After rising for much of last week, key lending rates hit the brakes Monday. Treasurys rose at the beginning of a week that economists expect will deliver a slew of ugly economic indicators.The 3-month Libor rate held steady at 2.24%, and the overnight Libor rate fell to 0.4%, according to Bloomberg.com. Libor, the London Interbank Offered Rate, is a daily average of interbank lending rates and a key barometer of liquidity in the credit market. More than $350 trillion in assets are tied to Libor.
Analysts attributed the recent rise in rates to Treasury Secretary Henry Paulson's abandonment of troubled asset purchases. Paulson said the Treasury is no longer intending to use the remainder of the $700 billion in financial rescue funds to buy up toxic mortgage-backed securities from banks' balance sheets, and will instead continue with capital injections.
But others said it was just a bump in the road, and rates will continue to fall as the government pours more and more money into financial institutions to boost liquidity.
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