Bloomberg gives a recap of the some of the credit market reaction in Asia, which is that borrowing has become, not surprisingly, more costly. Rates moved up even in Japan, whose banks are virtually unaffected by the financial crisis (out of a total $1 trillion plus in subprime debt, only an estimated $8 billion went to Japan).
Asian borrowing costs rose, with Japanese and Singapore money market rates reaching the highest in at least eight months, even as central banks pumped in cash to ease lending after U.S. lawmakers rejected a banking rescue.
Japan’s overnight call loan rate rose to 0.6 percent, the highest in more than six weeks, and the three-month interbank offered dollar rate in Singapore jumped 11 basis points, or 0.11 percentage point, to an eight-month high of 3.90 percent as banks hoarded cash. Australian funding costs surged by the most since July.
“Counterparty fear in the banking sector is at a new extreme,” said Greg Gibbs, director of currency strategy at ABN Amro Holdings Bank NV in Sydney. “Credit conditions are as tight as a drum. Unless this settles down, central banks would need to cut rates globally to bring funding costs down.”…
The three-month interbank offered rate in Hong Kong rose by the most in nearly a week to 3.664 percent. The difference between the rate Australian banks charge each other for three- month loans and the overnight indexed swap rate jumped 14 basis points to 98 points, close to a six-month high. The gap has averaged 45 basis points this year.
“This crisis is not driven by corporate defaults but by a systematic failure of the banks themselves,” said Anita Yadav, head of credit and hybrid research at UBS AG in Sydney. “It’s no longer about just paying higher borrowing costs, but also about being able to get the money from the market at all.”