Financial advices for students

Close hollande ally sapin named french finance minister


´╗┐PARIS Michel Sapin, a long-time political ally of President Francois Hollande who was his labor minister, was named to the powerful finance minister post on Wednesday. Arnaud Montebourg, who as industry minister backed protectionism to secure jobs and accused the European Union of hurting growth with its demands for lower public deficits, was given the expanded title of economy minister with oversight over industry and the digital economy.

In a statement read out on the steps of Hollande's Elysee Palace, Foreign Minister Laurent Fabius was re-confirmed in his post and handed additional duties for international development.

Corrected money markets dwindling volumes suggest ecb depo cut backfired


´╗┐(Corrects projected ECB rate cut in 16th paragraph)* Dwindling volumes cast doubt on ECB depo cut efficacy* Forward overnight rates too low if depo stays at zeroBy Kirsten DonovanLONDON, Aug 20 Dwindling money market trading volumes suggest the European Central Bank's cut to zero in its overnight deposit rate may have backfired, leaving the market's slim expectations of further easing looking overdone. The ECB cut the rate it pays for overnight deposits to zero from 25 basis points on July 5 in a bid to encourage banks to lend to one another rather than park cash at the central bank. But total volume for trades on which the Eonia overnight rate is calculated has fallen to about 20 billion euros a day since the ECB's move, according to Thomson Reuters data. This is the first time it has been so consistently low since at least mid-2007. Even accounting for the "summer lull", that is around 5 billion euros a day lower on average than over the same period in 2011.

"It's backfired massively, there's no volumes going through the market," one trader said."A lot of the funds can't trade without making a return so they're just closing and while the ECB may have hoped banks would lend for longer time periods, you can't expect them to just reinstate credit lines."Part of the problem, the trader said, was that any bank's credit rating is directly tied to that of its sovereign, with rating agencies typically downgrading banks within a couple of days of cutting a country's ratings."While the rating agencies are still putting banks on negative watch credit lines are still going to be decreased not increased," he added.

JPMorgan Chase & Co, BlackRock Inc, which is the world's largest money manager, and Goldman Sachs Group Inc restricted investor access to European money market funds immediately after the ECB's deposit rate cut."There's no incentive to participate in money markets anymore given the low margins and low rates," said Commerzbank rate strategist Benjamin Schroeder. The overnight rate is currently around 11 basis points, but forward rates are as low as 4 bps by year-end, indicating some modest pricing in of a further cut in the deposit rate to negative -- an unprecedented move for the ECB. Schroeder said even this looked overdone and left room for forward Eonia rates to rise.

"Eonia turnover has now consistently dropped... This should give the ECB further second thoughts about entering into uncharted territory," he said."Lower volumes should...support the current elevated Eonia/ deposit facility rate spread at the current level of around 11 basis points. While the overnight rate could potentially be anchored, Euribor rates, the main gauge of unsecured bank-to-bank lending, continue to fall on expectations the ECB will cut its main refinancing rate. A poll conducted immediately after the ECB's policy meeting in August showed expectations the refinancing rate would be cut by 25 bps to 0.50 percent in September. That would mean the spread between Euribor and overnight rates -- a popular trade -- would narrow. The three-month spread is currently at around 23 bps."Part of the compression in the spread is down to the refi rate cuts being seen as more likely than depo rate cuts. Euribors seem to be orientating themselves to a larger degree to the refinancing rate."Three-month Euribor rates eased on Monday to 0.325 percent from 0.334 percent on Friday.