The bank-to-bank funding rate for three-month dollars was little changed on Wednesday, but a key measure of money market stress eased following a US plan, unveiled early this week, to help rid banks of toxic assets. Uncertainty remains about how successful the US plan will be, but action by governments and central banks to fortify the embattled banking sector appears to be helping a market severely hit by the financial crisis.
"Itll take time. Were not even sure if banks will want to sell assets or if investors will want to participate in the program," said Guillame Baron, strategist at Societe Generale in Paris. "But if we see activity in this segment of the market, then it could do some good to banks, but we have to wait for it."
Near-term, the usual increase in funding demand for quarter-end window-dressing could put some upward pressure on short-term lending rates, analysts said.
But on Wednesday, rates were mainly steady. The benchmark three-month dollar London interbank offered rate was little changed at 1.22750 percent from a day earlier, the latest fixing from the British Bankers Association showed, steadying from a downtrend from a high of 1.33125 percent set earlier in the month.
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