Cost of borrowing euros for three months rose to the highest level in seven weeks

The cost of borrowing euros for three months rose to the highest level in seven weeks, adding to evidence central bank attempts to ease a shortage of cash in the money markets are misfiring. The euro interbank offered rate, or Euribor, for the loans climbed 7 basis points to 4.50 percent today, the European Banking Federation said. It was the biggest gain since Jan. 25. The one-week rate was little changed at 4.11 percent. The Federal Reserve said today it plans to increase loans to banks this month to offset ``heightened liquidity pressures'' and a deepening credit crisis. Money-market rates are rising as banks hoard cash after at least $188 billion in credit losses and writedowns linked to the U.S. subprime-mortgage collapse since the beginning of 2007. Credit-default swaps showed bank debt hasbecome more risky than corporate bonds. ``Nothing has actually been solved,'' said Padhraic Garvey, head of investment-grade debt strategy in Amsterdam at ING Bank NV, a unit of the biggest Dutch financial-services company. ``An elevated Euribor is an indication of stress in the financial system. Very clearly, things haven't been sorted out and the U.S. subprime story continues to reverberate throughout the market.'' Today's increase pushed the difference, or spread, between the three-month euro money-market rate and the European Central Bank's benchmark rate to 50 basis points, compared with an average of 25 basis points in the first half of 2007.

Cost of borrowing euros for three months rose to the highest level in seven weeks

The cost of borrowing euros for three months rose to the highest level in seven weeks, adding to evidence central bank attempts to ease a sh...

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