UK bank lending rates hit nine-year highs on Monday as banks sought funds to cover their commitments for the start of next year amid a tightening credit squeeze. Sterling one-month interbank rates spiked more than 60bp to their highest levels since the end of 1998. European one-month rates rose to levels not seen since May 2001. US rates were also abnormally high. Senior bankers insist the problems are linked mainly to the end of the year but others fear the growing sense of paralysis in the money markets could hit the financial system. Behind the scenes, senior European policymakers and central bankers are in intensive talks with private sector bankers about what can be done to ease the crisis. In a separate report, the FT says that deepening concerns in financial markets on Monday fuelled a fresh burst of risk aversion as equity markets suffered moderate losses after last week’s strong gains and the yen rallied as investors unwound risky carry trades.

This entry was posted by Gwen Robinson on Tuesday, December 4th, 2007 at 5:33 and is filed under Capital markets. Edit this entry.