In another sign that banks remain hesitant about lending to each other amid the European debt crisis, the three-month Libor, or London interbank offered rate for loans in dollars, rose Wednesday for the 12th straight day, to 0.538% -- its highest level since July 6, 2009, Bloomberg News reported Wednesday.

The Libor, which serves as a sort of 'ATM for banks,' rose to a stratospheric high of 3.65% during the financial crisis' acute stage when Lehman Brothers collapsed in the fall of 2008. The rate also serves as the benchmark for about $360 trillion in financial products globally, encompassing everything from mortgages to student loans.

One troubling sign (amid a week filled with disconcerting signs) for the markets is the increase in the three-month Libor, or London interbank offered rate, which rose 5.5 basis points to 0.428% on Friday: its highest level since August 17, 2009, Bloomberg News reported.

Experienced investors will recall that the Libor, which serves as a sort of "ATM for banks," rose to a stratospheric high of 3.65% during the financial crisis' acute stage when Lehman Brothers collapsed in the fall of 2008.

It's been a week of mostly positive data points for U.S. investors. Here's another: the Libor-OIS spread has narrowed to a level former U.S. Federal Reserve Chairman Alan Greenspan said he regarded as "normal."

The Libor-OIS spread, which measures the reluctance among banks to lend, fell 1 basis point Thursday to 25 basis points -- its lowest level since January 24, 2008, Bloomberg News reported. The spread had surged to an incredible 364 basis point in October 2008, during the global financial crisis' acute stage.

Some trends are obvious enough and visible to all investors. Others are more subtle, but are just as potent, and these often slip "under the radar."

Case in point: The 3-month Libor, or London interbank offered rate, dipped below 0.50% to 0.496% for the first time since the financial crisis began last fall, providing additional evidence that central banks' efforts to loosen credit markets are working, Bloomberg News reported Monday.

Is the Libor at a crossroads? Will monetary officials in the world's major economies have to do more to further loosen the credit markets?

The answers to the above, in the view of two economists, are: 'yes' and 'yes.'

Short-term interests have fallen considerably in the past four months, with the London rate for three-month loans in dollars (LIBOR) declining to 1.16% Thursday from 4.82% earlier last fall, primarily on the strength of more than $8.4 trillion in liquidity-oriented interventions by the U.S. Federal Reserve and other major central banks.

Still, credit conditions remain constrained, with credit availability no where near where it should be for healthy commercial activity, so says economist Richard Felson. "Credit conditions have improved since the fall crisis that nearly froze the global credit market, but you'd still categorize the credit markets as stressed, with a lack of bank-to-bank confidence. Credit markets are still not liquid enough to support an economic recovery," Felson said. "Central banks will have to do more to normalize credit conditions, primarily through purchases of assets."

The LIBOR is particularly important because it determines rates for $360 trillion of financial products worldwide, from home loans to derivatives.

Sept. 29: Dow 10,365 (down 777 points); trading range, 872 points

The markets collapsed after the U.S. House of Representatives failed to pass the $700 billion Emergency Economic Stabilization Act.

Considering the tight credit markets, most were expecting the measure to sail through Capitol Hill, but the bill's failure exacerbated fears that the economy would continue to suffer while the politicians tried to reach a solution.

Naturally, both political parties pointed the finger at the other to place blame for the measure's failure.

Continued tightness in the credit markets were reflected in the TED spread, the difference between what the banks charge each other for three-month loans (three-month LIBOR) and what the U.S. government pays for them (three-month T-bills). The spread was at its highest level since 1984, and indicated that banks were unwilling to lend to each other.

The selling on the Street was broad based, as the Dow, Nasdaq and S&P 500 fell 7%, 9.1% and 8.8%, respectively, settling at the session's lows.

The Nasdaq and S&P 500's declines were the largest since Black Monday in 1987, while the Dow posted its worst day since the 9/11 attacks.

Greg Tucker is the executive editor of OptionsZone.com.

Global credit markets have recovered and stabilized following a brush with a global financial meltdown in September, but those markets have not normalized and a tough stretch of road remains ahead, so says an economist.

"We are on 'a great, long, slow journey' to use a Chinese saying," economist David H. Wang told BloggingStocks. "We have to be prepared for more bumps in the road ahead in 2009. We must be both proactive and also take corrective action in the credit markets."

Short-term interests have fallen considerably in the past three months, with the London rate for three-month loans in dollars (LIBOR) declining Friday to 1.50% from 4.82% earlier this fall, Bloomberg News reported, primarily on the strength of $8.4 trillion in liquidity-oriented interventions by the U.S. Federal Reserve and the other, major central banks.

The LIBOR is particularly important because it determines rates for $360 trillion of financial products worldwide, from home loans to derivatives.

Central banks: on the watch for credit stress signs

What could represent one of those 'bumps,' i.e. a re-igniting of short-term rates, in Wang's view? Another wave of home mortgage foreclosures, which would lead to another batch of toxic-bonds, write-offs, and financial institution stress, he said. The aforementioned "underscores the urgency of the Obama Administration and Congress passing a major home mortgage refinance plan for preventable foreclosures," Wang said. "If we stem the rise in mortgage foreclosures, we will make progress on the road leading to economic recovery."

Policy makers and bank officials are hoping it's just a Monday 'pause that refreshes.'

Short-term interests notched a mixed day on Monday, as the London rate for three-month loans in dollars declined for the 24th consecutive day, dropping another 6 basis points to 2.24%.

