Dec. 9 (Bloomberg) -- Dollar money-market rates may be little changed as banks hold on to cash to meet year-end funding needs amid a deepening global recession.

Rates on three-month loans in dollars were about 2.18 percent as of 10:50 a.m. in London today, according to Jan Misch, a trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned lender. The Hong Kong interbank offered rate, or Hibor, for similar loans was unchanged at 1.752 percent. Singapore’s rate for comparable U.S. dollar loans was little changed at 2.192 percent.

“The volume of loans apparently is still close to zero and that hasn’t changed from what I understand,” said William Prophet, a fixed-income strategist in Singapore at UBS AG, Switzerland’s biggest bank.

With three weeks to go until the end of the year, financial institutions are vying for loans that mature after Dec. 31 to bolster their balance sheets as they prepare to report to investors. Money markets froze after Lehman Brothers Holdings Inc. collapsed on Sept. 15, spurring governments to bail out financial institutions and central banks to offer unlimited cash and cut interest rates.

“Credit and money markets remain highly dysfunctional,” Goldman Sachs Group Inc. analysts led by London-based Francesco Garzarelli wrote in a note to clients yesterday. “Risk aversion remains very high.”

Commercial Paper

Banks deposited 243.9 billion euros ($315 billion) with the European Central Bank in its overnight facility, underscoring the reluctance of financial institutions to lend to one another. It was the 14th straight day the figure surpassed 200 billion euros. The daily average in the first eight months of the year was 427 million euros.

The ECB is considering making its deposit facility less attractive to banks, council member Ewald Nowotny said in an interview Dec. 5.

Yields on Japanese one-month commercial paper, or CP, with the second-strongest credit rating advanced to 1.93 percent today, according to Tokyo Tanshi Co., the highest level since Bloomberg started tracking the data in 2004 and more than double the one-month Tibor rate.

In the U.S., rates on the highest-ranked 30-day CP rose 30 basis points to 1.6 percent yesterday, according to yields offered by companies and compiled by Bloomberg.

Indexed Swap Rate

The difference between the rate banks charge each other for dollar loans and the overnight indexed swap rate, a gauge of expectations of where the Federal Reserve’s target rate will be in coming months, was little changed at 189 basis points. Former Fed Chairman Alan Greenspan said in June that the gauge, known as the Libor-OIS spread, should be used as an indicator of the health of credit markets.

The spread averaged 11 basis points in the five years before the credit crisis started in August 2007.

Libor is the benchmark for about $360 trillion of financial products worldwide. It’s set by a panel of banks in a survey by the BBA before noon each day in London. The euro interbank offered rate, or Euribor, is published by the European Banking Federation earlier in the day.

The three-month Euribor declined six basis points to 3.43 percent today, the lowest level since Oct. 2, 2006, the EBF said.

To contact the reporters on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net

Last Updated: December 9, 2008 06:34 EST