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Euribor Stays at 7-Year High, Defying Central Banks (Update1)
By Gavin Finch
Dec. 13 (Bloomberg) -- Interest rates on loans in euros stayed at a seven-year high, a day after global central banks teamed up in an attempt to thaw a freeze in money markets.
The three-month borrowing cost was at 4.95 percent, its highest level since December 2000, according to prices from the European Banking Federation today. That's 95 basis points more than the European Central Bank's benchmark interest rate and up from 4.18 percent at the start of July, before losses related to subprime mortgages contaminated money markets.
Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed to the first coordinated action since the Sept. 11, 2001, terrorist attacks. The Federal Reserve said it will make $24 billion available to increase the supply of dollars into Europe. Banks have reported more than $66 billion in losses linked to U.S. subprime mortgages this year.
``It's not going to help us find an exit to this crisis,'' said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. ``These measures aren't going to address the root cause of the crisis. Banks are still reluctant to lend money to each other because there are serious concerns about potential further bad news.''
The euro levels suggest that money-market rates for the dollar and pound, which will be set by the British Bankers' Association later, won't decline.
``It's a very disturbing sign,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. ``I'm alarmed by the impact this is having, which underscores that the funding difficulties out there are enormous.''
Emergency Auctions
The U.S. central bank also plans four auctions that will add as much as $40 billion. The Bank of England said it would widen the range of collateral it will accept on three-month loans.
U.K. Prime Minister Gordon Brown said the surge in credit costs should spur increased transparency in the banking industry and change the way credit-rating companies work.
``It's a wake-up call for the global economy,'' Brown told lawmakers in Parliament in London today. ``The existing institutions aren't good enough. I'm going to make it my business to reform those institutions.''
The one-week rate for euros was also unchanged, at 4.13 percent, the EBF said today.
Euribor rates are based on a 360-day counting method for the year. The EBF represents the interests of 4,500 banks in 24 member states of the European Union and in Iceland, Norway and Switzerland.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: December 13, 2007 06:36 EST
By Gavin Finch
Dec. 13 (Bloomberg) -- Interest rates on loans in euros stayed at a seven-year high, a day after global central banks teamed up in an attempt to thaw a freeze in money markets.
The three-month borrowing cost was at 4.95 percent, its highest level since December 2000, according to prices from the European Banking Federation today. That's 95 basis points more than the European Central Bank's benchmark interest rate and up from 4.18 percent at the start of July, before losses related to subprime mortgages contaminated money markets.
Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed to the first coordinated action since the Sept. 11, 2001, terrorist attacks. The Federal Reserve said it will make $24 billion available to increase the supply of dollars into Europe. Banks have reported more than $66 billion in losses linked to U.S. subprime mortgages this year.
``It's not going to help us find an exit to this crisis,'' said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. ``These measures aren't going to address the root cause of the crisis. Banks are still reluctant to lend money to each other because there are serious concerns about potential further bad news.''
The euro levels suggest that money-market rates for the dollar and pound, which will be set by the British Bankers' Association later, won't decline.
``It's a very disturbing sign,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. ``I'm alarmed by the impact this is having, which underscores that the funding difficulties out there are enormous.''
Emergency Auctions
The U.S. central bank also plans four auctions that will add as much as $40 billion. The Bank of England said it would widen the range of collateral it will accept on three-month loans.
U.K. Prime Minister Gordon Brown said the surge in credit costs should spur increased transparency in the banking industry and change the way credit-rating companies work.
``It's a wake-up call for the global economy,'' Brown told lawmakers in Parliament in London today. ``The existing institutions aren't good enough. I'm going to make it my business to reform those institutions.''
The one-week rate for euros was also unchanged, at 4.13 percent, the EBF said today.
Euribor rates are based on a 360-day counting method for the year. The EBF represents the interests of 4,500 banks in 24 member states of the European Union and in Iceland, Norway and Switzerland.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
Last Updated: December 13, 2007 06:36 EST
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