Sept. 28 (Bloomberg) -- The cost of borrowing pounds, dollars, and euros overnight rose as banks sought funding over the quarter-end amid a credit squeeze, and as U.K. lender Northern Rock Plc borrowed more money from the Bank of England.

The London interbank offered rate that banks charge each other for overnight loans in pounds rose 20 basis points to 6 percent today, the highest in 10 days, British Bankers' Association figures showed. The corresponding rate for dollars rose 21 basis points to 5.30 percent, and the euro rate climbed 6 basis points to 4.23 percent.

Interbank market rates have soared as concern that losses on securities linked to U.S. subprime mortgages will spread keeps lenders from providing money to all but the safest borrowers. The Financial Times newspaper said today Newcastle-based Northern Rock had been forced to return to the U.K. central bank for more money after a Sept. 14 bailout to stay in business.

``Coming up to quarter-end you would expect to see a small spike in Libor, but with the market so short on cash it's particularly vulnerable at the moment,'' said Oliver Mangan, chief bond economist in Dublin at AIB Capital Markets, a unit of Ireland's second-biggest bank. ``People are reluctant to lend cash while banks are scrambling to hoard as much of it as possible. This is keeping rates elevated.''

Libor for pounds, euros, and dollars has typically risen between 4 and 11 basis points over quarter-end for the last four quarters, the BBA data shows.

`Abnormally High'

The cost of borrowing pounds for three months was unchanged at 6.3 percent, after touching a nine-year high of 6.9 percent on Sept. 11. The cost of borrowing dollars was also little changed at 5.23 percent and the euro rate stayed at a six-year high of 4.79 percent.

The pound three-month rate exceeds the Bank of England's key interest rate by 56 basis points while the equivalent dollar rate is 48 basis points over the Federal Reserve's benchmark. The difference between the rate for euros and the European Central Bank's refinancing rate is 79 basis points.

``Libor spreads to official rates continue to sit at abnormally high levels,'' said Charles Diebel, head of European rate strategy at Nomura International Plc in London. ``Spreads have scope to re-widen.''

Northern Rock has borrowed a further 5 billion pounds ($10 billion) since the bailout and it now owes the central bank almost 8 billion pounds, the FT said.

Northern Rock fell as much as 5.4 percent today, while the value of U.K. home-loan providers Bradford & Bingley Plc and Alliance & Leicester Plc, which also seek financing in money markets, declined.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net;

Last Updated: September 28, 2007 10:37 EDT