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Money markets us commercial paper market grew in latest week


* U.S. seasonally adjusted U.S. commercial paper grew * Not seasonally adjusted CP outstanding fell * Some analysts give more weight to data that is not adjusted * Euribor rates fall to new two-year lows By Ellen Freilich NEW YORK, May 24 U.S. seasonally adjusted commercial paper outstanding rose $14.9 billion in the week ended May 23, according to data released by the Federal Reserve on Thursday. Meanwhile, not seasonally adjusted commercial paper fell $4.6 billion in the week while not seasonally adjusted foreign bank commercial paper outstanding shrank $1.6 billion. Some analysts are putting more weight on the data that are not seasonally adjusted, however, saying the extreme events of the financial crisis make seasonally adjusted data more volatile than that without seasonal adjustments. "The unadjusted data might be more accurate than the adjusted data," said Ray Stone, managing director at Stone & McCarthy Research Associates. "Even before Lehman Brothers failed you had a plunge in commercial paper outstanding and after Lehman it became extremely acute," he said. "Seasonal adjustment factors get cranked into the history so the non-seasonally adjusted data has actually been smoother than the seasonally adjusted data, whereas usually there is more 'noise" in the non-seasonally adjusted data. "Economists are accustomed to using seasonally adjusted data, but in this case, it's better to pay more attention to the non-seasonally adjusted data when looking for the macro implications," Stone said. Overseas, key euro zone three-month bank-to-bank lending rates fell to new two-year lows as the European Central Bank's long-term funding operations supplied the financial system with ample liquidity. The sharp fall in interbank rates over the last few months has brought benchmark euro-priced three-month rates to within striking distance of the euro-era low of 0.634 percent hit in early 2010. The ECB, which kept euro zone interest rates at 1.0 percent again this month, has put more than 1 trillion euros of three-year funds into the banking system since the end of last year, and interbank rates have fallen by half since. Three-month Euribor rates fell to 0.677 percent from 0.680 percent on Wednesday. The equivalent Libor rate, compiled from London-based banks, also slipped, falling to a 13-month low of 0.60436 percent.

Obama to announce changes for student loan repayment


WASHINGTON, March 10 President Barack Obama is slated to speak to students at Georgia Tech on Tuesday about how he wants to make the process of repaying student loans easier to understand and manage. Obama will sign a "student aid bill of rights" and will speak about an assortment of policy tweaks and projects to try to make it easier to help people with student loans pay back their debt."It's our responsibility to make sure that the 40 million Americans with student loans are aware of resources to manage their debt, and that we are doing everything we can to be responsive to their needs," said Ted Mitchell, undersecretary of education, on a conference call with reporters.

More than 70 percent of U.S. students who graduate with a bachelor's degree leave with debt, which averages $28,400. The White House said it will require clearer disclosures from companies to make sure borrowers understand who is servicing their loan and how to set monthly payments and change repayment plans.

"Repayment rates improve when servicers work well and work directly with borrowers, helping them understand the terms of their loans," said Sarah Bloom Raskin, deputy secretary of the Treasury Department, on the conference call.

Obama will direct his Education Department to create a system by July 1, 2016 to better oversee and address complaints from borrowers about lenders, servicers and collection agencies, the White House said. His administration will also study whether it needs to propose changes to laws or regulations to create stronger consumer protections, the White House said.

Pakistan steps up islamic finance in infrastructure deals


Pakistan is stepping up its use of sharia-compliant financing to fund infrastructure deals, which could help to promote the use of longer-term transactions in Islamic finance. Islamic deals are backed by specific assets, which makes them convenient for infrastructure projects. But traditionally, Islamic bonds and loans have shorter tenors - often around five years - than their conventional equivalents. This is partly because Islamic markets are generally not as deep and liquid, and products are not as standardised. Also, Islamic banks mostly hold short-term deposits on their books. This month, however, Pakistani banks arranged 100 billion rupees ($955 million) worth of 10-year Islamic bonds (sukuk) for a hydropower plant, the largest infrastructure deal to use Islamic financing in the country. Opportunities for similar deals are growing with $45 billion worth of domestic infrastructure projects planned by Pakistan's government under an initiative dubbed the China-Pakistan Economic Corridor (CPEC), agreed between the states in 2014.

Islamic banks have become increasingly willing to manage any mismatch between their short-term deposit bases and such long-term projects, said Abdullah Ghaffar, head of investment banking at Al Baraka Bank Pakistan."Excess liquidity with Islamic banks is pushing them towards each and every opportunity emanating from the CPEC," Ghaffar said.

The government is providing encouragement; in November, Finance Minister Ishaq Dar said predominantly Muslim Pakistan wanted to make sharia-compliant financing its first choice for infrastructure and long-term financing needs. The government plans to shift between 20 and 40 percent of its debt financing to Islamic sources from conventional ones, Dar said without specifying a timeframe. Islamic finance is being used in deals involving foreign lenders, including large Chinese banks keen to revive ancient "Silk Road" trade links with Pakistan through CPEC projects.

The first CPEC transaction, a $1.95 billion loan syndication signed off in January to finance a coal mining project and associated power plant in Sindh province, was financed mostly by large Chinese banks. But the deal featured two sharia-compliant tranches worth a combined 16 billion rupees extended by Faysal Bank, Meezan Bank and Habib Bank."Given the diversity of the Silk Road I think we will see more structures like this," said Andrew Compton, Hong Kong-based counsel at law firm Linklaters, which advised on the deal. The transaction used a lease-based structure known as ijara, a common sharia-compliant contract. "This model is now out there, so this process could be replicated with some success."The law firm said it was working on other infrastructure transactions across Asia, including a hydropower plant and a wind farm in Pakistan and a coal power plant in Indonesia.

Pakistani stocks end on 2 mth high, rupee weakens


KARACHI Jan 23 Pakistani stocks closed on a more than two-month high on Monday, with volume at a one-year high, after the country's finance minister agreed amendments to capital gains tax (CGT) over the weekend. The measures agreed by Finance Minister Abdul Hafeez Shaikh include investors not having to divulge sources of income until June 2013, keeping the current CGT rate flat until 2014 and abolishing withholding tax on sale."Investors believe that new funds will come to the market after government assurance that no source of funds will be required," said Samar Iqbal, a dealer at Topline Securities Ltd."Retail participation was high as investors now feel comfortable to trade in stocks after the measures announced on Saturday."The KSE's benchmark 100-share index closed up 2.23 percent, or 262.98 points, at 12,037.66, its highest close since Nov. 11 last year.

Volume rose to 230.14 million shares, compared with 178.42 million shares traded on Friday. In the currency market, the rupee ended weaker at 90.21/26 to the dollar, compared with Friday's close of 90.18/23, due to an increase in import payments.

The rupee touched a record low of 91.28 to the dollar in intra-day trade this month. Analysts say concerns about the country's economic health, especially a weakening current account, are adding to pressures on the rupee.

The current account recorded a provisional deficit of $2.154 billion in the first six months of the 2011/12 fiscal year, compared with a surplus of $8 million in the same period last year, according to data from the State Bank of Pakistan. The deficit is likely to widen further in the coming months because of debt repayments and a lack of external aid. In the money market, overnight rates ended lower at between 9.75 percent and 10.50 percent, compared with Friday's close of between 11 percent and 11.15 percent, amid increased liquidity in the interbank market.