The European Central Bank (ECB) today acted to inject liquidity into the eurozone money markets, offering to lend funds to financial institutions at an interest rate of just 4 per cent.

The Bank, which pumped €94.8 billion (£63.9 billion) into the European banking system in early August when the liquidity crisis was in its infancy, made €42 billion available to financial institutions who were given a deadline of early this morning to borrow at the one-off rate.

The ECB's move follows the Bank of England's decision yesterday to offer £4.4 billion in extra funding to British banks struggling under the current liquidity crisis.

Today's 4 per cent borrowing rate set by the ECB is equivalent to the European interest rate, which remain frozen today after a meeting with the ECB's 19-member governing council. The Bank of England also kept interest rates unchanged at 5.75 per cent.

Background

• Markets regain liquidity but outlook unclear

• World markets plunge into red

• Shares plunge after ECB pumps a record €95bn into markets

A milestone reached by central banks

Amid the turbulence, the world’s central banks have been largely in lock step. In a global marketplace, they need to be

Related Links

• The Times MPC: The September verdict

• BoE breaks its silence over credit crisis

• OECD cuts growth forecasts after turmoil

The ECB announced the new cash injection as evidence emerged stability was returning to some parts of the bond markets.AstraZeneca, the drugs giant, successfully completed a bumper $6.9 billion (£3.4 billion) bond issue to help refinance its acquisition of MedImmune, the US biotechnology company.

The bond sale was the biggest so far this year and came despite the turmoil that broke out in the international credit markets just over two months ago.

Sources said the weight of demand from investors meant AstraZeneca was able to raise more money than it had originally planned, but acknowledged that risk-averse buyers had forced the Anglo-Swedish group to offer a higher return.

"Every borrower in this market has to pay up," said one source close to the deal. "This was a large transaction in a choppy market. Astra went out and were able to increase the size. The question is: is the price right? Something has to give."

Banking sources added that over the past two days, the market for bonds sold in dollars has markedly improved, adding that yesterday's assurances given by the Bank of England that it would inject extra capital into the markets if necessary had been welcomed.

AstraZeneca's dollar bond sale follows a two-tranche bond issue by General Electric that was also hailed as evidence that the markets were still open to the right issuers. GE sold one €1.6 billion bond and a £600 million bond.

Paul Kenyon, Astra's finance director, denied suggestions that raising the debt capital had been more expensive because of market condtions.

"We are very comfortable in terms of market timing and pricing," he said. "This is the outcome of being a quality issuer with a good story and a firm and stable credit rating. Quality issuers are still able to get good rates."

AstraZeneca, rated A1 by Moody's and AA- at Standard & Poor's, said the bonds were oversubscribed but declined to go into further detail.

The group, which earlier this year paid more than $15 billion for MedImmune, will be able to use the proceeds to repay a "significant portion" of the US commercial paper (CP) it issued to finance the acquisition over the short term.

The CP market has completely seized up in recent weeks as investors flee to safe-haven investments such as government bonds.

Astra issued four tranches of debt. The biggest line, of $2.75 billion was repayable over 30 years and paid an interest rate, or coupon, of 6.45 per cent. The group sold $1.75 billion each of five-year and 10-year bonds, paying 5.4 per cent and 5. 9 per cent respectively.

It also raised $650 million repayable over two years and a rate that is 0.3 per cent above dollar Libor, or the rate banks in London charge each other to borrow funds in dollars over three months.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC and JP Morgan were the joint bookrunners on the bond sale.

On Tuesday, HBOS, the mortgage bank, issued €2bn of 'covered' bonds in a further sign of the return of market liquidity. The issue was twice subscribed at 5 basis points over Euribor, the rate eurozone banks charge to lend to each other.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• B&B shareholders forced into funding rescue
• John Lewis department store sales plunge 8.3%
• Families turn to credit to cover mortgage bills