Credit markets are easing again

Credit markets continue to return to less extreme levels. While we are nowhere near where we were before the onset of the Lehman-induced panic, we are well off the panic levels of the worst of the crisis.

The Times of London is reporting that Libor rates in Dollars, Sterling and Euros are all coming down as the coordinated efforts of monetary authorities around the world are having their effect.

The interbank cost of borrowing dollars has continued to fall today, indicating that the pressure on the money markets may be easing.

The three-month Libor rate for interbank borrowing in dollars has fallen 0.225 per cent today to 3.83375 per cent. This follows a fall of 0.36 per cent yesterday, the sharpest one-day drop for nine months. The overnight dollar rate was down 0.23125 per cent, to 1.28125 per cent.

Three-month sterling Libor, the measure used to price mortgages, eased slightly by 0.03125 per cent to to 6.085, though this remains well above the UK base interest rate of 4.75 per cent. After rising slightly yesterday, the overnight sterling rate was down again today, at 4.75 per cent.

The cost of borrowing euros also dropped back. The three-month rate slipped 0.0275 per cent to 4.95875 per cent, and the overnight rate was 3.555 per cent. Stock markets were reassured by words from Ben Bernanke, chairman of the U.S. Federal Reserve.

Libor dollar rate continues to slide, London Times

Note the massive decline in the TED Spread in the chart below from Bloomberg:

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