by Calculated Risk on 3/10/2009 11:16:00 PM

From Bloomberg: Libor Creep Says Credit Markets Risk Freeze on Policy Distrust

The cost of borrowing in dollars is rising as the global recession deepens and central bank efforts to prop up the financial system fail to prevent a growing number of banks from requiring government bailouts.

The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans climbed to 1.33 percent yesterday, the highest level since Jan. 8 ...

Short-term borrowing costs are increasing as banks hoard cash and governments struggle to thaw credit markets ... “The market is beginning to think that the solution is either not politically possible, or we can’t afford it, or maybe there isn’t a solution,” said Bob Baur, chief global economist at Des Moines, Iowa-based Principal Global Investors ...

And from Bloomberg: Bank Debt Stressed at Bear Stearns, Lehman Peaks

Bank debt is as stressed as when Bear Stearns Cos. had to be bailed out and Lehman Brothers Holdings Inc. collapsed, according to analysts at BNP Paribas SA.
...
“We’re seeing the start of the next leg of the crisis and that’s going to be financial bondholders taking a haircut as lenders default,” said Mehernosh Engineer, a London-based strategist at BNP Paribas.