Strains drive Australian bank rates to 13-year high

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SYDNEY, Mar 10 (Reuters): Global credit strains took a heavy toll on Australian money markets Monday, driving interbank rates to their highest in 13 years as banks hoarded cash even as desperate borrowers scrambled for more funds.
The credit stress spilled over from the United States last week where the Federal Reserve was forced to promise billions of extra dollars to ease a logjam in the markets which had seen intense pressure on some hedge funds and mortgage lenders.
"The economic downside has increased quite a bit," said Peter Jolly, head of research at National Australia Bank. "The credit markets seem to be telling us that not all is well in the economy and the financial system."
On Monday, Carlyle Capital Corp, an affiliate of private equity firm Carlyle Group, said it was still in talks with lenders on funding its $21.7 billion bond portfolio.
Last week the bond fund said its banks had made margin calls it could not meet and warned of a cash shortage.
In Australia, the strains were showing in the interbank market where banks were hoarding cash, driving three-month bank bill futures as high as 8.15 per cent. That was up from 8 per cent Friday and almost 90 basis points higher than the central bank's overnight cash rate of 7.25 per cent.
In Japan, JGB futures vaulted to a 2-1/2-year high, with traders saying hedge funds were getting caught on the jump in London Inter-bank Offered Rate (LIBOR).
The jump in Australian bill rates came even as three-year and 10-year government bonds rallied after investors sought refuge in less riskier sovereign debt, spooked by gloomy US jobs data which stoked fears of a recession in the world's largest economy.