Dollar funding costs dip in Asia on Monday, extending a steady downtrend albeit against a backdrop of falling stock markets and worries about an outbreak of swine flu in north America. * Nevertheless most investors and banks still are worried about the outcome of the stress tests the U.S. government is conducting on its largest banks, the results of which are due next week. * So while Singapore's dollar SIBOR fell to its lowest since mid-2003, U.S. swap spreads and other indicators widened. * In Singapore, 3-month dollars are quoted at 1.07214 percent, down from 1.09417 on Friday and within striking distance of the 1 percent mark. * Eurodollar futures EDZ9 are higher, showing expectations building for a drop in LIBOR, with December eurodollar futures pricing 3-month LIBOR at 1.28. * The spread between LIBOR and overnight-indexed swaps (OIS), the latter a measure of market expectation of policy rates, narrows to 91 basis points from 93 the previous session. * But the 3-month TED spread TEDCASH, the difference between LIBOR and Treasury yields and a measure of credit risk, is wider at 88 points, up just a point from Friday.

Source