Giuseppe Maraffino at.........>

GLOBAL MARKET/OPINION: Giuseppe Maraffino at Barclays notes that the Group of

Central Bank Governors and Heads of Supervision (GHOS) and the Basel Committee

on Banking Supervision (BCBS). A press conference is due at 1600GMT that will

provide an update on the finalisation of Basel III.

- Barclays "will be looking out for any insights into a possible change in the

Leverage Ratio (LR) to exclude central banks reserves from the LR calculation."

- This sounds like a technical issue but it could have quite far-ranging

implications for swap spreads (particularly in the US) and could should narrow

the spreads between tri-party and GCF repo (often seen as a proxy for the cost

of balance sheet).

- For Europe, Maraffino adds "dealers likely would be more willing to accept

cash to lend specific bonds or use the cash collateral option in the Eurosystem

securities lending program to borrow bonds from the central banks, thus reducing

the demand for general collateral in the repo market. This would reduce the

richness of rates on core general collateral and on special bonds, thus favoring

a correction of front-end valuations."