Short term bank borrowing costs have surged in recent weeks to levels last seen during the 2008 global financial crisis when there were concerns about credit quality, but analysts are linking rise in rates to the consequences of the tax cuts passed by the U.S. Congress in December. The rise in borrowing costs may reflect dropping demand for bank debt from U.S. companies that had been storing large cash portfolios overseas to avoid U.S. taxes and are now preparing to bring the funds back, analysts said. The U.S. tax legislation passed late last year makes overseas cash holdings subject to tax, reducing the advantage of holding the funds offshore. The tax overhaul is not the only factor impacting bank borrowing costs though. A surge in U.S. Treasury borrowing concentrated in short-dated maturities, after Congress lifted the debt ceiling recently, has sent borrowing costs higher across fixed income and money markets.

Source: New Strait Times February 27, 2018 22:52 UTC