Today's LIBOR Rates
1 M |
0.31563 |
 |
3 M |
0.47500 |
|
6 M |
0.68794 |
|
1 YR |
1.06438 |
|
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3-Month LIBOR Rate
3-Month LIBOR Definition, Calculation, Examples, and Links
LIBOR is calculated in 15 different maturities. The following provides background on one the maturities most commonly used as a benchmark for financial instruments such as loans.
3-Month LIBOR is a filtered average of rates charged by banks for unsecured, 90-day loans to other banks. LIBOR stands for London Interbank Offered Rate and is compiled and broadcasted by the British Bankers’ Association (BBA). The BBA selects panels of contributor banks to provide their interbank lending rates every business day. Different panels exist for each of 10 currencies, including the US Dollar, the British Pound Sterling, the Euro and the Japanese Yen.
The BBA receives daily rate reports on 3-month interbank loans from its contributor banks and averages the middle quartiles of the data submission to formulate its 3-Month LIBOR benchmark for the day. 3-Month LIBOR is an annualized rate. To determine the exact cost of funds for a loan of that duration, a bank would perform the following calculation:
Principal times rate
Divided by 365
Times 90Or:
(principal x rate / 365) x 90
3-Month LIBOR is a LIBOR index seen frequently in the news. The TED Spread and LIBOR-OIS Spread both use 3-Month LIBOR as their comparison component. The TED Spread compares 3-Month LIBOR rates to 3-Month US Treasury rates, portraying the difference between three-month borrowing costs for banks and the United States government. The LIBOR-OIS Spread compares 3-Month LIBOR to an anticipated average of central bank rates. Both spreads gauge banks’ willingness to lend with smaller gaps indicative of more willingness.
Numerous companies borrow money and issue bonds with rates set at a designated margin above 3-Month LIBOR. Some examples:
- In February 2009, Rolls Royce borrowed £200 million at 3-Month LIBOR plus 26.7 basis points (.267%).
- In July 2009, Woori Bank of South Korea offered $800 million in bonds with yields of 3-Month LIBOR plus 3.84%.
3-Month LIBOR Links
Recent 3-Month LIBOR News
