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US Short term interest rates turned negative Thursday as banks stockpiled government securities in order to polish their balance sheets for the end of the year. The growing appetite for short-term government debt reflects an effort by banks to present pristine year-end balance sheets to regulators and investors, a practice known as “window dressing” on Wall Street. With the US Federal Reserve maintaining an overnight target rate of zero to 0.25%, investors are demonstrating a willingness to completely forgo interest income, or even to take a small loss, to own securities that are seen as safe. This action has been exacerbated by the fact that all leading US banks, many sitting on big trading profits, will this year close their books at the same time, at the end of December. In past years, investment banks such as Goldman Sachs and Morgan Stanley reported annual results in November. Late Thursday, US T-bills maturing in January traded below zero %, traders said. Three month T-bills traded at 1 bp and six-month T-bills fell to a record low of 13 bp, compared with 14bp at the height of the crisis last year. Read more

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The US Federal Reserved Wednesday decided to leave a Key interest rate at a record low in an effort to foster economy recovery world wide. Wrapping a two-day meeting, the Federal Open Market Committee (FOMC) said in a statement that it will maintain the target range for the federal funds rate at 0 to 0.25%, indicating that it will leave the benchmark interest rate at exceptional low levels “for an extended period” of time. The committee expressed concerns that while household spending seems to be stabilizing, it remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Read more

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The USD pulled back against major currencies Tuesday on profit-taking and speculations on US Federal Reserve meeting. The Fed began its two-day monetary policy meeting Tuesday and will announce rate decisions today. The central bank is widely expected to leave Key rates unchanged at historic low level, and its statement after the meeting would be fundamentally same with previous statements. If the statement is in line with expectations, it means that the Fed would keep its ultra-loose monetary policy for a while, increasing pressures upon the dollar. Any unexpected signal could spark big fluctuations in currency market. It was reported that US is proposing a broad new economic framework to tackle global economic imbalances on the G- 20 financial summit due later this week. Read more

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Crude Oil prices broke above US$72 a barrel Wednesday after a US government report showed a bigger than expected decline in Crude Oil inventories. NYMEX crude rose US$1.58 to settle at US$72.51bbl, adding to Tuesday’s gain of UD$2.07, while ICE Brent rose US$1.81 to US$71.67.The gain came after the US Energy Information Administration reported that commercial crude oil inventories dipped last week by 4.7 million barrels, against expectations of a 2.4-million-barrel drop. The decline, pegged to a slowdown in imports, came alongside builds in gasoline and distillate stocks, a combination that analysts said could hurt the profitability of US oil refiners. Other commodities and equities also rose strongly Wednesday, inspired by a comment from US Federal Reserve Chairman Ben Bernanke that an economic recovery had begun, a signal demand for raw materials will rebound. Read more

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US Federal Reserve Chairman Ben Bernanke said Tuesday that the country’s economic recession is very likely over at this point. More and more data showed that the world largest economy is pulling out of the worst recession since the 1930s. Bernanke admitted that in responding to questions at the Washington based think-tank Brookings Institution. The central bank chief also expressed his confidence that the Congress will enact a revamp of the nation’s financial rule book to prevent future crisis from happening. “I feel quite confident that a comprehensive reform will be forthcoming,” Bernanke said. In a speech delivered Monday in New York to rethink the one year anniversary of the collapse of Lehman Brothers, President Barack Obama urged the Congress to enact legislation this year. US Treasury Secretary Tim Geither also said recently that it is essential that the financial overhaul should be implemented to avoid future crisis.

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The revival of markets for bonds backed by auto and credit card debts is expected to be underscored today when the US Federal Reserve reveals details of its latest loans to investors in asset-backed securities. The Fed offers cheap funding every month to investors in such bonds under its term asset-backed securities loan facility (Talf), an emergency measure meant to support the markets through which hundreds of billions of dollars in consumer loans are financed. This month, Fed funding will be available for investors considering buying US$12B in eligible asset-backed securities sold by the likes of American Express, Bank of America, General Electric, Nissan and Ford. Read more

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