3-month Libor at record lows

inspector_monkfish

12:09 15Sep09 -3-month Libor at record lows; dlr OIS narrowest since Q3 2007

LONDON, Sept 15 - The interbank cost of borrowing
dollar, euro and sterling funds for three months all marked new
record lows on Tuesday, the latest daily fixing from the British
Bankers' Association showed.

The spread of three-month dollar Libor rates over OIS rates
tightened by two basis points to 13 bps - its narrowest level
since at least the third quarter of 2007 when the global credit
crisis began, according to Reuters charts. The tighter spread
reflected the large amount of liquidity still in the banking
system.

The equivalent OIS spread for euro funds dipped by one basis
point to 33 bps, its narrowest since January 2008 and close to
29 bps, the level at which the spread would be the tightest
since the third quarter of 2007.

The equivalent OIS spread for sterling funds edged away from
its third quarter 2007 lows.

The spread expresses the three-month premium paid over
anticipated central bank rates, or Overnight Index Swap rates,
and is seen as a gauge of banks' willingness to lend to each
other -- a wider spread is seen as an indication of decreased
inclination to lend.

Below is a table of the London interbank offered rates
(Libor) for dollar, euro and sterling funds in percentage terms,
with the change from the previous fixing in parentheses.

EURO STERLING DOLLAR

O/N 0.27500 (+0.00125) 0.50250 (+0.00000) 0.21875 (+0.00000)
1WK 0.30375 (+0.00125) 0.50625 (-0.00125) 0.23938 (+0.00000)
2WK 0.33375 (+0.00375) 0.51000 (-0.00125) 0.24375 (+0.00125)
1MO 0.39875 (+0.00375) 0.50500 (-0.00313) 0.24250 (+0.00125)
2M0 0.57188 (-0.00187) 0.52000 (-0.00375) 0.25438 (+0.00000)
3MO 0.72063 (-0.00375) 0.61063 (-0.00937) 0.29338 (-0.00162)
6MO 1.02438 (-0.00250) 0.81875 (-0.01188) 0.67500 (-0.00125)
1YR 1.24125 (-0.00375) 1.14750 (-0.00875) 1.26000 (+0.00625)

StevieJ

Does mean that the banks trust each other now

inspector_monkfish

StevieJ wrote: »

Does mean that the banks trust each other now

:rotfl:no !!

purch

The spread of three-month dollar Libor rates over OIS rates
tightened by two basis points to 13 bps

Something doesn't add up here.

The longer this goes on, the more nervous I am getting :eek:

inspector_monkfish

purch wrote: »

Something doesn't add up here.

The longer this goes on, the more nervous I am getting :eek:

dollars move up and down a bit everyday

sterling seems to be only going 1 way...

chucky

purch wrote: »

Something doesn't add up here.

The longer this goes on, the more nervous I am getting :eek:

why?

ps. i'm not using the Devonian Economic tactic of disagreeing with you just because you are allegedly a "bull". i'm interested why you think that.

purch

LIBOR's are at record Lows.

The OIS spread indicates everything is 'hunky dory'

Money is still not moving.

Either the damn will burst and we will struggle to be able to stop the flow, or .................... doesn't bear thinking about.

Hopefully I am being irrational, and there is an obvious 3rd option.

chucky

purch wrote: »

LIBOR's are at record Lows.

The OIS spread indicates everything is 'hunky dory'

Money is still not moving.

Either the damn will burst and we will struggle to be able to stop the flow, or .................... doesn't bear thinking about.

Hopefully I am being irrational, and there is an obvious 3rd option.

i'm with you. it's not knowing how much Weimar Republic style money will end up on the markets

my initial impressions where that it would take at least 12 months for the QE money that didn't end up plug up the holes on balance sheets to flow through onto the money markets. i'm waiting for the signal - not convinced it's reached yet.

Generali

chucky wrote: »

i'm with you. it's not knowing how much Weimar Republic style money will end up on the markets

my initial impressions where that it would take at least 12 months for the QE money that didn't end up plug up the holes on balance sheets to flow through onto the money markets. i'm waiting for the signal - not convinced it's reached yet.

M4 (the broadest measure of the money supply) has been basically flat over the last 4 months (link).

M0 (notes and coins in circulation plus bank reserves) have risen about 200% (2700% annualised) in the last 4 months (link).

There's a big disconnect there. At some point, if QE continues, presumably those big rises in M0 will start to flatten out (as banks stop adding cash to their reserves) and big rises in M4 will occur instead. I dread to think what would happen to inflation if M4 rose by 200% in 4 months!

(Again presumably) the Bank of England is waiting for M0 growth to slow as a signal that bank balance sheets are repaired and so QE can cease although it wouldn't be a signal to reverse the policy necessarily.

Who'd be a central banker?

michaels

I understood that companies are issuing bonds again, the upturn in M&A activity is hard to miss and even 'securitisation' (sorry to swear) seems to be making a comeback on a limited basis - even basket case banks like LTSB have been reported to have raised money - or be it at userous rates for short tenors...

purch wrote: »

LIBOR's are at record Lows.

The OIS spread indicates everything is 'hunky dory'

Money is still not moving.

Either the damn will burst and we will struggle to be able to stop the flow, or .................... doesn't bear thinking about.

Hopefully I am being irrational, and there is an obvious 3rd option.

inspector_monkfish

GBP LIBORs down quite a bit again today, after King's comments yesterday

3mth down 1.6bp to 0.595
6mth down 1.8bp to 0.80