Today's LIBOR Rates
1 M |
0.25781 |
 |
3 M |
0.29281 |
|
6 M |
0.49363 |
|
1 YR |
0.83488 |
|
FREE Newsletter
Recommended Links
 |
|
May 15, 2010
LIBOR rates continued to climb throughout the week after initial bank optimism over the announced EU/IMF bailout gave way to more uncertainty. LIBOR stands for London Interbank Offered Rate and is a filtered average of rates that banks charge each other for unsecured, short-term loans.
The European Union and International Monetary Fund pledged €750 billion to assist European nations with troubled finances and stem wider financial collapse. Primary among the European nations with debt issues is Greece, with Spain and Portugal also in a high state of indebtedness.
LIBOR rates had been moving upward prior to the announcements as banks grew more pessimistic about the state of the European economy and its effect on global financial markets. The EU/IMF announcement staunched the gloom on Monday, May 10, evidenced by the first drop for Three-Month US Dollar LIBOR in over one month. The Wall Street Journal noted the interruption in the US Dollar LIBOR’s upward trend as Three-Month LIBOR in that currency fell to 0.42125%, down from Friday's Three-Month LIBOR of 0.42813%. The Wall Street Journal also reported that LIBOR/OIS in U.S. Dollars remained steady at 18.5 basis points. This was a traditional “vote of confidence” by banks in central bank activist policies to bolster national economies.
However, the bank optimism was short-lived for the week as LIBOR rates began climbing again. The Wall Street Journal described the immediate sense of relief tempered by long-term concerns of large debt loads a failure to address the true sources of economic weakness in troubled nations such as Greece. Bloomberg BusinessWeek reported on Tuesday, May 11, that Three-Month U.S. Dollar LIBOR rose to 0.423%.
U.S. Dollar LIBOR continued to be a pessimistic indicator throughout the week, as the related Three-Month LIBOR rate continued to rise and LIBOR/OIS Spread widened to 20.2 basis points by midweek, its largest gap since August, signaling banks’ reduced willingness to lend.
On Friday, May 14, The Wall Street Journal summarized the negativity as a collective concern over institutions having exposure to banks and bonds directly involved with “peripheral” Euro Zone countries with severe financial difficulties, namely Greece, Spain and Portugal. In short, initial excitement over the EU/IMF support plan has faded and banks remain unconvinced that the worst is over. This absence of bank confidence is translating directly into higher LIBOR rates, seen most acutely in U.S. Dollar LIBOR.