Libor's rise for three-month dollar worries money markets

08/15/2008 | Financial Times (free content)

Recent auctions by central banks were conducted to boost liquidity in European money markets, but they failed to have an impact. Instead, they prompted a slight rise in Libor for the three-month dollar. Although the increase was small, money markets are worried because it is moving in the wrong direction. "These liquidity auctions have not been effective at all," said Alessandro Trentori at BNP Paribas. "The spread between overnight rates and Libor rates has continued to widen. This is a sign that the financial system is still stressed and it needs additional measures."

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