Aussie interbank rates fall to record

By Garfield Reynolds  |   2009-1-3  |     NEWSPAPER EDITION

AUSTRALIAN interbank borrowing costs dropped to a record as interest-rate cuts and cash injections worldwide overwhelmed banks' reluctance to lend now that a year-end funding squeeze has ended.

The rate Australian banks charge each other for three-month loans dropped 25 basis points, or 0.25 percentage point, to 3.9 percent, the Australian Financial Markets Association said. That's the lowest rate for 90-day bank bills since at least June 1969, according to the Reserve Bank of Australia's Website, Bloomberg News said. The London interbank offered rate, or Libor, for three-month United States dollar loans fell to 1.43 percent on Wednesday, lowest level since June 2004, the British Bankers' Association said.

"There's lot of liquidity and the interbank market may be finally starting to thaw," said Adam Carr, a senior economist at ICAP Australia Ltd in Sydney. "So rates are only going to go down."