However, the three-month rate is still 124 basis points above the U.S. Federal Reserve's target interest rate. Further, the five-year average for the three month rate is 22 basis points. In addition, the overnight rate, or LIBOR, rose 2 basis points to 0.35%.

Also, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, fell another 6 basis points to 170 basis points, which is down from 387 basis points on October 10.

However, the TED spread was 87 basis points before the Lehman Brothers bankruptcy, and the current rate is still 159 basis points above the 11-basis-point, five-year average.

More progress on the credit market front.

The London rate for three-month loans in dollars declined for the 20th consecutive day, dropping another 10 basis points to 2.29%. However, the three-month rate is still 129 basis points above the U.S. Federal Reserve's target interest rate. Further, the five-year average for the three month rate is 22 basis points.

Also, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, fell another 9 basis points to 174 basis points, which is down from 383 basis points on October 10.

However, the TED spread was 87 basis points before the Lehman Brothers bankruptcy, and the current rate is still 163 basis points above the 11-basis-point, five-year average.

Economist Peter Dawson said credit markets have notched another good week. "It was another week of progress, with rates consistently heading lower, but more work remains," Dawson said. "Bank confidence is increasing, but it's not where it should be. More must be done by governments to remove toxic assets from banks and from the financial system to encourage more banks to lend."

More progress on the credit market front. The initiative by major central banks to increase the supply of dollars globally to free up credit continued to move rates in the right direction early Wednesday -- down -- as rates fell to their lowest level since the failure of Lehman Brothers on September 15.

The London rate for three-month loans in dollars declined for the 18th consecutive day, dropping another 20 basis points to 2.51%. However, the three-month rate is still 151 basis point above the U.S. Federal Reserve's target interest rate. Further, the five-year average for the three month rate is 22 basis points.

Also, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, fell another 19 basis points to 192 basis points, which is down from 383 basis points on October 10.

Still, the TED spread was 87 basis points before the Lehman Brothers bankruptcy. Economist Peter Dawson said the difference between current credit market rates and the historical averages indicate both progress and how much work remains.

Another day of progress in the credit markets. The London rate for three-month loans in dollars declined for the 17th consecutive day, dropping another 15 basis points to 2.71%.

Meanwhile, the London interbank overnight rate, or LIBOR, dipped 1 basis point to 0.38%. Also, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, fell 12 basis points to 211 basis points, which is down from 364 basis points on October 10.

Economist Peter Dawson said Tuesday the only thing better than falling gasoline prices is a drop in overnight interest rates. "Again, you have to like this progress. Central bank infusions of dollars continue to loosen credit markets, which is one part in solving this financial crisis," Dawson said. "Also, look for continued downward movement in bank-to-bank rates, if the [U.S. presidential] election goes as expected and Obama wins, on the belief it's a vote of confidence for policies put in place to end the financial crisis."

According to Gallup.com, U.S. Sen. Barack Obama, D-Illinois, led U.S. Sen. John McCain, R-Arizona, 55%-44% in the organization's final tracking poll.

More progress on the credit market front.

The initiative by major central banks to increase the supply of dollars globally to free-up credit continued to move rates in the right direction early Monday -- down -- as rates fell to their lowest level since the failure of Lehman Brothers on September 15.

The London rate for three-month loans in dollars declined for the 16th consecutive day, dropping another 17 basis points to 2.86%. The three-month rate for the euro, the Euribor, also fell 3 basis points to 4.74%. Rates also fell in Asia.

Meanwhile, the London interbank overnight rate, or LIBOR, decreased 2 basis points to 0.39%. In addition, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, fell to 224 basis points, which is down from 364 basis points on October 10.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

The global financial crisis will not be resolved in a week, or a month, or even a quarter, economists generally agree. Nevertheless, notch an impressive week of liquidity improvement for the credit markets.

The initiative by major central banks to increase the supply of dollars globally to free-up credit continued to move rates in the right direction Friday -- down -- as private banks were encouraged by U.S. Federal Reserve commercial paper buying.

The London rate for three-month loans in dollars declined for the15th consecutive day, dropping another 16 basis points to 3.03%. Meanwhile, the London interbank overnight rate, or LIBOR, plunged another 41 basis points to 0.33% -- 59 basis points below the Fed's target rate.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Short-term interest rates continue their downward trek.

The effort by major central banks to increase the supply of dollars globally to free-up credit continued to move rates in the right direction Thursday -- down -- as private banks were encouraged by the U.S. Federal Reserve's interest rate cut and $120 billion in new swap lines with emerging market central banks.

The London rate for three-month loans in dollars declined for the 14th consecutive day, dropping another 23 basis points to 3.19%. Rates also fell in Asia: the three-month rate for Hong Kong, the HIBOR, dropped 15 basis points to 3.39%.

Meanwhile, the London interbank overnight rate, or LIBOR, plunged another 41 basis points to 0.73% - - its lowest level since January 2001.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

The thaw in short-term interest rates continues.

The effort by major central banks to increase the supply of dollars globally to free-up credit continued to move rates in the right direction Wednesday -- down -- as private banks were encouraged by commercial paper purchases by the U.S. Federal Reserve and a likely interest rate cut later today.

The London rate for three-month loans in dollars declined for the 13th consecutive day, dropping 5 basis points to 3.42%. The three-month rate for the euro, the Euribor, also fell 2 basis points to 4.83%, and the three-month rate for Hong Kong dollars, the Hibor, dropped 30 basis points to 3.54%.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.