Today's LIBOR Rates
1 M |
0.25781 |
 |
3 M |
0.29281 |
|
6 M |
0.49363 |
|
1 YR |
0.83488 |
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June 27, 2010
LIBOR rates for the Euro climbed during the week, resembling a recent rise for U.S. Dollar LIBOR rates. In the meantime, Dollar LIBOR leveled off. LIBOR stands for London Interbank Offered Rate and is a filtered average of rates that banks charge each other for unsecured, short-term loans.
Driving Euro LIBOR’s climb is the anticipation of the European Central Bank (ECB) rolling back its liquidity programs to bolster regional economies. As LIBORATED.com has reported, financial institutions approve of activist central bank policies such as cash infusions. This approval is reflected in lower interbank lending rates, expressed in corresponding lower LIBOR rates.
On Monday, Reuters reported that Euro LIBOR rose from 0.66125% to 0.66438% ahead of banks’ scheduled payback of €442 billion of one-year loans to the ECB. Reuters cited analysts who attributed the rise to decrease availability of liquidity. A Bloomberg News article presented a similar opinion from Barclays that Euro LIBOR would rise in response to the ECB winding down its rescue financing.
As the week began with a rise in Euro LIBOR, the Euro LIBOR/OIS Spread actually tightened to 17 basis points, due to a rise in the central bank portion of the comparison index, the OIS or Overnight Indexed Swap, an anticipated monthly average of overnight rates. The LIBOR/OIS Spread is another indicator of bank confidence as a smaller spread denotes increased willingness to lend.
Contrary to the ECB’s liquidity rollback, America’s Federal Reserve indicated its willingness to maintain its rates at historically low levels. According to The Wall Street Journal, the Federal Open Market Committee (FOMC) issued a guarded assessment of U.S. economy combined with the expectation of subdued inflation, all contributing to its decision to leave rates untouched.
On Friday, iMarketNews.com noted a sharp increase in Euro Three-Month LIBOR from 0.66938% to 0.67375%, a 0.44 basis point increase, putting Euro LIBOR at its highest level since December 2009. The article noted U.S. Dollar Three-Month LIBOR falling 0.25 basis points to 0.53469%. The LIBOR/OIS Spread in U.S. Dollars widened to 33.219 basis points due to a decrease in the OIS component.
Despite the week’s leveling of U.S. Dollar LIBOR, The Wall Street Journal reported an anticipated mark of 0.71% for the U.S. Dollar Three-Month LIBOR per September 2010 Eurodollar futures. The previous settlement produced an expected LIBOR rate of 0.66%.