Hong Kong and Tokyo three-month interbank rates rise to the highest levels in over nine months
4 October 2008
ASIAN banks’ borrowing costs rose to the highest levels in at least nine months after the collapse of lenders in the US and Europe deepened a global credit freeze.
Hong Kong’s three-month interbank rate this week jumped 41 basis points, or 0.41 percentage point, to 3.81 per cent, and Tokyo’s increased one basis point to 0.87 per cent - both the highest since December. The London interbank offered rate for Australian dollars headed for a fourth weekly increase.
‘The interbank lending market remains clogged up as banks hoard cash,’ said Joshua Williamson, a senior strategist at TD Securities in Sydney. ‘Funding pressures look likely to remain high and the longer they stay up there the greater the chance banks will pass on those costs to clients.’
Credit markets have frozen, driving rates higher, as banks including Lehman Brothers Holdings Inc and the UK’s Bradford & Bingley plc failed. Central banks pumped an unprecedented US$1 trillion into the global financial system to ease the turmoil, which has prompted businesses including Australian iron-ore miner Fortescue Metals Group Ltd and PGG Wrightson Ltd, New Zealand’s largest agricultural services provider, to scale back or review expansion plans.
Singapore’s rate for three- month US dollar loans rose 49 basis points to 4.27 per cent, the most expensive since Jan 11.
Interbank loans of three months or more remain scarce even after the US Senate voted by 74 to 25 to approve an amended bank rescue Bill that would give the US Treasury as much as US$700 billion to buy distressed debt from financial companies. The House of Representatives on Sept 29 rejected an earlier version of the legislation by 228 to 205 votes and was due to take action on the version passed by the Senate on Friday.
Fortescue Metals, seeking to become Australia’s third-largest iron ore producer, said on Thursday that funding for the second stage of a A$7 billion (S$7.9 billion) expansion is ‘uncertain’ because of turmoil in debt and equity markets. PGG Wrightson on Oct 1 delayed its NZ$220 million (S$211 million) purchase of a 50 per cent stake in Silver Fern Farms Ltd.
Australia and Japan’s central banks added US$8.8 billion to the financial system yesterday. The Bank of Japan pumped 800 billion yen (S$11.1 billion) into money markets and the Reserve Bank of Australia added A$1.57 billion.
‘The Bank of Japan will have to continue injecting money into the market,’ said Yuuki Sakurai, who oversees US$54 billion as general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co. ‘A lot of investors are avoiding foreign banks at the moment.’ A shortage of dollars forced foreign banks to pay 0.73 per cent for overnight loans in yen, versus 0.44 per cent paid by local lenders, according to money broker Tokyo Tanshi Co. The premium reached 42 points on Sept 24, the widest since May 2004.
The London interbank offered rate, or Libor, used to set rates on US$393 trillion of financial products worldwide in 2007, rose on Thursday to 4.21 per cent, the highest since Jan 11, according to the British Bankers’ Association. Australian-dollar Libor was 7.79 per cent on Thursday, up from 7.71 per cent at the end of last week.
The Hong Kong Monetary Authority failed to hold down loan rates this week after saying on Sept 30 that it will accept more securities in repurchase transactions and provide banks with additional funds through the three-month repurchase window.
Three-month Hibor yesterday exceeded the high set last week after a run on Bank of East Asia Ltd, Hong Kong’s third-largest lender. Hang Seng Bank, the second-biggest, said on Thursday that it has ‘exposure’ to debt issued by Washington Mutual Inc, the largest bank to fail in US history.
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Asian Money Rates Surge on Credit Concerns
Hong Kong and Tokyo three-month interbank rates rise to the highest levels in over nine months
4 October 2008
ASIAN banks’ borrowing costs rose to the highest levels in at least nine months after the collapse of lenders in the US and Europe deepened a global credit freeze.
Hong Kong’s three-month interbank rate this week jumped 41 basis points, or 0.41 percentage point, to 3.81 per cent, and Tokyo’s increased one basis point to 0.87 per cent - both the highest since December. The London interbank offered rate for Australian dollars headed for a fourth weekly increase.
‘The interbank lending market remains clogged up as banks hoard cash,’ said Joshua Williamson, a senior strategist at TD Securities in Sydney. ‘Funding pressures look likely to remain high and the longer they stay up there the greater the chance banks will pass on those costs to clients.’
Credit markets have frozen, driving rates higher, as banks including Lehman Brothers Holdings Inc and the UK’s Bradford & Bingley plc failed. Central banks pumped an unprecedented US$1 trillion into the global financial system to ease the turmoil, which has prompted businesses including Australian iron-ore miner Fortescue Metals Group Ltd and PGG Wrightson Ltd, New Zealand’s largest agricultural services provider, to scale back or review expansion plans.
Singapore’s rate for three- month US dollar loans rose 49 basis points to 4.27 per cent, the most expensive since Jan 11.
Interbank loans of three months or more remain scarce even after the US Senate voted by 74 to 25 to approve an amended bank rescue Bill that would give the US Treasury as much as US$700 billion to buy distressed debt from financial companies. The House of Representatives on Sept 29 rejected an earlier version of the legislation by 228 to 205 votes and was due to take action on the version passed by the Senate on Friday.
Fortescue Metals, seeking to become Australia’s third-largest iron ore producer, said on Thursday that funding for the second stage of a A$7 billion (S$7.9 billion) expansion is ‘uncertain’ because of turmoil in debt and equity markets. PGG Wrightson on Oct 1 delayed its NZ$220 million (S$211 million) purchase of a 50 per cent stake in Silver Fern Farms Ltd.
Australia and Japan’s central banks added US$8.8 billion to the financial system yesterday. The Bank of Japan pumped 800 billion yen (S$11.1 billion) into money markets and the Reserve Bank of Australia added A$1.57 billion.
‘The Bank of Japan will have to continue injecting money into the market,’ said Yuuki Sakurai, who oversees US$54 billion as general manager of financial and investment planning in Tokyo at Fukoku Mutual Life Insurance Co. ‘A lot of investors are avoiding foreign banks at the moment.’ A shortage of dollars forced foreign banks to pay 0.73 per cent for overnight loans in yen, versus 0.44 per cent paid by local lenders, according to money broker Tokyo Tanshi Co. The premium reached 42 points on Sept 24, the widest since May 2004.
The London interbank offered rate, or Libor, used to set rates on US$393 trillion of financial products worldwide in 2007, rose on Thursday to 4.21 per cent, the highest since Jan 11, according to the British Bankers’ Association. Australian-dollar Libor was 7.79 per cent on Thursday, up from 7.71 per cent at the end of last week.
The Hong Kong Monetary Authority failed to hold down loan rates this week after saying on Sept 30 that it will accept more securities in repurchase transactions and provide banks with additional funds through the three-month repurchase window.
Three-month Hibor yesterday exceeded the high set last week after a run on Bank of East Asia Ltd, Hong Kong’s third-largest lender. Hang Seng Bank, the second-biggest, said on Thursday that it has ‘exposure’ to debt issued by Washington Mutual Inc, the largest bank to fail in US history.
Bloomberg
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