Aug. 9 (Bloomberg) -- The British Bankers Association said the overnight lending rate that banks charge each other to borrow in dollars rose to 5.86 percent today from 5.35 percent. The so-called London interbank offered rate in dollars is the highest since the start of 2001.
The benchmark borrowing rate is rising on concern banks face growing losses on investments linked to U.S. mortgages. The European Central Bank said today it is ``closely monitoring the situation and stands ready to act to assure orderly conditions in the euro money market.'' "Liquidity in the market has completely dried up as investors aren't recycling their money back because of subprime concerns,'' said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. ``Levels have shot up dramatically since yesterday as issuers are trying to entice investors back.''
Bank of America Corp. and UBS AG said their overnight borrowing costs rose 65 basis points to 6.00 percentage points. Royal Bank of Canada said its costs rose to 6.00 percentage points from 5.37 percentage points. Barclays also said it needs to pay 6.00 percentage points to borrow overnight in dollars, up from 5.38 percentage points yesterday. For Bank of America, the increase in overnight borrowing costs was the biggest since the Federal Open Markets Committee raised interest rates at the end of June 2004.
BNP Paribas SA, France's biggest bank, today halted withdrawals from three investment funds because it couldn't ``fairly'' value their holdings on concern about subprime mortgage losses. The ECB in Frankfurt said in its statement today that ``there are tensions in the euro money market notwithstanding the normal supply of aggregate euro liquidity.'' Three-month dollar Libor increased to 5.5 percent from 5.38 percent
The only time our FED ever did that was the day after 9/11!!! Futures down hard this morning on the above news. CNBC again had a trader calling for an immediate rate cut.