous day. (Reuters)(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Kim Coghill)

UK's Cameron backs ex-HSBC chairman Green going before parliament -spokesman

Feb 11 (GNN) - British Prime Minister David Cameron would support HSBC's former executive chairman Stephen Green going before lawmakers to answer questions about what he knew about tax avoidance at the bank's Swiss arm, his spokesman suggested on Wednesday.

Cameron appointed Green, a British peer, to be a trade minister in 2010 and his spokesman has said he thinks Green, who is no longer in government, did a good job.

Asked on Wednesday if Cameron felt it would be useful for Green to appear before a parliamentary committee to explain what he knew about possible wrongdoing at HSBC's Swiss arm, his spokesman said it wasn't a decision for the prime minister but that he favoured people accounting for themselves.

"The prime minister's sort of point of principle, you know, is that he's always of the view wherever possible it is (desirable for individuals to testify)," Cameron's spokesman told reporters.

"He would support the idea of people coming before select committees and answering questions that parliamentarians have," he added.

So far, Green has not commented.

A panel of British lawmakers said earlier this week they planned to open an inquiry into HSBC Holdings Plc HSBA.L, after media reports that the bank helped wealthy customers dodge taxes and conceal millions of dollars of assets.

It has not yet disclosed who it would like to question. (Reuters)(Reporting by Andrew Osborn; Editing by Guy Faulconbridge)

UPDATE 2-Brazil's swelling budget gap compounds dire 2015 for Rousseff

1. * Worst fiscal result in more than a decade
2. * Overall budget gap doubles to 6.7 percent in 2014
3. * Minister says numbers are "honest" (Adds comment by cabinet minister)

By Silvio Cascione and Luciana Otoni

BRASILIA, Jan 30 (AsiaTimes.ga) - Brazil fell far short of its main fiscal target in 2014, underscoring the uphill battle that President Dilma Rousseff faces to shore up public accounts to prevent a credit downgrade as recession risks loom.

Brazil posted a primary budget deficit of 32.536 billion reais ($13.76 billion) for last year, equal to 0.63 percent of gross domestic product, the central bank said on Friday. That was the first annual gap since the current data series started in 2001 and a far cry from the 91.3 billion reais surplus of 2013.

The country's overall budget gap, which takes into account debt servicing costs, doubled in 2014 to 6.7 percent of GDP, one of the highest among major economies according to the International Monetary Fund.

The results, much worse than the already grim estimates of investors and ratings agencies, mean that newly appointed Finance Minister Joaquim Levy will have to slash spending or continue jacking up taxes to meet the government's goal of saving 1.2 percent of GDP in 2015.

Budget constraints are just one headache for Rousseff, who struggled to win re-election in October. State-run oil company Petroleo Brasileiro SA is engulfed in a massive corruption probe, and some of the country's biggest cities risk rationing water.

Brazil needs to run solid budget surpluses to service its sizable debt, on which it pays double-digit interest rates. Gross debt will probably keep rising this year, to 65.2 percent of GDP, according to central bank estimates.

Brazil's currency, the real, dropped nearly 3 percent on Friday, while interest rate futures <0#2DIJ:> spiked.

On condition of anonymity, a cabinet minister acknowledged the figures were "very bad," but said they reflected the true state of Brazil's finances.

The December results are the last under former Finance Minister Guido Mantega and Treasury Secretary Arno Augustin. Both left office at the end of the year after investors accused them of using "creative accounting" to bolster budget results.

"We can have a true start from 2015 onwards," the minister told Reuters. "The plan was that there should be no skeletons in the closet for Levy."

The Rousseff administration originally aimed for a primary surplus equivalent to 1.9 percent of GDP in 2014. It later abandoned that target as tax revenues dwindled and public spending surged ahead of the October election. (GA, Reuters, ATimes)(Additional reporting by Anthony Boadle; Editing by Todd Benson, Chizu Nomiyama and Lisa Von Ahn)

IFR-Big three bond raters still hold sway over mortgage market

NEW YORK, Jan 30 (IFR) - Call it old-school thinking but despite all the regulatory scrutiny and public slamming of the top three global rating agencies for their roles during the last real estate bust, their rating calls on the riskiest tranches of conduit commercial mortgage bond deals are still influential enough to impact pricing outcomes on transactions.

Just last week when two competing deals priced their D classes with a 20bp differential, issuers, investors and analysts said the difference was simply because one had a Triple B minus rating from the one of the main credit rating agencies, while the other did not.

"It's certainly the easiest thing for market players to hang their hat on," one issuer of the two trades said of the pricing disparities. "It shows us the preferences of investors, and we are in this market a lot."

Simply put, the costs of doing business in the primary and repo markets for conduit commercial mortgage bond deals will be higher without a stamp of approval from one of the big three rating agencies - Moody's Investors Service, Standard & Poor's and Fitch Ratings.

