Where are Worldwide Rates heading ? - LIBORS

lemonjelly

inspector_monkfish wrote: »

nothing i am implying, just facts and figures.....
i still firmly believe that rates will not rise at least for another year

bottom line is, GBP 12mth LIBOR probably went too low 3mths ago


looking at the data another way...

USD 12mth LIBOR is currently 88 basis pts above base rate of 0.00pct
GBP 12mth LIBOR is currently 77 basis pts above base rate of 0.50pct
EUR 12mth LIBOR is currently 20 basis pts above base rate of 1.00pct
AUD 12mth LIBOR is currently 158 basis pts above base rate of 3.75pct

so we're pretty much in the line with the middle of things i would say...

Am I to take it that the recent inflation figures haven't changed your opinion?

(FWIW I think I kinda agree they won't rise soon...by more than 0.5%;))

inspector_monkfish

lemonjelly wrote: »

Am I to take it that the recent inflation figures haven't changed your opinion?

(FWIW I think I kinda agree they won't rise soon...by more than 0.5%;))

for now, i'm still unchanged yes

lemonjelly

inspector_monkfish wrote: »

for now, i'm still unchanged yes

Aha!
bets being hedged?;)
Can I ask why libors went too low? Would this be a result of panic?
Forgive me, libors are set by the market, is that right? So why was the GBP libor rate so different?

inspector_monkfish

lemonjelly wrote: »

Aha!
bets being hedged?;)
Can I ask why libors went too low? Would this be a result of panic?
Forgive me, libors are set by the market, is that right? So why was the GBP libor rate so different?

no hedging, but we are constantly getting closer to my estimated time for a hike, which currently still stands around 'early 2011'

just over excitement from the banks that set libors
they were mostly very long of cash on their books heading into year end, so more than happy to offer it cheaply to their clients that have libor agreements

now that year end is out the way, the banks can relax again and start hoarding more cash, without having to offer it quite so cheap

lemonjelly

inspector_monkfish wrote: »

no hedging, but we are constantly getting closer to my estimated time for a hike, which currently still stands around 'early 2011'

just over excitement from the banks that set libors
they were mostly very long of cash on their books heading into year end, so more than happy to offer it cheaply to their clients that have libor agreements

now that year end is out the way, the banks can relax again and start hoarding more cash, without having to offer it quite so cheap

Great answer - nice & accessible. Many thanks.

Personally I think IR's could go up sooner, but I know nowt!:D

inspector_monkfish

lemonjelly wrote: »

Great answer - nice & accessible. Many thanks.

Personally I think IR's could go up sooner, but I know nowt!:D

of course they could !!

lemonjelly

inspector_monkfish wrote: »

of course they could !!

Don't play semantics with me!!:D

princeofpounds

LIBOR is the London Interbank Offered Rate. It's normally the most liquid market for borrowing and lending money between financial institutions in different currencies, and there are different rates for each currency and also for a variety of time horizons. Presumably what you have pasted here are the overnight rates, which are the shortest duration rates.

They contain absolutely no indication of where interest rates will go. All the contain is information of where interest rates are, and where they have been (if you compare to past data, as you have already).

If you want to look at where interest rates are likely to go, the market already has a mechanism for such expectations. It is called the forward curve of interest rates (although you might also hear it called the yield curve, which contains the same information but is presented slightly differently).

Broadly speaking these curves represent expectations about future interest rate moves as determined by the market (they are not pure expectations thanks to various practical complications, but they are close).

And in general they point to rates increasing. This is hardly surprising as central banks are increasing the supply of money to reflate the economy, which makes money worth less over time and causes inflation, and so you need a higher interest rate to be incentivised to lend to someone else, particularly over a longer time period.

The market could be wrong on the exact rate or timing, but it represents the accumulated expectations of everyone on earth.*

*Edit: well, those who have the cash and are involved in the market anyway!

inspector_monkfish

princeofpounds wrote: »

Presumably what you have pasted here are the overnight rates, which are the shortest duration rates.

They contain absolutely no indication of where interest rates will go. All the contain is information of where interest rates are, and where they have been (if you compare to past data, as you have already).
.

as it says above, they are 12mth LIBOR rates.

by the way, i am a trader for a bank in the interbank cash money markets.

lemonjelly

:eek:
I'm slightly scared, because I think I understand princofpounds' post.

Not sure what scares me more - the fact I (think I) understand it, or the consequences of what the post contains!:eek: