Short-term borrowing rates soared yesterday to near six-year highs as banks and other financial institutions scramble to secure cash to cover their commitments over the next month and into the New Year, a period traditionally when liquidity among lenders is squeezed.

The development comes just a day after the European Central Bank failed to alleviate severe short-term funding pressure by injecting €50bn ($74bn) into the money markets, forcing it to take additional steps to ease the tension over the festive period.