Asian money-market rates rose

Asian money-market rates rose as the deepening global recession undermines banks’ willingness to lend, prompting central banks to extend interest rate cuts. The Tokyo three-month interbank offered rate, or Tibor, climbed to a 10-year high and Hong Kong’s Hibor jumped the most since Oct. 28. The Reserve Bank of Australia slashed borrowing costs today to the lowest level since 2002, adding to the biggest round of cuts since 1991. The Bank of Japan started an emergency board meeting in Tokyo at 1 p.m. to consider ways to help companies obtain funds. “The major thing is that banks are still not willing to lend especially toward year-end due to counter-party risk,” said Frances Cheung, a fixed-income strategist at Standard Chartered Plc in Hong Kong. “An equities sell-off in the region means risk appetite is quite low and that will drive up interbank rates.” Credit markets seized up after the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, spurring governments and central banks around the world to bail out financial institutions and pump cash into money markets. The MSCI Asia-Pacific Index of regional shares tumbled 3.8 percent after the Standard & Poor’s 500 Index sank 8.9 percent yesterday. Bank of Japan Asian money-market rates rose this week as banks hoard cash on concern a global economic slowdown will make it harder for companies to repay debt. Three-month Tibor rose one basis point to 0.89 percent at 11:50 a.m. in Tokyo, advancing for a 17th day, the longest stretch of gains since July 2007. The benchmark is back above the level it reached before the BOJ cut its overnight lending rate to 0.3 percent from 0.5 percent on Oct. 31. Three-month Hibor rose 10 basis points to 2.14 percent, a two-week high. The similar rate for U.S. dollar loans in Singapore, Sibor, fell one basis point to 2.23 percent. “Money-market pressures are increasing and more pressure is likely ahead of the year-end,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients. “There continues to be a shortage of dollars and yen.” BOJ Governor Masaaki Shirakawa said yesterday that companies’ access to funding is deteriorating “at an accelerating pace” and likened an increase in borrowing costs to the country’s credit crunch 10 years ago. No Country Immune Gains in Tibor after the BOJ rate cut “underline how no country is immune from the increase in economic uncertainty and risk aversion -- even one that has largely avoided the financial excesses in the West,” analysts at Capital Economics wrote in a note to clients. RBA Governor Glenn Stevens lowered the overnight cash-rate target to 4.25 percent from 5.25 percent today, bigger than the 0.75 percentage point median estimate of 21 economists surveyed by Bloomberg News. “Weighing up the international and domestic developments of recent months, the board judged that a further significant reduction in the cash rate was warranted now, to take monetary policy to an expansionary setting,” Stevens said in a statement. Policy makers will also lower interest rates this week to 5 percent from 6.5 percent in New Zealand, to 2 percent from 3 percent in the U.K. and to 2.75 percent from 3.25 percent in the euro region as central banks move to stem the economic slowdown, according to separate Bloomberg surveys. Commercial Paper The cost of borrowing in dollars for one month rose yesterday to the highest level in four weeks as banks held on to cash to strengthen their balance sheets through to next year. The London interbank offered rate, or Libor, which banks charge each other for such loans, climbed one basis point to 1.91 percent, according to the British Bankers’ Association. Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a survey by the BBA before noon each day in London. Interest rates on U.S. commercial paper rose to the highest level in almost a month. Rates on the highest-ranked 30-day CP climbed three basis points to 1.55 percent, or 55 basis points more than the Fed’s target, according to yields offered by companies and compiled by Bloomberg. Yields advanced 75 basis points since Nov. 25, when they were the lowest in at least 12 years. Banks, brokerages and funds are seeking rescues or cutting costs amid almost $1 trillion of writedowns and credit losses since the start of 2007. More than 80 hedge-fund firms liquidated funds, restricted redemptions or segregated assets as credit dried up and stock-market valuations slumped.