Friday, June 19, 2009
NEW YORK: The rates banks charge one another for loans fell again on Thursday, with the three-month lending rate marking a fresh low for a fifth straight session, while short-term lending rates for euros also eased. Ongoing action by central banks world-wide to provide financial institutions with massive short-term liquidity has helped take the pressure off the interbank money markets, allowing rates to drift lower.
Even Standard & Poor's move on Wednesday to cut its credit ratings on 18 US banks failed to stall the downtrend in rates. S&P said increased regulation and market volatility would hurt the already weakened sector. "Central bank support and the prospect for the low yield environment to stay have helped these fixings to come in lower and lower," said Christoph Rieger, rate strategist at Dresdner Kleinwort in Frankfurt.
However, ICAP's New York Funding Rate (NYFR) rose again amid some jitters about potential funding pressures at the end of the first half of the year. The three-month NYFR rose 1.75 basis points to 0.6306 percent versus a 0.125 basis point decline in three-month Libor to 0.60875 percent.
In a further effort to encourage banks to lend money, the European Central Bank is offering 12-month funds for the first time next week at its longer-term refinancing operations and analysts expect money market rates to fall even further.
The three-month Euribor rate, traditionally the main gauge of interbank euro lending, has already dropped to a new all time low of 1.235 percent. The three-month euro London interbank offered rate was set at 1.23438 percent, near the record low of 1.23188 percent on May 19, while the equivalent dollar Libor was fixed at an all-time low of 0.60875 percent.
Analysts and traders said lenders could borrow up to 600 billion euros at next week's ECB 12-month refinancing operation, although many believe a more conservative figure of 200 to 400 billion euros was likely. Given the potential for such a large liquidity inflow, short-term rates such as the Euro Overnight Index Average (Eonia) are likely to fall even further.
Eonia, the weighted average of all overnight unsecured lending in the interbank market, was last set at 0.852 percent and analysts expect in the weeks to come it could retest the low of 0.486 percent seen in May. A gauge of money market stress - the spreads between Libor and the equivalent overnight index swap rate, or expected central bank rates - continued to improve.
The dollar spread contracted to 39 basis points, the narrowest since early 2008, well off the highs of around 360 basis points hit in the aftermath of Lehman's collapse. But it remained above the pre-credit-crisis level of around 10 basis points seen consistently before July 2007.
(Reuters)
NEW YORK: The rates banks charge one another for loans fell again on Thursday, with the three-month lending rate marking a fresh low for a fifth straight session, while short-term lending rates for euros also eased. Ongoing action by central banks world-wide to provide financial institutions with massive short-term liquidity has helped take the pressure off the interbank money markets, allowing rates to drift lower.
Even Standard & Poor's move on Wednesday to cut its credit ratings on 18 US banks failed to stall the downtrend in rates. S&P said increased regulation and market volatility would hurt the already weakened sector. "Central bank support and the prospect for the low yield environment to stay have helped these fixings to come in lower and lower," said Christoph Rieger, rate strategist at Dresdner Kleinwort in Frankfurt.
However, ICAP's New York Funding Rate (NYFR) rose again amid some jitters about potential funding pressures at the end of the first half of the year. The three-month NYFR rose 1.75 basis points to 0.6306 percent versus a 0.125 basis point decline in three-month Libor to 0.60875 percent.
In a further effort to encourage banks to lend money, the European Central Bank is offering 12-month funds for the first time next week at its longer-term refinancing operations and analysts expect money market rates to fall even further.
The three-month Euribor rate, traditionally the main gauge of interbank euro lending, has already dropped to a new all time low of 1.235 percent. The three-month euro London interbank offered rate was set at 1.23438 percent, near the record low of 1.23188 percent on May 19, while the equivalent dollar Libor was fixed at an all-time low of 0.60875 percent.
Analysts and traders said lenders could borrow up to 600 billion euros at next week's ECB 12-month refinancing operation, although many believe a more conservative figure of 200 to 400 billion euros was likely. Given the potential for such a large liquidity inflow, short-term rates such as the Euro Overnight Index Average (Eonia) are likely to fall even further.
Eonia, the weighted average of all overnight unsecured lending in the interbank market, was last set at 0.852 percent and analysts expect in the weeks to come it could retest the low of 0.486 percent seen in May. A gauge of money market stress - the spreads between Libor and the equivalent overnight index swap rate, or expected central bank rates - continued to improve.
The dollar spread contracted to 39 basis points, the narrowest since early 2008, well off the highs of around 360 basis points hit in the aftermath of Lehman's collapse. But it remained above the pre-credit-crisis level of around 10 basis points seen consistently before July 2007.
(Reuters)
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