Tett: Ero banks' dollar funding gap and Libor

Last week, European leaders unveiled a €750bn (£642bn, $927bn) aid package designed to remove market fears about weak eurozone countries such as Greece, Portugal and Spain, and by extension calm any funding pressures for eurozone banks.

But something curious has been under way in the dollar funding markets. This week, the average cost banks in Europe need to pay to borrow dollars for three months has gone on rising: it was running at 46 basis points yesterday, up from 30bp earlier this month.

Meanwhile, the closely watched spread between the three-month dollar Libor and the "risk-free" Overnight Indexed Swap rate has risen to about 24bp. That does not signal as much stress as during the Lehman Brothers panic.

However, it is worse than anything seen for almost a year, and that is worrying central bankers.

The issue appears to relate to an estimated $500bn-odd funding gap haunting European banks...