Wednesday, September 24, 2008

Libor dead? Central Banks Rule? Chaos spreads!

This is from Bloomberg, here:

The one-month London interbank offered rate, or Libor, that banks charge each other for loans in dollars jumped 22 basis points to 3.43 percent, the highest level since January, the British Bankers' Association said today. The corresponding euro and pound rates also rose, and yields on Treasury bills tumbled as investors fled all but the shortest-maturity government debt.

Banks are balking at lending to each other on speculation more institutions will fail following the collapse of Lehman Brothers Holdings Inc. and the U.S. government takeover of American International Group Inc. A $700 billion bank rescue plan from Treasury Secretary Henry Paulson has met resistance from Congressional Democrats and Republicans.

``There's no real term funding markets except for central banks,'' said Meyrick Chapman, a fixed-income strategist in London at UBS AG. ``The Libor is meaningless. It's for unsecured lending and there is no unsecured lending as far as I can see.''



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