Bids reach £23.6bn for BoE’s £5bn offer

The Bank of England has seen bids totalling £23.6bn today for its offer of £5bn three-day funding to banks.

The central bank offered the facility at the current interest rate of 5.25% to help bring down the overnight LIBOR rate.

A Bank of England statement says: “This action is being taken in response to conditions in the short-term money markets this morning.

“The bank will take actions to ensure that the overnight rate is close to Bank rate. Along with other central banks the Bank of England is closely monitoring market conditions.”

UK overnight LIBOR rates had spiked to around 5.8% earlier this morning, far above the Bank of England’s 5.25% rate.

Angela Knight, chief executive of the British Bankers’ Association, says: “The continued rise in BBA LIBOR rates reflects increasing liquidity pressures in funding markets internationally.

“These were referred to in the co-ordinated statement by the major central banks last Tuesday. This is the quarter–end reporting period for many banks internationally. It was always anticipated that rates would tighten further at this time.”