Nov. 17 (Bloomberg) -- Asian money rates declined, with Australian funding costs dropping to the cheapest since before Lehman Brothers Holdings Inc. collapsed, amid expectations central banks will extend reductions in interest rates.

The Hong Kong interbank offered rate, or Hibor, for three- month loans fell four basis points to 2.15 percent, its first decline in three days. The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate shrank to 32 basis points at 3:09 p.m. in Sydney, the narrowest since Sept. 4, from 42 basis points on Nov. 14. The measure of funding availability averaged 11 basis points in the five years before the credit crisis started in July 2007.

``It's an indication that the stresses are easing, but not that they're done,'' said Matthew Johnson, an economist at UBS AG in Sydney. ``There's still a lot of uncertainty about just what will be confessed when it comes to the end of the year book closing, particularly by U.S. banks.''

Interbank lending rates jumped as banks hoarded cash after Lehman Brothers went bankrupt on Sept. 15. Costs have eased in the past month as governments announced deposit and lending guarantees and central banks offered unlimited U.S. dollars to financial institutions.

South Korea's one-year rate to swap won loans for dollars rose for a second day to 0.3 percent, indicating banks are less desperate for dollars. The measure averaged 3.3 percent this year before Lehman's demise. The country's benchmark 91-day certificate of deposit rate declined three basis points, or 0.03 percentage point to 5.53 percent, the lowest since July 16.

Central Banks

The Reserve Bank of Australia added A$1.68 billion ($1.07 billion) to money markets today after estimating there would be a deficit of A$2 billion. Australian banks reduced deposits held at the RBA by A$268 million to A$4.47 billion on Nov. 14, the central bank said today on its Web site.

``Central banks have taken a lot of steps to inject liquidity and ease strains in the money markets and they're all helping,'' said Johnson. ``It's definitely not the death of the risk premium.''

Governments have offered trillions of dollars in bailouts, assistance for banks and deposit guarantees to ease the crisis. The U.S. Treasury last month announced a $700 billion Troubled Asset Relief Program to bolster banks' balance sheets.

`Pain Killers'

``The good thing about the TARP was that it brought Libor down,'' said David Carbon, head of economic and currency research at DBS Group Holdings in Singapore, Southeast Asia's largest bank. ``But the thing is, it is as if they just injected a whole lot of morphine into the patient because they can't do anything about him till January when they have a new administration. So for now, they're just feeding him as much pain killer as they can.''

The London interbank offered rate, or Libor, that banks say they charge each other for three-month loans in dollars, rose for a second day on Nov. 14 after falling for 23 days. The rate increased 9 basis points to 2.24 percent on Nov. 14, according to British Bankers' Association data.

Money market rates rose in London last week after Europe sank into its first recession in 15 years, stoking concern world leaders will struggle to fix a financial crisis that's paralyzing lending by banks.

The Singapore interbank rate for three-month U.S. dollar loans advanced five basis points to 2.28 percent, rising for a second day. A basis point is 0.01 percentage point.

The Libor-OIS spread, a gauge of cash scarcity among banks, widened 7 basis points to 167 basis points on Nov. 14. The difference compares with 87 basis points on the last trading day before Lehman declared bankruptcy, and an average of 11 basis points in the five years before the onset of the financial crisis.

The TED spread, which measures the difference between what the U.S. government and banks pay for three-month loans, widened 6 basis points to 203 basis points.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.netPatricia Lui at plui4@bloomberg.net

Last Updated: November 17, 2008 01:06 EST