* Libor falls across the board for dollars, euros, sterling
* 3-month dollar Libor at 2.50 percent, lowest since December 2004
* Dollar, euro spreads narrow; sterling wider
* Strains still evident; ECB reports record o/n deposits
(Recasts, updates with Libor fixings, adds quotes, comment and context. Changes byline and dateline)
By Jamie McGeever
LONDON, Nov 5 (Reuters) - The rates at which banks lend three-month dollar funds to each other fell on Wednesday to its lowest level in almost four years, indicating severe money market strains continued to ease.
London interbank offered rates at the British Bankers' Association's daily fixing for these three-month dollars fell 20 basis points to 2.50625 percent, the lowest since December 2004.
While interbank rates remain high relative to official benchmarks, the Libor premium over anticipated official interest rates measured by Overnight Index Swaps fell below 200 basis points for the first time since the immediate aftermath of the Lehman Brothers collapse.
Euro and sterling Libor fell across the board too, although sterling Libor/OIS spreads widened.
Central banks' measures to get markets functioning again -- via liquidity provisions, currency swaps, purchases of commercial paper and other assets as well as anticipated interest rate cuts -- all help, analysts say.
However, they added that banks remained loath to lend for more than a month despite a steadying in nominal interbank lending rates and a narrowing in spreads, again mostly in U.S. dollars.
The European Central Bank said overnight deposits at the central bank were a record 295 billion euros ($378.9 billion) as of Nov. 4, while sources said China was considering a plan to help selected foreign banks secure funding in its money market.
A global economic slowdown is crimping firms' ability to borrow and banks' willingness to lend.
"Rates are falling ... which may help companies get the funding for the next 90 or 270 days but from a pure business perspective why would you lend money if the number of insolvencies is going to rise?" said Kenneth Broux, financial markets economist at Lloyds TSB in London.
"Are you going to lend to a counterparty knowing full well that there's a big risk that counterparty could go bust?"
CENTRAL BANK HELP
Wednesday's was the 18th straight session that the BBA's three-month dollar Libor rate -- the global benchmark interest rate for corporate, household and financial derivative borrowing -- was fixed lower.
The premium paid for three-month Libor over comparable T-bill yields -- known as the "TED" spread -- was indicated around 200 basis points, the narrowest since late September and less than half levels seen a month ago, Reuters charts showed.
Euro and sterling Libor fell across the board too and euro Libor/OIS spreads narrowed. Sterling spreads widened, however, as UK rates markets moved more aggressively to price in the possibility of a full percentage point rate cut from the Bank of England on Thursday.
Libor rates are only indicative prices of where banks are lending to each other, which institutions use as a base to set their own lending rates.
The premium paid for two-year interest rate swaps over two-year U.S. government bond yields fell to around 105 basis points from 119 basis points Tuesday.
Earlier on Wednesday, the ECB allotted some $58.6 billion in one-week funds, and the Swiss National Bank allotted $2.1 billion in a seven-day repo and swapped 3.9 billion euros in a three-month currency swap.
The Bank of England drained only 850 million pounds in overnight money compared with a target of 15 billion pounds, and alloted $20.55 billion in a seven-day auction.
(Reporting by Jamie McGeever; Editing by Ruth Pitchford)