Canadian banks greeted the new fiscal year with lower funding costs on Monday, as the thaw in inter-banking lending picked up steam.
Libor, the TED spread and all the other indicators of the financial sector's health continued to move the right way on Monday. Attitudes towards lending clearly improved as bankers bid farewell farewell to a brutal October.
Three month Libor fell 17 basis points to 3.03 per cent – it was 4.33 per cent a month ago, when inter-bank lending all but dried up. One-monthe Libor dropped 22 basis points, to 2.36 per cent. Libor has now been declining for three consecutive weeks. Those looking for all these numbers in one place should check out a site called TheDeal.com for a ‘Crisis Dashboard' that puts all the credit market data we suddenly can't live without on a single chart.
What's next for interest rates? Well, the Montreal Exchange's futures market is pricing in a 100 per cent probability that the Bank of Canada will trim its interest rates by 25 basis points when it next meets on Dec. 9, and is putting 62 per cent odds on a 50 basis point cut.
U.S. futures markets say there's a 100 per cent that the Federal Reserve will lower rates by 25 basis points when its brass gather on Dec. 16, and a 42 per cent probability of a 50 basis point cut.
