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MONEY MARKETS-U.S. money rates stable after Greek referendum
July 6, 2015 / 2:30 PM / 2 years ago

MONEY MARKETS-U.S. money rates stable after Greek referendum

NEW YORK, July 6 (Reuters) - Interest rates for Wall Street dealers and European banks to borrow dollars were little changed on Monday after Greek voters soundly rejected terms of a previous bailout on Sunday which traders feared may hasten the nation’s exit from the euro zone.

Most U.S. and European banks have little direct exposure to Greek debt, analysts and investors say, but there remained concerns that a similar situation might play out in larger, debt-laden European countries such as Italy and Spain.

“While you look at the aggregate exposure to Greece, it is small,” said Joe D‘Angelo, head of money markets at Prudential Fixed Income in Newark, New Jersey. “The risk for the market is possible contagion to other countries.”

Private exposure to Greek bank and government debt has fallen since the start of the European debt crisis over three years ago.

Greek bank liabilities to other banks declined to 12.9 billion euros in April from 41.7 billion euros in mid-2012, while investors held 21.1 billion euros in Greek sovereign debt in April from 205.6 billion euros in mid-2012, according to analysts at Cornerstone Macro.

Greece’s referendum outcome surprised many investors who had thought most Greeks would vote ‘Yes’ as a proxy to European officials and international lenders that they want to stay with the common currency, even as Prime Minister Alexis Tsipras urged for a ‘No’ vote in a bid to force creditors to loosen their austerity conditions for more aid to Athens.

In reaction to the stunning result, the euro and stock markets worldwide fell, while debt cost of Greece, Italy, Spain and other peripheral euro zone nations rose.

The intensity of the market responses tapered off when U.S. markets opened after a three-day holiday weekend as there were some hopes of a resolution for Greece to receive more cash before it misses another debt repayment.

The cost banks charge each other to borrow dollars in the London interbank market was little changed. The benchmark three-month London interbank offered rate was fixed at 0.28425 percent, compared with 0.28430 percent on Friday.

In the $5 trillion repurchase agreement market, the overnight interest rate was last quoted at 0.16 percent to 0.18 percent, compared with 0.16 percent on Thursday, according to ICAP.

In the commercial paper sector, German and French banks offered to pay 0.18 percent to 0.20 percent to investors to hold their one-month paper, unchanged from on Thursday. (Reporting by Richard Leong; Editing by Meredith Mazzilli)

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