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Rpt fitch revises indian railway finance corporations outlook to stable;


(Repeat for additional subscribers)June 13 (The following statement was released by the rating agency)Fitch Ratings has revised the Outlook on Indian Railway Finance Corporation Limited's (IRFC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to Stable from Negative and affirmed its IDRs at 'BBB-'. A list of additional rating actions is provided below. KEY RATING DRIVERS The rating action follows Fitch's revision of the Outlook on India's Foreign- and Local-Currency IDRs to Stable from Negative (see rating action commentary "Fitch Revises India's Outlook to Stable; Affirms Ratings at 'BBB-' " dated 12 June 2013 at this site). IRFC's ratings reflect the entity's public sector status, government ownership, and strong operational and strategic ties with the government of India (GoI), resulting in a strong likelihood of extraordinary government support if needed. As such IRFC has been classified as a dependent public sector entity under Fitch's criteria and the ratings are credit linked to that of the sovereign. The ratings derive strength from Ministry of Railway's (MoR) ongoing support as evidenced by regular equity injections into IRFC since its formation. IRFC's debt/equity ratio has been close to the regulatory 10x limit in the past three years. Fitch expects further capital injections from the MoR if this ratio were to exceed the limit; INR7.5bn and INR6bn were injected by the MoR in FY12 and FY13 respectively.

IRFC is the sole financing arm of the MoR and is mainly involved in providing finance lease to rolling stocks including locomotives, passenger coaches, and freight wagons among others. At end-March 2012, IRFC financed around 25% of the total outlay of the MoR. Fitch expects IRFC's collaboration with the government to persist over time. IRFC is wholly owned by the government and the board of directors are appointed by the government of India (GoI). The MoR signs a memorandum of understanding with IRFC every year to set its operational and financial performance targets, which it reviews on a quarterly basis. The Comptroller and Auditor General of India appoints auditors of IRFC on an annual basis, enhancing government control. It has been agreed with IRFC that the MoR will cover any shortfall of IRFC by making advance payments of lease rentals if IRFC does not have sufficient resources to redeem maturing bonds and/or repay loans. Fitch expects future standard lease agreements to continue to contain a similar assurance and the MoR to provide funding to prevent liquidity mismatch that may lead to a IRFC default. IRFC's profitability is resilient and highly visible since its interest income is charged on a cost mark-up basis and the capital investment pipeline of the Indian railway sector is strong. Its assets and liabilities are closely matched. With a sound reputation in capital market, Fitch deems IRFC can easily access domestic capital markets and banks for low-cost long-term funding.

RATING SENSITIVITIES A positive rating action would stem from a similar change in the ratings of sovereign in conjunction with continued strong support from the GoI.

Material changes to its strategic importance and financing arm status to the MoR or a dilution in the government shareholding to less than 51% could result in the entity no longer being classified as a dependent public sector entity and therefore no longer being credit- linked to the sovereign rating. Other rating actions are as this site (USD121.38m) term-loan affirmed at 'BBB-'JPY3bn (USD30.35m) term-loan affirmed at 'BBB-'USD200m bond affirmed at 'BBB-'USD300m bond affirmed at 'BBB-'

Rpt money markets watching for exit strategy comments at ecb meeting


* Money market curve has steepened in March* Markets focus on exit strategy debate at the ECB meeting* Curve may flatten back Draghi avoids "exit" commentsBy Marius ZahariaLONDON, April 2 Last month's rise in long-term euro zone money market rates could unwind if the ECB does not take the debate about an eventual withdrawal of its emergency cash injections any further at its meeting on Wednesday. Several policymakers, led by the German Bundesbank chief Jens Weidmann, have said in recent weeks that the European Central Bank needs to prepare an exit strategy after pumping about 1 trillion euros of cheap funds into the financial system. In the context of upbeat macro-economic data out of the United States and receding expectations for more monetary easing in the world's largest economy, the comments have led to a steepening of the money market curve. But analysts say the move may have gone too far given the bloc's weaker economic outlook relative to the United States.

"Recent comments by some of the ECB members have brought the exit strategy on the table," Commerzbank rate strategist Benjamin Schroeder said."(But) I think the steepening move has already happened and I would expect some flattening out of the ECB meeting if there is no talk about the exit strategy."Euribor futures fell across the 2013 and 2014 strip last month, indicating expectations for higher interest rates. The 2012 contracts remained relatively stable reflecting no near-term expectations for a change in monetary policy.

The December 2013 Euribor had fallen by some 20 ticks to a 10-week low of 98.81 in the first two weeks of March, reflecting interest rates were expected to be 20 basis points higher at the end of next year than they were seen in February. The contract has since rebounded to trade at 98.99 on Monday as disappointing euro zone data such as the manufacturing PMI surveys have tamed the steepening pressure. Analysts say long-term money market rate expectations could fall back towards levels seen at the beginning of last month if President Mario Draghi keeps his neutral stance on the debate. He has so far avoided to commit to an exit strategy, saying only that the ECB will take immediate action if the inflation outlook worsened.

FALLING EURIBOR RATES ING's head of investment grade debt strategy Padhraic Garvey also did not expect Draghi to change his tone on Wednesday and said this would give more momentum to a fall in Euribor rates "across the curve."The benchmark three-month Euribor rate fixed at 0.771 percent from Friday's 0.777 percent, the lowest level since the late June 2010. Twelve-month rates dropped by a lower amount to 1.410 percent from 1.416 percent. Erste Bank fixed income analyst Mildred Hager expected the three-month Euribor rate to fall to 0.70 percent during this quarter and remain stable for the rest of her forecast horizon until March 2013. No change in the ECB's main refinancing rate was expected in the foreseeable future and no further liquidity injections were seen in the near term, Reuters polls showed, leaving any market reaction dependent on Draghi's post-meeting news conference. Erste's Hager expected the first hike in the ECB's benchmark interest rate at the end of the 2014 or the beginning of 2015."I don't think there's anything that can be contained in the ... (ECB) statement that could change that," Hager said. Overnight Eonia forward rates trade within a tiny 0.35-0.37 percent range on the 2012 strip, but gradually rise above 0.40 percent in 2013, when banks have the option to pay back some of the cheap ECB loans.