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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."

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