Credit costs keep pressure on rates

The global credit crunch is showing no signs of easing with the bank bill swap rate at an 11 year high of 7.27 per cent yesterday. The rate at which banks lend money to each other was up from 7.25 per cent the day before, and at 52 points over the cash rate well above the average of 11 basis points premium on the cash rate before the credit squeeze began. The Reserve Bank continues to pump cash into the system in an attempt to relieve credit shortages and thereby bring down the cash rate but to little effect. Funding costs remain high as banks want to preserve their liquidity to ease strains on their balance sheets and meet financial commitments through the year-end period.