Central banks pumped more than $11 billion (£6.3 billion) into money markets today, seeking to ease a credit freeze threatening to tip the world economy into a recession.

As the Bank of England rolled over its now-regular $10 billion overnight and $30 billion weekly injections, the Bank of Japan put in one trillion yen ($9.8 billion) as the Tokyo three-month interbank rate held at 0.87%, the highest this year.

The Reserve Bank of Australia added A$1.815 billion ($1.3 billion) and cut interest rates by a huge one percentage point. Taiwan's overnight lending rates surged the most since June 2007.
Short-term lending rates between banks have jumped as lenders store cash to bolster balance sheets, sheltering from bank failures and plunges in global stocks and commodities.

The Nikkei 225 Stock Average fell below 10,000 for the first time since December 2003 as Asian shares slumped to the lowest since July 2005, extending a rout that wiped more than $2 trillion off global equities.

“There's a massive asset bubble deflating and it just encompasses everything," said Adam Carr at Icap Australia in Sydney. “We've been living in a dreamland and that dream has ended."

Financial institutions have incurred $585 billion in writedowns and credit-market losses since the collapse of the US subprime mortgage market in early 2007.

The London interbank offered rate, or Libor, which banks charge each other for overnight loans, yesterday rose 37 basis points to 2.37%. The three-month rate fell to 4.29 % from the highest since January.

The US dollar Libor-OIS spread, the difference between the three-month dollar rate and the overnight indexed swap rate, stood at 289 basis points today, after touching 298 points yesterday.