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Belgian money market

yields remain stable

BRUSSELS: Belgian money market yields remained stable and the franc was steady at 20.5700/20 by 0900 GMT after the central bank trimmed two of its key rates, with dealers saying the move had already been discounted.

The National Bank shaved its central rate and end-of-day rates by five basis points each to 4.45 percent and 5.70 percent respectively. The move followed a five basis-point easing in the Bundesbank's repo rate earlier this morning.

"The market was looking for a move (on Belgian official rates) today or tomorrow...and (market) rates have recently been going a little lower every day," one dealer said.

"There was no problem concerning the franc....and after the repo rate cut, there was no point in the (Belgian) central bank waiting," the dealer added.

After the move three-month T-bills were yielding 4.47/49 percent compared with 4.48/50 percent late yesterday.

Today's German repo rate trim had been widely expected and dealers said all eyes now would be on tomorrow's Bundesbank council meeting, the first after the summer recess, to see whether the Bundesbank would also cut official German rates.

Most said they did not rule out a Bundesbank rate cut on Thursday but thought it was more likely later in the summer.

In the bond market the benchmark 2005 OLO yield stabilised around 7.17 percent, unchanged from yesterday after edging up to 7.19 percent ahead of the German repo rate move. The spread over the 10-year Bund narrowed by one basis point to 49.

One dealer said he was optimistic the spread would remain around current levels or even narrow further in coming weeks.

"For a lot of people it's worth buying bonds because short term rates are very low -- people will continue to buy the longer end," he said, adding that he did not expect Belgian government budget talks starting in September to weigh much on sentiment.-Reuter