The cost of inter-bank borrowing surged once again yesterday despite concerted efforts by central banks to resuscitate lending with money-market injections.
With banks hoarding cash as concerns about liquidity evolve into outright solvency fears, the London Interbank Offered Rate, or Libor, for overnight dollar loans jumped from 2.36875% to 3.9375%. The three-month dollar rate jumped from 4.28875% to 4.32%. Key sterling and euro Libor rates also climbed, with the overnight sterling rate up more than 75 basis points to 5.84375. Three-month euro Libor hit an all-time high of 5.37125%.