U.S. three-month interbank lending rates continued to move lower on Monday with three-month USD Libor losing another 5 bps to 1.87% and the overnight USD Libor relatively unchanged at 0.12%.
The Libor/OIS spread narrowed 7 bps to 155 bps, its lowest level since Sept. 23, and the Ted spread narrowed 5 bps to 186 bps.
The data comes as the Fed kicks off the first of a two-day FOMC meeting after which the central bank is expected to slash rates by 50 bps to 0.50%. However, Fed funds futures suggest markets have priced in a 70% chance of a 64bp reduction while the OIS market suggests a 67% chance of a 75bp cut to 0.25%.
The main news in the United States continues to revolve around a possible government bailout of the auto industry using the TARP funds after the Senate threw out legislation on Thursday evening.
Nevertheless, U.S. President George W. Bush has said the terms of the bridge loan have not yet been hammered out.
By Erik Kevin Franco and edited by Nancy Girgis
©CEP News Ltd. 2008