The cost of longer-term U.S. dollar borrowing in the interbank market continued to fall Monday, extending its decline from an Oct. 10 peak.

Confidence is gradually returning to money markets after measures implemented by governments and central banks.

According to data from the British Bankers' Association, the three-month U.S. dollar London interbank offered rate dropped 5.5 basis points from Friday, to 2.235%, the lowest level this year. The rate peaked at 4.81875% on Oct. 10.

The one-month rate fell over 8 basis points, to 1.53875%.

The overnight rate edged up nearly 2 basis points, to 0.35%, but remained below the Federal Reserve Board's federal funds target rate of 1%.

The three-month BOR/OIS spread, a gauge of stress in the money markets, narrowed over 4 basis points, to 170.8 basis points, as tensions within the interbank lending market eased. The spread peaked at 366 basis points Oct. 10.

The key three-month sterling Libor fell 7.5 basis points, to 4.42125%, its lowest level since April 2004, as the impact from last week's 150-basis-point rate cut by the Bank of England continued to filter through to the term interbank lending market.

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