LONDON, Nov 4 (Reuters) - The bank-to-bank cost of borrowing dollars eased slightly and spreads narrowed early in London on Tuesday, although signs of continued improvement in euro and sterling money markets were less visible. In early London trading, interbank rates for overnight dollar deposits were indicated in a range of 0.01-0.17 percent compared with 0.01-0.25 percent early on Monday. Three-month dollar deposit rates were indicated in a range of 2.2-3.7 percent compared with 2.6-3.7 percent . The premium paid for three-month London interbank offered rates (Libor) over comparable T-bill yields -- known as the "TED" spread -- was indicated around 240 basis points, the narrowest since late September, Reuters charts showed. Rates for three-month sterling were indicated marginally lower but three-month euros were little changed. Euro and sterling spreads remained wide too, suggesting it's still expensive for financial institutions to borrow from one another. Interbank deposit rates are only indicative prices of where banks are lending to each other, which institutions use as a base to set their own lending rates. The premium paid for two-year interest rate swaps over two-year U.S. government bond yields was around 119 basis points compared with 117 basis points early in London on Monday but narrowing from levels of up to 123 basis points in U.S. hours Monday.

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