Dlr interbank rates edge lower, 2-yr swap spread steady

LONDON, Oct 22 (Reuters) - The interbank cost of borrowing dollars eased and dollar-based spreads, closely-watched indicators of dollar funding pressures and financial market dislocation, held steady on Wednesday around their narrowest levels in a month.

In early London trading on Wednesday interbank rates for overnight dollar deposits were indicated in a range of between 0.3 and 1 percent compared with 0.3 and 1.4 percent USDOND= early on Tuesday in European trading.

The British Bankers' Association's London interbank offered rate (Libor) for overnight dollars was fixed at 1.28125 percent on Tuesday USDONFSR=, below the Federal Reserve's 1.5 percent target for its federal funds rate.

Three-month dollar deposit rates were indicated in a range of between 3.1 and 4 percent, compared with 3.2-4.2 percent USD3MFSR= early on Tuesday.

Deposit and Libor rates are only indicative prices of where banks are lending to each other, not necessarily the levels at which lending is actually being carried out.

The two-year dollar swap spread was quoted around 100 basis points, near the five-week low of 99 basis points struck late on Tuesday USDSB3L2Y=RR US2YT=RR.