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MONEY MARKETS-Elevated repo rates seen persisting as coupons settle

Friday, 12 Oct 2012 | 2:09 PM ET

(Reuters plans to discontinue New York money market reports as of Oct. 15 and fold coverage into daily U.S. Treasury reports. Significant money market developments will be reported separately. Please e-mail comments to william.schomberg@thomsonreuters.com)

By Ellen Freilich

NEW YORK, Oct 12 (Reuters) - General collateral repo rates will likely remain elevated at least through Monday when the Treasury's recent coupon auctions settle.

The government sold a total of $66 billion in three-, 10- and 30-year Treasuries this week on Tuesday, Wednesday and Thursday, respectively.

The settlements "will add more collateral to a heavy amount already floating around," said Roseanne Briggen, market analyst at IFR, a Thomson Reuters unit.

Overseas, LIBOR (London Interbank Offered Rates) three-month dollar rates were set at 0.33425 percent on Friday, down from 0.34025 percent on Thursday, the British Bankers' Association said.

Markets ignored S&P's two-step downgrade of Spanish debt, reasoning that the downgrade would nudge Spain closer to requesting a bailout from the European Central Bank.

Italian Prime Minister Mario Monti said on Friday that any request by Spain for ECB support to lower its borrowing costs would calm financial markets.

Spanish Prime Minister Mariano Rajoy, who has said he will only make a decision on the matter when he has all the details, is thought to be waiting for regional elections on Oct. 21 and may delay a decision further if bond yields remain manageable.

The ECB's plan to buy the bonds of struggling member states has raised hopes of an end to the most acute phase of the euro zone's crisis, but this has been undermined by Spain's delay in asking formally for such aid.

Italy, the euro zone's third-biggest economy, has a large deficit and the slowest average growth rate in the European Union. Its yields often track just below those of Spain.

The spread of three-month Libor rates over three-month OIS rates, calculated from Reuters data, expresses the three-month premium paid over anticipated central bank rates, or Overnight Index Swap rates.

(Additional reporting by Lisa Jucca and Paola Arosio in Milan; Editing by James Dalgleish)

((ellen.freilich@thomsonreuters.com)(646-223-6309)(Reuters

Messaging: ellen.freilich.thomsonreuters.com@reuters.net))

Keywords: MARKETS MONEY/

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