BOJ Official: O/N Rate Rise May Be On Subprime Woes

TOKYO -(Dow Jones)- A Bank of Japan official said Friday that the central bank injected Y1 trillion into money markets after the overnight call rate rose from the BOJ's target of 0.50% to 0.54%-0.55%. The Japanese central bank's fund injection followed similar steps overnight by the U.S. Federal Reserve and the European Central Bank, as market worries about the U.S. subprime loan crisis escalated. The BOJ official said it was "possible" that the rise was tied to the subprime crisis, but that the bank didn't know for sure. "We're not certain if that is related (to subprime) or not. It all depends on why the overnight call rate was a little bit high this morning," the official said. "We're not sure why some of the financial institutions were raising funds at a higher rate than on other days.

" The official called the step "an extension of our normal day-to-day operations," but noted that the last time the BOJ made such a large cash injection was June 29 - just as the U.S. subprime crisis flared. The injections follow French banking giant BNP Paribas' decision to freeze three funds that trade in mortgage-backed securities, saying the dramatic absence of liquidity in the market for such products as the subprime crisis spreads has made it impossible to accurately value the funds' holdings. A BOJ official said the bank acted after the overnight call rate rose to 0.54%-0.55%, above the bank's target rate of 0.5%. It is "possible" that the rise in the key rate was related to the subprime chaos, the official said, though he added that the BOJ is "not certain" of the cause. "We're not certain if that is related (to subprime) or not. It all depends on why the overnight call rate was a little bit high this morning," said the BOJ official. "We're not sure why some of the financial institutions were raising funds at a higher rate than on other days." The official described the move as "an extension of our normal day-to-day operations. The rates were a bit high, deviating a little bit away from our target, so we thought it might be necessary to inject some liquidity.

" The ECB took the almost unprecedented step of injecting nearly EUR95 billion into European money markets overnight, and the Fed funneled $24 billion into U.S. credit markets. "Suddenly, central banks have changed their tune from a wait-and-see stance on the subprime issue to a move to stabilize the financial system," Barclays Capital analyst Masuhisa Kobayashi wrote in a research note Friday. He said the start of action could either mean that the credit market and financial system have destabilized to the extent that central banks had to take action, or that the action was meant to prevent such a situation, and things should calm down going forward. He added: "The market seems to have taken the former, more pessimistic view." But the BOJ official suggested that the central banks had not coordinated their moves. "We're all responding to the situation in our domestic markets. It might mean that something common behind our domestic markets is happening, but we're not certain," he said.
-By Michael S. Arnold, Dow Jones Newswires; 81-3-5255-2929; michael.arnold@dowjones.com (END) Dow Jones NewswiresAugust 09, 2007 23:39 ET (03:39 GMT)

Yen Rallied after BNP Froze Funds

The yen rose sharply BNP Paribas, France’s biggest bank, froze three investment funds worth 1.6 billion euros, raising concern the US subprime mortgage sector woes is spreading worldwide. The ECB today injected 94.8 billion euros into the region’s banking market to meet the sudden liquidity demand. The US subprime worries prompted investors to unwind carry trades, driving the yen higher against high-yielding currencies.The euro slumped from 165 to 161.55 versus the yen, while the sterling slid from 244 to test the 239 level. The yen strengthened from 119.75 to as low as 118.20 versus the dollar. As a safe haven currency, the dollar also benefited from anti-risk trades. The euro fell off the 1.38 handle and was supported by the 1.3650 level versus the dollar. The sterling dipped from 2.04 to as low as 2.0212.

Rate Sentiment Drives FX

The dollar was mixed in the Wednesday session amid a dearth of fresh US economic news, climbing higher against the yen but falling sharply versus the sterling. The data release was limited to June wholesale inventories, which was slightly higher than expected at 0.5%, unchanged from the previous month. Interest rate expectations continue to play a key role in the FX market, with the Aussie and sterling regaining its footing on hawkish sentiment from both respective central banks.

