The actions announced by five central banks two days ago continue to leave the money markets unpersuaded. From Bloomberg:
The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success.
The rates banks charge each other for three-month loans held at seven-year highs for a second day after policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed to ease the logjam in short-term credit markets. The cost of borrowing in euros stayed at 4.95 percent, the British Bankers’ Association said today, up from last month’s low of 4.57 percent and 3.68 percent a year ago.
“The market clearly doesn’t believe central banks can do anything about this crisis,” said Nathalie Fillet, senior interest-rate strategist at BNP Paribas SA in London. “This is not going to be a magical solution to the problem.”……
The cost of borrowing for three months in dollars fell 2 basis points to 4.97 percent, the BBA said today. That’s 72 basis points higher than the Federal Reserve’s target rate, up from an average of 11 basis points in the first half of the year and 16 basis points at the end of October.
The rate for pounds dropped 1 basis point to 6.5 percent, 100 basis points higher than the Bank of England’s benchmark interest rate. The spread averaged 34 basis points more than the central bank’s key interest in the first half and is up from 53 basis points at the end of October.
Stocks fell, with the Standard and Poor’s 500 Index declining 0.4 percent. The so-called TED spread, the difference between the amount the government and banks charge for three- month loans, was at 2.1 percentage points, up from 0.35 percentage point at the start of the year, signaling increased reluctance among banks to lend.