Today's LIBOR Rates
1 M |
0.25781 |
 |
3 M |
0.29281 |
|
6 M |
0.49363 |
|
1 YR |
0.83488 |
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LIBOR-OIS Spread Remains Tight |
September 25, 2009
Reuters reports that the LIBOR-OIS Spread, a key gauge of banks’ confidence in the market, remained tight, indicating continued optimism. LIBOR stands for London Interbank Offered Rate and is a filtered average of rates that banks charge each other for unsecured, short-term loans.
At press time, the LIBOR-OIS Spread was 12.4 basis points, up slightly from recent lows of approximately 11 points. The LIBOR-OIS Spread in U.S. Dollars compares the rates for 3-Month Dollar LIBOR with the overnight index swap, an anticipated monthly average of the federal funds rate. The closer LIBOR veers to the historically more stable OIS component, the more the spread shrinks. A smaller spread denotes more bank confidence as institutions are charging lower interest rates to their most trusted customers—other banks.
The Reuters article attributes the tight LIBOR-OIS Spread to banks’ satisfaction with ongoing Federal Reserve policy to bolster the economy, seen most notably in the recent decision to leave its rates at near zero for the foreseeable future. A quoted expert predicts a LIBOR-OIS Spread of 8.5 to 9 basis points by year’s end.