BoE, SNB offer more overnight money

FRANKFURT-GERMANY: The Bank of England and the Swiss National Bank each offered overnight loans to banks on Tuesday as part of their daily credit operations - although declining bids indicated that funding gaps in credit markets could be narrowing.

The Bank of England offered US$10 billion to markets to 10 bidders. The BoE said it received bids for US$6.12 billion at a weighted average interest rate of 1.571 per cent.

The Swiss National Bank offered up its standard US$10 billion and received bids for just US$1.2 billion from four bidders. The weighted average interest rate on the SNB's offer was 1.5 per cent.

Central banks have been pumping short-term credit into the banking system for weeks to give financial institutions the ready money they need to operate. High interbank lending rates - a sign of scarce liquidity and lack of confidence in other banks - has been weighing on stock markets, although in recent days the rates have been easing somewhat in an apparent response to central bank efforts.


The European Central Bank has said it would monitor the credit situation but not offer overnight liquidity unless it deemed it necessary. The ECB posted the results of the first swap of Swiss francs, part of a program announced last week with the SNB meant to give euro zone banks Swiss franc liquidity.

On Monday, the ECB offered banks euro20 billion (US$27 billion) at a rate of 1.4554 Swiss francs per euro, including a margin of 5 percent to cover the foreign exchange risk. The ECB said the swap was subscribed by 50 bidders for euro15.3 billion (US$20.2 billion)

Next Monday, the ECB will take back the francs at a rate of 1.4547 francs per euro. The franc swap will go on as long as needed and at least until January 2009, the banks said.