Money rates rise in Asia as world recession looms
Saturday, 1 November 2008
David Yong and Candice Zachariahs
Money-market rates in Asia advanced for a second day as concern the credit crisis has dragged the global economy into a recession overshadowed efforts by policy makers to revive lending.
Hong Kong's three-month interbank lending rate, or Hibor, increased 10 basis points to 3.84 per cent, the highest since Oct. 17, as the city's chief executive announced a task force to handle fallout from the global crisis. South Korea's one-year cross-currency swap was little changed, showing a $130 billion bank rescue package and a record interest-rate cut haven't eased a shortage of U.S. dollars.
"The dollar funding problem is still out there with some breakdown in the lending that greases the economy,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. "It's hard to tackle this as we are facing a banking crisis, recession, oil and stock slump and emerging-market defaults, all rolled into one year.''
Asian stocks and currencies tumbled as Hong Kong's Bank of East Asia Ltd. yesterday reported losses from toxic debt holdings and Kuwait's Gulf Bank KSC suffered a run following derivative losses. Credit markets froze after the collapse of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks worldwide to pledge trillions of dollars to bail out banks and resuscitate lending.
Hong Kong Chief Executive Donald Tsang said Stephen Roach, chairman of Morgan Stanley Asia Ltd., will be part of a group set up to cope with global financial turmoil. Tsang will chair the group along Financial Secretary John Tsang, Hong Kong's CEO told reporters today.
"Hong Kong is amplified with the problems you have with global growth because the economy is so open and reliant on what's going on in the equity markets,'' said Sebastien Barbe, a Hong Kong-based strategist at Calyon. "It's risk aversion, people are not lending to each other.''
Korean banks were asking 0.485 per cent to swap won loans for dollars as of 1:20 p.m. in Seoul, versus 0.475 per cent yesterday. The rate, a measure of the availability of dollar funding, averaged 3.3 per cent this year before Lehman Brothers filed for bankruptcy.
The benchmark 91-day certificate of deposit rate was unchanged today at 6.04 per cent, even after the Bank of Korea cut its seven-day repurchase rate to 4.25 per cent from 5 per cent. The difference between what banks pay to borrow from each other and the Bank of Korea benchmark rate widened to 179 basis points this week, tripling since the start of the month.
The Reserve Bank of Australia pumped A$2.7 billion ($1.6 billion) into money markets as financing costs advanced for the fifth day in six.
The rate Australia's banks charge each other for three-month loans rose 2 basis points to 5.82 per cent as of 3:28 p.m. in Sydney. The difference between that yield and the overnight indexed swap rate, a measure of funding availability, climbed 2 basis points to 86 points, the highest since Oct. 15. The gap, which peaked at 108 basis points on Oct. 10, averaged 6 basis points in the first half of 2007.
The Tokyo interbank offered rate for three-month loans advanced for a third day, reaching 0.888 per cent, the highest since March 1998.
Singapore's three-month interbank rate for U.S. dollar loans fell 4 basis points to 3.48 per cent, its 10th straight decline since reaching 4.8 per cent on Oct. 13, the highest this year.
The London interbank offered rate, or Libor, the benchmark for $393 trillion of financial contracts in 2007, fell less than 1 basis point yesterday to 3.51 per cent for three-month loans, the British Bankers' Association said.
The Libor-OIS spread, a measure of cash scarcity, widened 1 basis point to 262 basis points yesterday. It was at 87 points before Lehman filed for bankruptcy protection.
The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, was at 266 basis points, compared with 114 basis points two months ago.
Libor is set by a panel of banks in a daily survey by the British Bankers' Association by noon in London. Members provide estimates on how much it would cost to borrow in 10 currencies for terms ranging from one day to a year.
Yields on U.S. commercial paper climbed as the Federal Reserve began its program of buying the debt directly from companies, part of the central bank's efforts to unfreeze credit markets.
Rates on the highest-ranked 30-day commercial paper jumped 25 basis points to 2.88 per cent, according to yields offered by companies and compiled by Bloomberg. Rates on paper due in 90 days rose to 3.34 per cent, compared with the 2.88 per cent rate demanded by the Fed, including an unsecured credit surcharge.
The U.S. economy shrank at an annual rate of 0.5 per cent in the third quarter, the biggest decline since the 2001 recession, according to a Bloomberg News survey before a Commerce Department report on Oct. 30.