Dollar Slipped after FOMC

The Fed kept interest rates at 5.25% unchanged as widely expected. The Fed acknowledged tightening credit conditions and slowing economy, but maintained its bias against inflationary pressure for fear that inflation may not moderate as expected. The dollar fell slightly against the euro and sterling after the post-meeting statement.The euro will face resistance at 1.3750, followed by 1.3780 and 1.38. Additional gains will target 1.3830 and 1.3850. Meanwhile, on the downside the pair will encounter support at 1.3720 followed by 1.37 and 1.3680. Subsequent floors will emerge at 1.3650, backed by 1.3620 and 1.36.

Yahoo’s Search Assist There When you Need It

Search Engine Land takes a close look at Yahoo’s new Yahoo Search Assist tool

. Unlike normal search suggestion tools, Search Assist predicts when you might need a little help with your search and then shows up.
As Danny Sullivan explains…
Ever had one of those moments when you start to type in a query, enter a word and then pause because you’re not quite sure what other words to add to it? Search Assist senses this. It notes that you’ve paused, takes that as a sign you need help and magically makes suggestions appear below the search box. Cool!
In addition, you don’t just get suggestions that contain some of the letters you initially type. Search Assist goes beyond the original word to suggest related topics.

Yahoo Fully Acquires Right Media

After investing in online advertising company Right Media, in October (and getting 20% of the company in the process), Yahoo has now shelled out $680 million to secure the remaining 80%.

In a move that many suspected and most see as an answer to Google’s acquisition of DoubleClick, Yahoo’s acquisition of Right Media will strongly boost the companies online display advertising options.
“The acquisition of Right Media will further Yahoo!’s goal to create the industry’s most open, accessible and vibrant advertising marketplace, which will help democratize the buying and selling of digitally enabled advertising,” said Terry Semel, chairman and CEO of Yahoo!, in a statement. “This acquisition is an important step in our long-term vision to build the industry’s leading advertising and publisher ecosystem. We believe that Yahoo!’s open approach is a clear differentiator from others in the industry and provides significant benefits to advertisers, publishers and Yahoo! itself.”
Before the acquisition, Yahoo’s display advertising had been mostly confined to its own network of properties. With Right Media’s open exchange model, Yahoo will combine its content with many other third-party offerings, providing an expansive network for publishers and advertisers to buy and sell online ad placements in a real time auction system.
Here’s what Yahoo is promising will come from the acquisition:


*Advertisers will have greater inventory and audience options from Yahoo! and other participants in this exchange, as well as increased control and visibility into the buying process.
Publishers will be able to bundle their own ad inventory with Yahoo!’s inventory and the exchange’s inventory - thereby boosting demand and generating the highest returns for each ad placement.
*Advertising networks will reap the same benefits as advertisers and publishers, and additionally, the exchange will benefit those ad networks with unique value propositions, giving them an opportunity to compete with the largest players, thanks to reduced friction and increased transparency.
*For Yahoo!, this more open approach will allow the company to increase liquidity, allow advertisers to more efficiently ascertain the true value of display ad inventory, and generate greater returns for Yahoo!’s own display inventory. It will give Yahoo! a new channel and inventory for excess demand and provide an opportunity to derive more value from non-premium inventory.

The deal is a mixture of stock and cash and is expected to close within 3 months.

Yahoo Buyout Rumors Echoing Loudly

The good news of increased revenue received a splash of cold water as investors also digested Yahoo's drop in earnings for the recent fiscal quarter. Wall Street pummeled the stock overnight, leading to an open of $26.07 that has been largely unchanged through the day after Yahoo's earnings report.
It has reopened talk that the company rests at the cusp of being taken over, with the only questions being how soon and for how much. Microsoft has long been discussed as a new corporate master for the Sunnyvale-based portal.
A Bloomberg report cited analyst Clayton Moran of Stanford Group in discussing the latest wave of rumors that Yahoo will soon find a home within the Microsoft arcology:
"Given a seemingly increasing disconnect between management commentary and operating results, a sale of Yahoo seems more likely," Moran wrote in a note to clients. "In the near-term, we believe this stock will linger in the mid-$20s, unless a suitor arises."
Steve Ballmer and company could make that deal, and plenty of banks would be more than willing to help Microsoft take on some debt to acquire Yahoo. If one can accept Precursor president Scott Cleland's assertion that Yahoo simply cannot make up ground against Google in online advertising, a takeover may be inevitable.