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MONEY MARKETS-Dealers seen dominating 4-week Treasury bill sale

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

By Ellen Freilich

NEW YORK, Oct 10 (Reuters) - Elevated general collateralrepo rates indicated the Treasury's $40 billion four-week billauction Wednesday is likely to be dominated by dealers.

The one-month bills the Treasury will sell today yielded0.115 percent in when-issued trade. The Treasury will auctionthe bills at 11:30 a.m. (1530 GMT).

"Demand for the bills is likely to be dealer-dominated todaybecause high repo rates keep anyone except dealers and those whoare mandated to buy bills away from auctions and the bill marketin general," said Thomas Simons, vice president and money marketeconomist at Jefferies & Co in New York.

"Add to that a slightly inverted curve - the three-monthbills are trading at a premium due to a maturity date thatbridges year-end - and you have a pretty clear indication ofinvestor apathy towards the extreme front end," he said.

"Investors think the rates are too low," said Tom di Galoma,managing director at Navigate Advisors LLC, a Stamford,Connecticut-based broker-dealer.

Short-term U.S. Treasury bills traded with yields 10 to 17basis points above zero, anchored by the Federal Reserve's verylow overnight rates.

At its September policy meeting, the Fed said it would keepthe target range for its federal funds rate at zero to 1/4percent and said it currently anticipated "that exceptionallylow levels for the federal funds rate are likely to be warrantedat least through mid-2015."

Three-month Treasury bills yielded 0.10 percent whilesix-month Treasury bills yielded 0.147 percent.

Overseas, the LIBOR three-month dollar rate wasfixed at 0.34275 percent versus 0.34675 percent on Tuesday,according to the British Bankers' Association.

The three-month dollar LIBOR/OIS spread stood at 20 basispoints on Wednesday, unchanged from the previous day, accordingto Reuters data. The spread of three-month Libor rates overthree-month OIS rates expresses the three-month premium paidover anticipated central bank rates, or Overnight Index Swaprates.

(Editing by James Dalgleish)

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

Keywords: MARKETS MONEY/