Interbank Lending Rates Fall

123jump.com Staff
03 Nov, 2008
New York City

Interbank lending though tight, loan rates are on the decline for euro and dollar loans. The Libor rate for dollar loans declined to 2.86% and for euro loans fell to 4.74%.

[R]9:20 a.m. New York – Interbank lending rates decline as liquidity and market confidence rebounds for now.[/R]

Interbank lending rates appear to be on the decline as banks are willing to lend more to each other. After a series of monetary stimulus provided by the governments of the U.S, Europe, Japan, China and India, liquidity appears to be on the rise.

The London interbank offered rate between banks dropped 17 basis points to 2.86% for the 90 day U.S. dollar loans. The 3-month loan rate for euros dropped 3 basis points to 4.74% according to the latest data from British Banker’s Association in London.

The interbank lending remains tight but spreads between Libor rates and the U.S. Treasury had shot up to nearly 475 basis points at the height of the financial crisis when Lehman Brothers declared bankruptcy.

Commercial paper market where corporation seek short term funding in the U.S., the loan rates have been on the decline as the Fed offered nearly $170 billion in direct loans to corporations. The Fed also lowered the rates to five-year low to 1%.

In addition, China and Japan lowered rates and India lowered rates for the second time last week. ECB and Bank of England are likely to lower their key lending rates this week.
Australia is expected to lower the rate tomorrow.

Asian Markets Review

Hang Seng index in Hong Kong increased 375.70 or 2.69% closed to 14,344.37. CSI 300 index in China lower 10.12 or 0.61% closed to 1,653.54. ASX 200 index in Australia increased 203.50 or 5.06% to close 4,221.50. The KL Composite index in Malaysia closed higher 35.74 or 4.14% closed to 899.35. Markets in Tokyo were closed today.

The Kospi Index in South Korea increased 16.02 or 1.44% to close at 1,129.08. SET index in Thailand closed higher 32.66 or 7.84% to 449.19 and JSE Index in Indonesia increased 96.01 or 7.64% to 1,352.72. The Sensex index in India increased 549.62 or 5.62% closed to 10,337.68.

Europe Markets Review

In London FTSE 100 Index traded higher 33.31 or 0.76% to 4,410.65, in Paris CAC 40 Index increased 7.13 or 0.20% to 3,494.20 and in Frankfurt DAX index traded higher 30.67 or 0.61% to 5,018.64. In Zurich trading SMI increased 23.25 or 0.38% to 6176.46.