Investors Buy More Bonds After Jobless Claims Data

 

LONDON (AP) — The cost of three-month dollar loans between banks fell to another new low Friday in a further sign that credit markets are getting back to normal.

The British Bankers' Association said the rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — fell 0.02 of a percentage point to 0.83 percent.

Meanwhile, the three-month sterling rate fell 0.01 of a percentage point to 1.36 percent while the equivalent rate for three-month loans in euros — known as the European Interbank Offered Rate, or Euribor — also fell 0.01 of a point to 1.25 percent.

Interbank lending rates affect the wider economy by determining the costs of loans to households and businesses. They had spiked higher since the start of the financial crisis, and have only been falling gradually as governments and central banks around the world announced a raft of measures to stimulate the global economy and financial sector.

All three rates are well down on their peaks after big interest rate cuts from the U.S. Federal Reserve, the European Central Bank and the Bank of England. As well as falling sharply, the spread between the Libor rates and the market's expectations for the benchmark rates in three months time have narrowed sharply, indicating that banks are more willing to take on risks. All three spreads are now well below one percentage point.

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