Asian money-market rates dropped, extending last year’s declines, as global risk aversion abated and banks met their year-end liquidity ratio requirements. Singapore’s three-month interbank rate for U.S. funds slipped 2.5 basis points, or 0.025 percentage point, to 1.42 percent, the lowest since June 2004. Hong Kong’s local currency rate, three-month Hibor, fell 0.2 basis point to 0.95 percent, the lowest since January 2005. The yield on South Korea’s benchmark 91-day certificate of deposit rate was unchanged at 3.93 percent, the lowest since November 2005. The country’s three-month commercial paper decreased two basis points to 6.38 percent, the lowest since Sept. 23. “We continue to see global risk aversion coming off in the new year and the hoarding of cash by banks to fix their year-end ratios for various regulations has passed,” said Sean Darby, head of regional strategy at Nomura Holdings Inc. in Hong Kong. “Liquidity will ease over time, but it won’t be a burst of funds as there’s a lag effect.” Euribor, the rate that banks say they charge each other for three-month loans in euros, slid four basis points to 2.90 percent on Dec. 31, according to the European Banking Federation. The rate fell below 3 percent on Dec. 24 for the first time since June 2006. Australian Rates Australian interbank borrowing costs dropped to a record as interest-rate cuts and cash injections worldwide overwhelmed banks’ reluctance to lend now that a year-end funding squeeze has ended. The rate Australian banks charge each other for three-month loans dropped 25 basis points, or 0.25 percentage point, to 3.9 percent, the Australian Financial Markets Association said. That’s the lowest rate for 90-day bank bills since at least June 1969, according to the Reserve Bank of Australia’s Web site. The London interbank offered rate, or Libor, for three-month U.S. dollar loans fell to 1.43 percent on Dec. 31, the lowest level since June 2004, the British Bankers’ Association said. “There’s plenty of liquidity and the interbank market may be finally starting to thaw,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “The liquidity injections are still coming hard and fast, so rates are only going to go one way, and that’s down.” Credit markets froze after the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, spurring governments and central banks around the world to bail out financial institutions and pump cash into money markets. Policy makers in the U.S., Europe and Asia are slashing interest rates to revive lending. RBA Injects The Federal Reserve cut its funds target rate to as little as zero on Dec. 16 and the Bank of Japan followed on Dec. 19 with a reduction in its benchmark to 0.1 percent from 0.3 percent. China cut interest rates for the fifth time in three months on Dec. 22. Australian banks held A$8.5 billion ($6 billion) in deposits at the Reserve Bank of Australia on Dec. 31, the central bank said today on its Web site. The RBA added A$1.27 billion to money markets today, after estimating the shortfall would be A$995 million. Japan’s financial markets are closed today for a public holiday. The interbank offered rate for three month loans, Tibor, was 0.743 percent on Dec. 30, the lowest since July 2007. Credit Default Swaps The cost of protecting Asia-Pacific bonds from default was little changed, according to traders of credit-default swaps. The Markit iTraxx Australia index, linked to the debt of 25 companies including Qantas Airways Ltd. and BHP Billiton Ltd., was quoted at 340 basis points at 11:45 a.m. in Sydney, down 10 basis points from Dec. 31, according to ABN Amro Holding NV. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan was quoted at 340 basis points as of 9:20 a.m. in Singapore, up 10 basis points from Dec. 31, Barclays Plc prices show. There were no indicative prices for the index of Asian high-yield borrowers, which was last quoted at 1,250 basis points on Dec. 30. The Markit iTraxx Japan index was quoted on Dec. 30 at 292.5 basis points, according to BNP Paribas SA. Credit-default swap indexes are benchmarks for protecting bonds against default and traders use them to speculate on changes in credit quality. The swaps pay the buyer face value in exchange for the underlying securities if a borrower fails to adhere to its debt agreements. A basis point, or 0.01 percentage point, is worth $1,000 on a swap protecting $10 million of debt.

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