Asian Money Rates Rise as Central Banks Fail to Unlock Credit

By Nate Hosoda and Candice Zachariahs

Oct. 10 (Bloomberg) -- Asian money-market rates climbed as injections of more than $32 billion by Japan and Australia and a round of global interest-rate cuts failed to unlock credit.

The three-month interbank offered rate in Tokyo, known as Tibor, was fixed at 0.878 percent, the highest since March 1998. The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate gained to 108 basis points in Sydney, from 89 yesterday.

``You just don't know whether the person you're lending to is going to be the guy that has the weak balance sheet and is going to fall over,'' said Sally Auld, interest-rate strategist at JP Morgan Securities Australia Ltd. in Sydney. ``What markets are telling you is that it doesn't matter what central banks and governments do.''

The Bank of Japan added 3 trillion yen ($30.3 billion) to the banking system and the Reserve Bank of Australia pumped in A$2.63 billion ($1.8 billion) after the cost of borrowing in dollars for three months in London soared to the highest level this year.

Hong Kong's three-month interbank offered rate climbed 1 basis point to 4.41 percent, the highest since Oct. 31 last year. Singapore's three-month dollar loan rate increased for a fourth day, rising 23 basis points to 4.74 percent, according to the 11 a.m. fixing by the Association of Banks in Singapore. The cost is at the highest this year.

Loan Growth

The BOJ has pumped more than 25 trillion yen into the system over the past three weeks, the most in at least six years, after lending growth at Japanese banks slowed in September for the first time in nine months as companies cut earnings forecasts. Loans, excluding those by credit associations, rose 1.8 percent in September from a year earlier, after increasing 2 percent in August, the Bank of Japan said today.

Japan's overnight call rate climbed as much as 18 basis points, or 0.18 percentage point, to 0.72 percent, before falling back to 0.5 percent following a second injection of cash, according to brokerage Tokyo Tanshi Co.

The Reserve Bank of Australia added cash through so-called repurchase agreements after estimating money markets would have a deficit of A$1.84 billion in funds today. Australian banks reduced deposits held at the central bank by A$1.37 billion to A$8.36 billion yesterday, after those holdings reached a record A$11.04 billion on Sept. 30, the RBA said today on its Web site.

To contact the reporter on this story: Nate Hosoda in Tokyo at nhosoda@bloomberg.net