21 Sep 2008
The cost of borrowing in dollars overnight tumbled after central banks worldwide pumped $247 billion into money markets. The three-month rate rose for a third day, to the highest since January, signaling that banks are still wary of more failures among financial institutions after Lehman Brothers Holdings Inc.
collapsed and the U.S. government took control of American International Group Inc."The only thing you can say about today's intervention is that the overnight rate is now better,'' said Jan Misch, a money-market trader in Stuttgart at Landesbank Baden- Wuerttemberg, Germany's biggest state-owned bank.
"There's still a complete lack of confidence in the market though. There is enough cash out there, it's just not being lent out because people have lost faith in each other.'' The Federal Reserve, the European Central Bank and the Bank of Japan joined with counterparts in Switzerland, the U.K. and Canada to inject cash into the money markets in a coordinated bid to ease the worst financial-market crisis since the 1920s.
The London interbank offered rate, or Libor, for overnight loans fell 1.19 percentage points to 3.84 percent today, according to the British Bankers' Association. It dropped 1.41 percentage points yesterday after jumping 3.33 points the day before. The three-month rate, which rose yesterday the most since 1999, climbed a further 14 basis points to 3.20 percent today, according to BBA data. Working Together The Fed said on its Web site that it authorized other central banks to auction the dollar funds to financial institutions. A joint release said that the Bank of England, the Bank of Canada and the Swiss National Bank also participated. The ECB, Bank of England and Swiss National Bank allotted a combined $64 billion for one day today
