Ted Spread Narrows After Treasury Announces Regional Bank Bailout

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U.S. interbank lending rates were once again relatively unchanged from Monday's levels, but the Ted Spread narrowed after the U.S. government announced plans to inject capital into the nation's larger regional banks on Monday.

The Treasury said it would invest $15 billion in seven local U.S. banks using the second half of the $350 billion from the Troubled Asset Relief Program (TARP).

The banks include SunTrust Banks, Inc. in Atlanta, Georgia; the PNC Financial Services Group Inc. in Pittsburgh, Pennsylvania; Fifth Third Bancorp in Cincinnati, Ohio; Hampton Roads Bankshares, Inc. in Norfolk, Virginia; CIT Group Inc. in New York, New York; West Bancorporation, Inc. in West Des Moines, Iowa; and First Banks, Inc. in Clayton, Missouri.

The overnight USD Libor was relatively unchanged at 0.12% on Tuesday and the three-month Libor was lower by 1 bp at 1.41%.

The Ted Spread narrowed 5 bps to 129 bps, and the Libor/OIS spread was little changed at 123 bps.

Elsewhere, the Canadian dollar Libor was down 9.17 bps to 1.53%, while the three-month Libor declined 9.17 bps to 1.97%. The Euro Libor fell 0.75 bps to 2.11%, while the three-month Libor lost 3.13 bps to 2.78%. The Sterling Libor was flat at 2.00%, while the three-month Libor declined 3.38 bps to 2.61%.

By Erik Kevin Franco and edited by Nancy Girgis
©CEP News Ltd. 2009