The interbank cost of borrowing euros held near daily lows on Tuesday as the ECB prepared to launch an offer of long-term funding while UK consumer lending stayed subdued despite central bank efforts to get cash circulating. In the United States, an index of housing prices rose for the third consecutive month, but September consumer confidence was down, primarily due to the difficulty of finding work in the worst job market in 26 years.
Benchmark sterling Libor rates hit a new low but short- sterling interest rate futures sold off, pushing implied rates higher as economists attending a meeting at the Bank of England said the bank was not planning to alter the interest it pays on reserves any time soon.
UK consumers paid down unsecured debt at the fastest rate since records began in 1993, Bank of England figures showed, suggesting many Britons are doing their best to work off debts accumulated during a decade of easy credit. The numbers also indicate banks remain reluctant to lend, despite BoE efforts to get cash flowing around the economy, including its 175 billion quantitative easing program.
"It's not really showing the kind of pick-up that many people might have wanted to see given the fact that we've got the QE in place and that it should be generating some flow of credit into the household sector," said Stephen Lewis, chief economist at Monument Securities. Meanwhile, three-month dollar rates edged up to 0.28969 percent as the rate covered the key year-end funding period for the first time.
Three-month borrowing rates for US banks were 0.3113 percent on September 16, according to ICAP's New York Funding Rate. ICAP's three-month NYFR was 0.3113 percent versus the previous session's 0.3250 percent, ICAP said. That compares with a three-month dollar-denominated London interbank offered rate last fixed at 0.29188 percent. ICAP 's one-month NYFR was 0.2550 percent versus the previous session's 0.2537 percent.
That compares with a one-month dollar-denominated Libor rate last fixed at 0.24375 percent. Interbank euro trading remained subdued ahead of the European Central Bank launching its second tender of one-year funds, but three-month euro Libor rates inched up as that rate also took in the year-end period for the first time.
Banks can take unlimited money at the tender at a flat rate of 1 percent, but with the 12-month OIS rate at 0.64 percent, demand is expected to be much lower than at a similar operation in June where banks grabbed 442 billion euros. The central bank's balance sheet shows open market operations totalled 683 billion euros in the week ending September 18, meaning around two-thirds of outstanding liquidity is coming from the 12-month money taken in June.
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