The problem has being magnified on the riskiest bonds broadly being offered - namely the D class - where the act of securing an investment grade from the old guard rating agencies has become harder to come by.

When Morgan Stanley and Bank of America sold their US$1bn plus conduit a week ago, called MSBAM 2015-C20, the issuers did so with marks of Triple B minus and Triple B (low) from Morningstar and DBRS at the D class level.

Moody's was also hired to rate the trade, but like most of the deals it rated in recent months, supplied letter grades only on the deal's most bullet-proof Triple A and Aa2 securities.

So when Morgan Stanley's US$50.2m D class priced at swaps plus 380bp, versus S+360bp for a similar US$70.65m bond from Deutsche Bank and Ladder Capital that had a Triple B minus rating from Fitch Ratings, market players reacted by saying that having a top-three firm on a deal still mattered.

That partly stems from decades-old investment criteria that required at least one major rating agency on a deal before certain investors were allowed to buy into a deal.

But because little has changed in the criteria even after the crash, newcomers to the rating agency arena like Kroll Bond Rating Agency or Morningstar are still absent from the ranks of approved firms.

"Documentation and technology tend to move relatively slow on that front," one analyst said.

And in practical terms, that not only means some money managers will be barred from buying Triple B minus paper without the sign off from a major rating agency, but also that fast money accounts looking for leverage in the repo market will often be paying more.

Fast-money accounts are big buyers of Triple B minus paper from the conduits, and are known for levering up bonds on a 5.5% yielding D tranche to reach mid-teen returns.

"I don't know what the delta is (on repo) terms for a Triple B minus with or without Fitch (or) Moody's but I am sure it is something," a portfolio manager said.

Credit Suisse, for one, does not differentiate between ratings from one of the big three or from a DBRS, Kroll Bond Rating Agency or Morningstar, a person familiar with the matter said.

But many of the large US investment banks do, he said, noting that most are known to charge more for deals without Triple B minus marks from Moody's or Fitch.

WILLING AND ABLE
Fitch Ratings has stood alone for months as the only firm of the big three agencies willing, or able, to supply Triple B minus ratings.

Standard & Poor's has been largely out of the picture since the crash, and just this month agreed to a one-year ban from rating any new US conduit deals as part of a settlement with regulators, who claimed the agency misled investors in six post-crash deals.

And while Moody's has picked up the bulk of the slack, until this week, its views on anything just below the Triple A level have been absent on new-issues.

But any lingering doubts of Moody's stance of credit quality deterioration has been cleared up in a searing report issued by the agency on Thursday, which stated that bonds rated Triple B minus by others are more akin to B1, or junk status, by Moody's own metrics. [ID: nL1N0V827K]

"None of us really respect what rating agencies have had to say (since the crash)," a portfolio manager at a large money manager said in an interview following the report's release.

"But this had people paying attention for the first time in years."

He was not the only one keeping a close eye on what this all could mean for investors.

Darrell Wheeler, an analyst at Amherst Pierpont Securities, has been warning about the vulnerability of new-issue Triple B minus paper to downgrades and losses.

"If we go into a near-term recession, there is a real risk of losses at the Triple B minus level, and certainly there is concern from a downgrade perspective," he said in an interview.

But even in a downgrade scenario, Wheeler says there are sharp consequences for holders of Triple B minus paper, as deals that initially printed at S+335bp on average in 2014 will quickly widen to S+550bp.

"That's quite a kick in the pants." (Reporting by Joy Wiltermuth; editing by Shankar Ramakrishnan and Jack Doran)

Italy's Padoan urges ECB bond buying "without constraints"

Jan 17 (AsiaTimes.ga) - Italian Economy Minister Pier Carlo Padoan has called for the European Central Bank (ECB) to launch its expected bond-buying programme "without constraints", saying he hoped its impact was not watered down and fragmented along national lines.

The ECB is expected next week to announce it will issue newly printed money to buy government bonds and flood cash into the euro zone economy, aiming to ward off deflation in a step known as quantitative easing (QE).

"QE is an essential contribution against deflation, it should absolutely not be diluted," Padoan was quoted saying in business daily Il Sole 24 Ore on Saturday.

"I hope that national fragmentation doesn't exert an influence," he said. "What counts is to turn around expectations and for that, there needs to be a decisive intervention without constraints."

Details of the programme, which ECB President Mario Draghi is widely expected to unveil after a meeting on Jan. 22, are still unclear.

The size of any programme and conditions such as whether risks will be distributed across the whole euro zone, or whether national central banks will buy the bonds of their own country only, have been under discussion since late last year.

The plan has faced stiff resistance from Germany, the bloc's biggest economy, which fears unlimited bond purchases would risk loading too much risk from weaker countries onto the Eurosystem as a whole.

