Global Central Banks Pump Money to Soothe Markets

[Slimprofits]

Japan, Australia Inject $33 Billion to Soothe Markets (Update2)

By Shamim Adam and Nate Hosoda

The Bank of Japan pumped 3 trillion yen ($29.3 billion) into the financial system today, for a total of 5.5 trillion this week. The Reserve Bank of Australia added A$4.285 billion ($3.45 billion). Global central banks from Tokyo to Frankfurt have added more than $200 billion since the beginning of the week.

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Japan's overnight loan rate fell to 0.53 percent at 1 p.m. in Tokyo from 0.65 percent before two money-market operations today. The central bank kept is target overnight lending rate unchanged at 0.5 percent today. The Bank of Japan added 2.5 trillion yen to the banking system yesterday.

The one-year swap rate, the fixed payment in exchange for interbank six-month borrowing, climbed 5 basis points, the biggest increase since June 10, according to data compiled by Bloomberg.

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Japan's banks and insurers, including Mitsubishi UFJ Financial Group Inc., announced a combined 245 billion yen of potential losses tied to the collapse of Lehman.

Australian one-year swap rates climbed 14 basis points, the largest gain since June 10, after the RBA's biggest injection of funds in almost two months failed to ease credit concerns.

``The RBA is flushing the system with money to help financial institutions trying to shore up their balance sheets,'' said Adam Carr, a senior economist in Sydney at ICAP Australia Ltd. ``Things could get worse from here.''

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The London interbank offered rate, or Libor, that financial institutions charge each other for loans soared 3.33 percentage points to 6.44 percent yesterday. The increase was the biggest in its history.

The U.S. Federal Reserve yesterday added $50 billion in temporary reserves to the banking system, while the European Central Bank awarded 70 billion euros ($99.8 billion) in a one- day money-market auction. The Bank of England pumped in 20 billion pounds ($36 billion).

Central banks in South Korea and Singapore reiterated that they are ready to provide extra liquidity to their financial markets if necessary. The Bank of Korea will purchase government bonds if needed directly from the market, Governor Lee Seong Tae told parliament in Seoul today.

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The nation's (South Korea) one-year swap rate increased 7.5 basis points, the biggest gain since July 14.

In Taiwan, the central bank yesterday said it will cut its required reserve ratios for the first time in eight years in a bid to inject liquidity into the island's financial markets. The central bank added $3.59 billion into the foreign-currency interbank market yesterday.

The Reserve Bank of India also took steps to boost cash in its banking system, reversing its policy to reduce liquidity as it sought to quell inflation. Lenders can get more funds through an additional repurchase auction everyday and a temporary increase in their eligibility to access funds through the repurchase auction, the central bank said.

Note that the link below (to bloomberg.com) leads to the article posted above, but the headlines are different and this sentence does not appear: "China lowered its interest rate for the first time in six years late yesterday and may do so again to protect growth"

So we're looking at a re-write that doesn't mention China at all, very strange. It appears that Update3 has been completely scrubbed from Bloomberg.com.


Search news pages that contain the term china currency +bloomberg.com.

Global Central Banks Pump Money to Soothe Markets (Update3) Bloomberg - Sep 16, 2008 China lowered its interest rate for the first time in six years late yesterday and may do so again to protect growth. While the Fed's policy-setting Open ...AIG - LEH

[don]

Re: Global Central Banks Pump Money to Soothe Markets

That's been the case since there was a press. In my historical research I have found the local, on-the-spot reporting provides the nuggets of information that come closest to what transpired. I'm talking about a 100 years ago.

Apparently it still goes on today, even with all the firewalls and internal checks. Getting it up and on the board is critical to getting that take on developments. Great point!

[Slimprofits]

Re: Global Central Banks Pump Money to Soothe Markets

Central banks dish out more cash as money mkts freeze - 09/26/08

Europe's big three central banks, the ECB, BoE and SNB stepped up their efforts to ease funding pressures over quarter-end.

The ECB said it would add $35 billion, the BoE promised $30 plus extra sterling resources and the SNB offered $9 billion.

"Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing pressure in funding markets," the ECB said in a statement.

On Thursday, three-month U.S. dollar LIBOR shot up nearly 30 basis points to 3.769 percent -- its highest level since January and nearly 2 percentage points above the expected federal funds rate in three months time.

That is double the levels seen in previous money market crunches since the credit crisis struck in August last year.

The Reserve Bank of Australia (RBA) launched its first ever repurchase operation in U.S. dollars and all $10 billion on offer was hungrily snapped up at 3.165 percent, well above the minimum bid rate of 2.35 percent.

The RBA established a U.S. dollar swap line with the Federal Reserve earlier in the week, aimed at meeting strong demand for U.S. dollars during Asian trading hours.

In South Korea, the Finance Ministry said it would inject $10 billion or more into the local swap market until the middle of October to stave off persistent dollar funding shortages.

South Korea's central bank said it would skip its weekly bond auction next Monday, a move widely seen as aimed at keeping the local money markets flush with liquidity.

The RBA and the Bank of Japan also kept adding extra cash to their own banking systems on Friday, while Vietnam lifted the rate it pays on bank reserves to reduce the cost of borrowing.

Yet these sums paled into insignificance compared to the U.S. Federal Reserve's largesse.

Figures released late Thursday showed U.S. institutions borrowed from the Fed $188 billion per day on average in the latest week, almost four times the previous record.

"The scale of the Fed's direct support for the financial system escalated dramatically this week," said Lou Crandall, chief economist at Wrightson ICAP, in a note to clients.