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Bloomberg
Money-market rates in Asia advanced for a second day as concern the credit crisis has dragged the global economy into a recession overshadowed efforts by policy makers to revive lending.
Hong Kong's three-month interbank lending rate, or Hibor, increased 10 basis points to 3.84 per cent, the highest since Oct. 17, as the city's chief executive announced a task force to handle fallout from the global crisis. South Korea's one-year cross-currency swap was little changed, showing a $130 billion bank rescue package and a record interest-rate cut haven't eased a shortage of U.S. dollars.
"The dollar funding problem is still out there with some breakdown in the lending that greases the economy,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. "It's hard to tackle this as we are facing a banking crisis, recession, oil and stock slump and emerging-market defaults, all rolled into one year.''
Asian stocks and currencies tumbled as Hong Kong's Bank of East Asia Ltd. yesterday reported losses from toxic debt holdings and Kuwait's Gulf Bank KSC suffered a run following derivative losses. Credit markets froze after the collapse of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks worldwide to pledge trillions of dollars to bail out banks and resuscitate lending.
Hong Kong Chief Executive Donald Tsang said Stephen Roach, chairman of Morgan Stanley Asia Ltd., will be part of a group set up to cope with global financial turmoil. Tsang will chair the group along Financial Secretary John Tsang, Hong Kong's CEO told reporters today.
"Hong Kong is amplified with the problems you have with global growth because the economy is so open and reliant on what's going on in the equity markets,'' said Sebastien Barbe, a Hong Kong-based strategist at Calyon. "It's risk aversion, people are not lending to each other.''
Korean banks were asking 0.485 per cent to swap won loans for dollars as of 1:20 p.m. in Seoul, versus 0.475 per cent yesterday. The rate, a measure of the availability of dollar funding, averaged 3.3 per cent this year before Lehman Brothers filed for bankruptcy.
The benchmark 91-day certificate of deposit rate was unchanged today at 6.04 per cent, even after the Bank of Korea cut its seven-day repurchase rate to 4.25 per cent from 5 per cent. The difference between what banks pay to borrow from each other and the Bank of Korea benchmark rate widened to 179 basis points this week, tripling since the start of the month.
The Reserve Bank of Australia pumped A$2.7 billion ($1.6 billion) into money markets as financing costs advanced for the fifth day in six.
The rate Australia's banks charge each other for three-month loans rose 2 basis points to 5.82 per cent as of 3:28 p.m. in Sydney. The difference between that yield and the overnight indexed swap rate, a measure of funding availability, climbed 2 basis points to 86 points, the highest since Oct. 15. The gap, which peaked at 108 basis points on Oct. 10, averaged 6 basis points in the first half of 2007.
The Tokyo interbank offered rate for three-month loans advanced for a third day, reaching 0.888 per cent, the highest since March 1998.
Singapore's three-month interbank rate for U.S. dollar loans fell 4 basis points to 3.48 per cent, its 10th straight decline since reaching 4.8 per cent on Oct. 13, the highest this year.
The London interbank offered rate, or Libor, the benchmark for $393 trillion of financial contracts in 2007, fell less than 1 basis point yesterday to 3.51 per cent for three-month loans, the British Bankers' Association said.
The Libor-OIS spread, a measure of cash scarcity, widened 1 basis point to 262 basis points yesterday. It was at 87 points before Lehman filed for bankruptcy protection.
The difference between what banks and the U.S. Treasury pay to borrow for three months, the so-called TED spread, was at 266 basis points, compared with 114 basis points two months ago.
Libor is set by a panel of banks in a daily survey by the British Bankers' Association by noon in London. Members provide estimates on how much it would cost to borrow in 10 currencies for terms ranging from one day to a year.
Yields on U.S. commercial paper climbed as the Federal Reserve began its program of buying the debt directly from companies, part of the central bank's efforts to unfreeze credit markets.
Rates on the highest-ranked 30-day commercial paper jumped 25 basis points to 2.88 per cent, according to yields offered by companies and compiled by Bloomberg. Rates on paper due in 90 days rose to 3.34 per cent, compared with the 2.88 per cent rate demanded by the Fed, including an unsecured credit surcharge.
The U.S. economy shrank at an annual rate of 0.5 per cent in the third quarter, the biggest decline since the 2001 recession, according to a Bloomberg News survey before a Commerce Department report on Oct. 30.
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Bloomberg