British bank Barclays is close to selling its Barclays Global Investors (BGI) asset management unit to US money manager BlackRock, the Financial Times said on Friday.

The deal would be worth more than US$10 billion, but talks could still halt because Barclays had asked at least US$12 billion, the FT said on its website, and a compromise could still take days to be hammered out.

Bob Diamond, president of Barclays and head of BGI, plans to join BlackRock’s board if the money management group reaches agreement to buy Barclays Global Investors, the Financial Times said.

Mr Diamond could stay at Barclays and join BlackRock as a non-executive director, the newspaper said.

‘Barclays is still in talks with a couple of interested parties on BGI and iShares,’ a person familiar with the situation told Reuters, asking not to be named.

Barclays declined to comment on the story. BlackRock also declined to comment, citing a company policy not to comment on rumours or speculation.

Bank of New York Mellon has also been mentioned as a bidder for BGI, widely regarded as a jewel in crown.

A sale of the San Francisco-based unit would sideline private equity houses, which were bidding for iShares, the exchange-traded fund unit that forms part of BGI.

Barclays decided to sell iShares to buy-out house CVC for 3 billion pounds (US$4.81 billion) in April, but a ‘go shop’ clause allows it to seek higher offers until June 18.

CVC has the right to match any rival bids for iShares - or all of BGI - and gets a US$175 million break fee if it is left out of the deal. Bankers have said it could team up with a bigger group to buy all of BGI.

Barclays will retain a 20 per cent stake in iShares if it sells it separately, and a deal for all of BGI may well be structured similarly, giving it exposure to future gains.

Barclays would be willing to sell BGI if offers approach US$12 billion, bankers told Reuters last month.

Private equity firm BC Partners stopped working on its bid for iShares after Barclays seemed to want to sell all of BGI, sources told Reuters last month.

Analysts say iShares, a clear leader in both US and European markets, has strong growth potential. It saw record net inflows of US$89 billion last year.

Credit Market Says: Don’t Buy Stocks Yet! Part I

Since July 15 when U.S. markets hit another intermittent low amid the ongoing credit crisis, the Dow Jones Industrials Average (Dow) has gained 7.2%.

But over the same period the most important credit indices have posted declines while others have logged marginal gains. Overall, the broad trend in credit has not been bullish since mid-July. This tells me that stocks are luring more investors into another bear market trap.

Since the onset of the credit squeeze last August, stocks have staged two bear market rallies - the first last September and another one in late March. Both rallies ended badly for investors.

The last bear market rally following the Bear Stearns Cos. bailout was actually supported by a broad-based decline in riskier credits. But that 10% gain for stocks from late March through late May also proved dangerous. In June, the S&P 500 Index plunged more than 8%. In fact, that was the worst June for the S&P 500 since 1930.

Nevertheless, it’s important to gauge what credit indicators are telling us now so we can at least feel more confident dipping our toes back into the stock market.

Lending rates, as defined by LIBOR, which sets the standard for over US$1.5 trillion worth of global funding remains elevated. It’s still 80 basis points above the Federal Funds target rate.

The same is true in Europe where EURIBOR sits at 4.96%. That’s significantly above the European Central Bank’s (ECB’s) base rate of 4.25%.

These lending rates have not eased since June and continue to paint a bad picture for global cross-border lending or the lack of inter-bank liquidity. Central banks, despite pumping the credit markets with hundreds of billions of dollars or euro since last summer, still can’t ease LIBOR or EURIBOR.

LIBOR remains my greatest concern followed by mortgage rates.

Tune in tomorrow and I’ll show you exactly how the credit markets reacted to this past week’s stock market rally.