However some analysts say a system under which national central banks buy their own country's debt would risk undermining the basic principle on which the single currency is built.

QE has already been deployed in the United States, Britain and Japan, but would be an unprecedented experiment in a bloc made up of different countries with no common fiscal system.

Bank of Italy Governor Ignazio Visco told a German newspaper last week he favoured a programme under which risks were borne jointly by the euro zone as a whole, in line with other policy measures which the ECB sets for the whole bloc.

Separately Dutch Finance Minister Jeroen Dijsselbloem signalled in a newspaper interview he would not object to the ECB purchasing national bonds of member states.

Policy makers in Italy, which is struggling to emerge from three years of on-off recession, have warned repeatedly that their economy faces a growing risk that chronic low inflation will tip into full deflation. (Reporting by James Mackenzie; Editing by David Holmes)(GA, Reuters, Asia Times)

TREASURIES-U.S. 30-year yield hits record low for second day

Jan 15 (ATimes) - Yields on U.S. 30-year Treasuries bonds struck a record low on Thursday for a second straight session after a surprise interest rate cut by the Swiss National Bank spurred buying of higher-yielding U.S. government debt.

The yield on the longest U.S. government securities touched 2.3940 percent, below the previous record low of 2.3950 percent set on Wednesday, according to Tradeweb and Reuters data.

The 30-year bond yield last traded at 2.398 percent, down 5.5 basis points from late on Wednesday. This brought its decline so far in January to 35 basis points, putting it on track for its steepest monthly decline since May 2012.

(Reporting by Richard Leong; Editing by James Dalgleish)(GA, Reuters, Asia Times)

Goldman to test appetite for new structured product

LONDON, June 23 (IFR) - Goldman Sachs will start marketing a new type of bond transaction this Wednesday that straddles asset categories and features an unusual triple-recourse structure, as it seeks to take advantage of investors' demand for Triple A rated assets.

The so-called Fixed Income Global Structure Collateral Obligation (FIGSCO) issuer is a joint venture between Goldman Sachs and Mitsui Sumitomo Insurance and will provide investors with a triple recourse if things turn sour.

Under the structure, investors will have recourse to the pool of assets backing the trade, as well as having an unsecured claim against Goldman Sachs and Mitsui.

This triple-recourse mechanism makes the transaction akin to a covered bond issue, where investors have a claim against the assets and the issuer and, indeed, covered bond investors will be among the targeted roadshow audience.

The transaction is expected to diversify Goldman's funding sources and the outright pricing level is expected to be competitive with senior funding.

The deal has been structured in response to a lack of supply of Triple A rated assets and net negative covered bond supply. The programme size being set up is 10bn.

Barclays, Credit Agricole-CIB, Natixis, Goldman Sachs and UBS will hold investor meetings running from Wednesday until July 1.

But while the transaction uses some covered bond technology, it does not have all the bells and whistles traditionally attached to the sector.

There is no legal framework; the assets would not be eligible for a cover pool as defined by European regulation; the bonds will unlikely be repo-eligible at the ECB; nor will they likely count for the Liquidity Coverage Ratio. They will probably have a 20% risk-weighting and be treated as Triple A corporate exposure under Solvency 2.

TRIPLE A WITH A SPREAD

The deal could offer buyers a much more attractive spread than a sovereign trade, while filling a supply gap in the covered bond primary market, according to a FIG syndicate banker.

"This is an interesting trade, especially if you look at what's going on in the world," he said. "This will offer value and we expect the big liquidity books to get on board." On the negative side, the deal may require more knowledge than a plain Triple A trade.

"We have been here before: Triple A with a spread," the banker said, "which is why the roadshow will be extremely important and investors will have to do their homework."

Another banker said the complex nature of the trade was a negative. "They clearly want to leverage the success of covered bonds, but the complexity alone is negative."

The S&P Triple A is achieved thanks to a total return swap provided on it by Goldman Sachs Mitsui Marine Derivative Products, or GS MMDP, a joint venture with strong credit ratings. For some, this has echoes of the much maligned CDO market.

Meanwhile, the deal's collateral cashflow is likely to come from a variety of securities from Goldman Sach's long-term funding operations.

There is no disclosure yet, but that could mean the collateral could include bonds, derivatives and loan assets, which sources away from the deal say resembles something between a structured covered bond and a CDO structure.

FIGSCO would be more dynamic than a typical covered bond pool, though, as assets would be marked to bid on a daily basis and topped up to keep overcollateralisation above 5%.

More collateral will be added to the pool if the existing securities decline in value. A reputable international asset monitor will be tasked with assessing the valuation of the pool on a monthly basis.

The items would not be disclosed line by line, but investors would be informed of the type of assets, the country of origin, the proportion of fixed and FRN assets and the level of concentration risk.

(Reporting By Helene Durand, Anna Brunetti, Editing by Philip Wright)