The cost of borrowing in dollars between banks dropped by the most in two months as record low interest rates and rising customer deposits quicken the thaw in lending.Bloomberg "credits" several factors including a flood of central bank money, lessening concerns about further financial shocks, and rising savings.
The London interbank offered rate, or Libor, for three- month loans fell four basis points to 79 basis points today, the biggest decline since March 19, according to British Bankers’ Association data. It declined 11 basis points last week, the most since January....The TED spread (shown to the right), the difference between what banks and the U.S. Treasury pay to borrow for three months, narrowed one basis points to 66 basis points, the lowest level since August 2007, when the credit crisis began. The Libor-OIS spread, another gauge of banks’ reluctance to lend, narrowed five basis points to 58 basis points, the least since March 24, 2008.
This trend, if it holds, would be especially encouraging as it would indicate that the end of the credit crisis. It would be more encouraging still if lending were to resume without such massive assistance from central banks.
