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 22, 2010
LIBOR rates continued to rise throughout the week, led by US Dollar LIBOR which returned to levels not seen in nearly one year. LIBOR’s ascent represents banks’ negative reactions to the eurozone debt crisis and the EU’s attempts to stem it. LIBOR stands for London Interbank Offered Rate and is a filtered average of rates that banks charge each other for unsecured, short-term loans.
In The Wall Street Journal’s MarketBeat blog, Matt Phillips urged market watchers to “keep a close eye” on Three-Month LIBOR (LIBORATED.com adds that the best place to do that is right here at LIBORATED.com). Phillips cites this key LIBOR index as a detector of “where the worries are in the market.”
According to Phillips, major worries inflaming LIBOR rates include:
- Determining which banks have the most exposure to the “peripheral” eurozone countries leading the debt crisis—Greece, Spain, Portugal
- The possibility of restrictive economic policies in response to the debt crisis, throttling growth
- Restrictive trade policies on the continent as another debt crisis reaction, prompting the United Kingdom and the United States to follow suit
On Monday, Financial Times expressed many of the same themes presented in Phillips’ blog. FT added that LIBOR is moving upward even though central banks are maintaining low rates, an activist policy to maintain liquidity that typically pleases banks and inspires lower LIBOR rates. Concerns about the EU debt crisis are trumping this traditional LIBOR rate suppressant.
On Tuesday, The Wall Street Journal reported that the LIBOR/OIS Spread in US Dollars had expanded to 24 basis points. The LIBOR/OIS Spread compares Three-Month LIBOR to the Overnight Indexed Swap, an anticipated monthly average of federal funds rates. When the LIBOR component diverges from the historically more stable OIS component, banks are demonstrating more unease banks regarding lending.
The specter of the EU crisis spreading to other markets has affected their interbank rates and outlooks. Matt Phillips noted on Wednesday that Sterling LIBOR rates actually declined from 0.69625% to 0.69594%; however, The Sydney Morning Herald speculated on UK economic woes driven by the continent’s financial issues. In Asia, Bloomberg BusinessWeek noted that SIBOR, the Singapore market’s counterpart to LIBOR, rose to 0.49583%, its highest level in 10 months.