USD Interbank Market

USD interbank market still hostage to credit risks

SINGAPORE, Reuters said that the cost of overnight U.S. dollar funds was barely changed for short tenors up to three months in Asia on Tuesday, with a lingering wariness of credit risk keeping spreads from tightening further.

U.S. markets are closed for a Veteran's Day holiday on Tuesday. That meant there were no transactions for overnight dollar deposits in Asia, although there were tom-next trades where traders borrowed one-day funds beginning from Wednesday.

Tom-next dollar rates were quoted at 0.1 to 0.6 percent in Singapore and a narrower 0.1-0.35 percent range in Hong Kong, traders said, below the Federal Reserve's 1 percent target and in ranges similar to those dealt in London and New York.

Three-month rates eased to between 2.2 and 2.75 percent in Singapore, almost in line with LIBOR on Friday and just a shade lower than the 2.3-3 percent range on Friday in Asia.

"Liquidity is very thin," said a trader in Singapore. The worry about credit risk was weighing very heavily on volumes, he said. (Reporting by Vidya Ranganathan; Editing by Jan Dahinten)