The credit crunch will still be hurting banks at the end of the year as they continue to scramble for cash to shore up their balance sheets, according to key measures of stress in the markets.

The spread between average overnight rates and London interbank offered rates, the rate at which banks lend to each other - a spread seen as a pure measure of credit risk - has jumped to an all-time record level for December.

This spread, forecasting the extra interest banks must pay to borrow dollars over three months at the end of the year, has doubled since Lehman Brothers collapsed two weeks ago.

It rose to just under 200 basis points at the end of last week, around the same level as the extra cost to borrow three-month money today, which is also at record highs.

Don Smith, economist at inter-dealer broker Icap, said: "This spread [in December] suggests there will still be stresses in the market at the end of the year, traditionally a time when funding comes under pressure."

Other indications of stresses to come can be seen in forecast overnight rates for Libor at the turn of the year, although traders say these could come down sharply in the event of a positive conclusion to the US plan to buy up toxic assets.

Dollar Libor is forecast to rise to 12 per cent at the end of the year, sterling Libor to 10 per cent and euro Libor to 7.7 per cent.

This compares with overnight Libor rates on Friday of 2.3125 per cent for the dollar, 5.0 per cent for sterling and 4.0687 per cent for the euro.

Some traders are predicting money market strains will intensify on Monday as the end of the third quarter on Tuesday approaches.

The end of the third quarter is also a time of acute funding pressure as it marks the end of the financial year for many Asian banks and companies.

Fidelio Tata, derivatives strategist at RBS Greenwich Capital, predicts three-month dollar Libor will rise 20-25bp higher on Monday , "causing further pain to the financial markets".

Three month dollar Libor fixed at 3.76 per cent on Friday, a sharp rise since mid-September when it stood at 2.81 per cent.

The elevation in Libor has reflected a loss of trust among investors such as money market funds, which lend to banks for short periods of time.

The recent demise of Lehman and Washington Mutual has compounded the fears of counterparty risk.

"Libor is not a credit problem, it is a balance sheet and capital problem," said Michael Cloherty, strategist at Banc of America Securities.

"We think Libor will settle down somewhat after quarter-end."

Following the bankruptcy of Lehman, about $400bn was taken out of money market funds, which are heavy buyers of short-term debt issued by financial institutions.