Money Market Borrowing Costs Soar

[Hissyspit]

Source: Reuters

Money market borrowing costs soar

By Jamie McGeever and Kirsten Donovan
8 minutes ago
LONDON (Reuters) - The cost of borrowing overnight dollars on global money markets soared on Tuesday despite central banks pumping billions into the banking system to prevent it seizing up further after U.S. lawmakers' rejection of a $700 billion financial rescue bill panicked markets.

The scramble for cash as banks sought to square their books over the end of the quarter saw the European Central Bank lend $30 billion dollars overnight at a huge rate of 11 percent -- more than five times the Federal Reserve's 2 percent target rate -- and call for bids for an additional $50 billion. Meanwhile, the London interbank offered rate (Libor) for overnight dollars jumped by a record 430 basis points to 6.87 percent, the highest in at least 7-1/2 years.

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But in part buoyed by the Irish government's decision to guarantee all bank deposits and speculation central banks could cut interest rates in concert soon, a collapse of European equities failed to materialize.

European shares erased initial losses to trade largely flat on the day (.FTEU3) (.FTSE) and U.S. stock futures pointed to a higher opening on Wall Street. "Money markets are more of a problem than stock markets. Perceived counterparty credit risk ... probably won't go away for a while," said Everett Brown, strategist at IDEAGlobal.

Read more: http://news.yahoo.com/s/nm/20080930/bs_nm/us_financial_centralbanks

[ixion]

1. hell, these same banks charges credit card holders as much as 30 percent

so it seems like they're still looking at a pretty good deal.

How's it feel, distressed banks, to have to borrow money at a high rate? Consumers deal with this on a daily basis. So now it's your turn. Welcome to our world, as the saying goes.

[Name removed]

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[whistle]

2. That will cause a drain of capital out of U.S. because capital goes where it can get the highest

...return