Tuesday, November 04, 2008

The Commonwealth Bank can only cut 0.58 points

So it says

But this story from Dow Jones Newswires suggests otherwise:

THE gap between Australian interbank lending rates and cash rate expectations today narrowed to levels not seen since before the Lehman Brothers collapse and the following global financial markets panic mid-September.

The spread between the benchmark 90-day bank bill swap rate set and the three-month overnight index rate narrowed to 54 basis points early today, in from 64 basis points yesterday and well down from its peak of 144 basis points early October.

The current spread is the lowest it has been since September 14, which just preceded Lehman Brothers' bankruptcy filing.

The thawing in Australian lending rates also follows falls in US dollar LIBOR and its spread to the relevant overnight index swap rate.

"It has been a very gradual decline, but we are seeing signs of relief on the funding front," ICAP senior economist Adam Carr said.

"There are good indications we've seen the worst in terms of the credit freeze."