Even though much has been made of itty bitty falls in Libor from very elevated levels, leaving Libor still at very elevated levels, we have a sign that the massive efforts of commercial banks to lubricate the money markets is finally having an effect. 30 day commercial paper rates eased meaningfully, although they still remain high.
Note that 30 to 90 day CP are the most popular tenors; we need to see more improvement at the 30 day and longer maturities before we declare victory, but this is a move in the right direction.
Rates for one-month commercial paper fell to a three-week low after central banks joined forces to pump cash into money markets and government backed loans.
Average yields offered on the highest-rated commercial paper placed by dealers and due in 30 days fell 0.48 percentage point today to 3.45 percent, according to data compiled by Bloomberg. Rates fell 0.83 percentage point this week to the lowest since Sept. 26 from a nine-month high of 4.28 percent.
“The infusion of capital by the government into the banking system should improve balance sheet health greatly and gradually, make unsecured lenders more comfortable,” Barclays Plc analysts Piyush Goyal and Kurush Mistry said yesterday in a report.