News&Notes: LIBOR & Cali. Muni. Deal

RCM Comment: Updates to stories covered in this blog over the last few weeks...

ECONX Dollar Libor logs first weekly drop since July on cash funding -
Bloomberg.com
Bloomberg.com reports the cost of borrowing dollars in London fell, rounding off the first weekly decline since July, after central banks around the world pumped unprecedented amounts of cash into money markets and governments backed loans. The London interbank offered rate, or Libor, for three-month loans in dollars dropped for a fifth day, sliding 8 basis points, or 0.08 percentage point, to 4.42%, the British Bankers' Association said. It declined 40 basis points this week. The overnight rate for dollars slid 27 basis points to 1.67%, the lowest level since September 2004. Asian rates also fell... Rates fell this week after central banks joined forces to offer lenders an unlimited supply of dollars and the European Central Bank did the same with euros. Still, the cost of borrowing between banks remains near record highs relative to the Federal Reserve's benchmark rate of 1.5%. The spread between three-month dollar Libor and the Fed rate was 292 basis points, or 2.92 percentage points, up from 108 basis points a month ago. At the start of the year, the spread was 43 basis points.

California increases offering twice to meet demand for munis - WSJ
WSJ reports California sold $5 billion in short-term municipal notes Thursday in a deal that helps the state meet its cash needs and one that was upsized twice in the final 24 hours because of strong investor demand. The state will return to the market at a later date to raise the additional $2 billion toward its $7 billion total cash-flow borrowing needs for fiscal 2008-09, Bill Lockyer, California's state treasurer, said in a statement. To woo enough investors to take on such a large block of debt, California set the initial yield ranges to relatively high levels for short-term paper. Demand for the offering was sufficient that the final yields were at the low end of ranges first quoted to individual investors. California split the offering into two tranches, with $1.2 billion maturing May 20, 2009, and yielding 3.75%, and $3.8 billion maturing June 22, 2009, and yielding 4.25%. This compares with 2.2% yields on $750 million in similar short-term notes Massachusetts sold earlier this month. "It comes down to sheer size," said Tom Dresslar, a spokesman for Mr. Lockyer. "If we'd have gone to market with $750 million we could have gotten significantly lower rates."