Panic not apparently. While the rest of the country is bulk buying the fizz and loading up the trolley with pigs in blankets and multi-packs of Twiglets, the banks are filling up with another New Year staple. Cash.
Three-month sterling Libor has risen to 6.48625 per cent, the highest level since on September 19, in the thick of the crisis at Northern Rock.
In fact, it was on September 19th that Libor fell back following the 50bp Fed rate cut in the US, on the expectation that the MPC might follow its US counterpart in cutting rates – which has yet to be the case.
hree month sterling Libor had peaked at 6.903 just a couple of days before the Fed moved to help the US banks out of their credit-induced squeeze.
The latest Libor fix constitutes a rise of about four basis points and is the eighth successive move higher.
But fret ye not. There’s a festive explanation.
The BBA, who have been sending out a briefing note on such matters in these difficult times, on Tuesday tells us:
The strong demand for cash over the traditionally illiquid New Year period has pushed three-month sterling BBA LIBOR rates to a two-month high.
The latest upward trend, which started around the beginning of the month after rates for shorter-term lending reverted to more normal levels after the summer peak, is clear in overnight to three-month sterling rates, but is less pronounced in euro or US dollar rates.
And notes the BBA, twelve-month rates in both sterling and the dollar continue to fall indicating that the market expects base rate cuts by the central banks within the year.
Hmmm. Why then are UK banks stockpiling to a greater extent than their European or US counterparts? Do we really drink that much more between Christmas and New Year in the UK, draining cashpoints from north to south, east to west? Or is this something to do with the relative amounts of liquidity being pumped into the money markets by respective central banks?
Are we reassured? We are not. But in the meantime, we’ll just deck the halls with bags of money.