950816

HK interbank

rates firmer,

bill yields up

HONG KONG: Hong Kong overnight cash ended firmer and short-end bill yields rose as the US dollar strengthened against the local currency, said dealers.

Short cash ended at 5-7/8 3/4 percent against Tuesday's closing 4-3/4 5/8, while three-month interbank was 6-3/16 1/4 versus 5-15/16 13/16 percent.

Dealers said interbank traders, worried about being left short of US dollars after the greenback hit 99 yen today, sold the local currency, squeezing liquidity in the market.

"Overnight is up because the t.t. (Hong Kong dollar/US dollar exchange rate) went up to 7.7455 today, the higest since January," said a dealer with European bank. The local dollar firmed to 7.7424/31 to the US unit in late trade.

The closing balance in the interbank market was HK$1.40 billion as banks borrowed HK$80 million at the discount window.

One-week Exchange Fund bills bore the brunt of the liquidity squeeze and faced selling pressure as market sentiment weakened, said a dealer with a European bank. One-week bills yielded 5.78 percent versus Tuesday's closing 5.62 percent.

"One-week bill yields went up to 5.88 percent at one point in morning trade as market sentiment went down and the t.t rose to 7.7450/60," he said.

"The yield curve is flattening as short-end paper yields more but longer-end note yields are little changed," he added.

Three-year notes yielded 6.75 percent against Tuesday's 6.69 percent while five-year notes yielded 7.47 versus 7.41 percent.

Turnover of bills and notes soared to HK$24.63 billion from Tuesday's HK$9.17 billion.-Reuter