Dr. Ed’s
Economic
Indicators

LONDON INTERBANK OFFERED RATE

Release Date: Daily Readings/Published with Lag
Release Coverage: Monthly-End
Released By: British Bankers' Association (BBA)
Official Release: http://www.bloomberg.com/apps/quote?ticker=US0003M:IND

LIBOR is the rate of interest at which banks borrow funds from each other, in marketable size, in the London interbank market. The BBA LIBOR is the most widely used "benchmark" or reference rate for short term interest rates. It is compiled by the BBA with Reuters and released to the market shortly after 11.00 a.m. London time each day.

The BBA LIBOR is fixed on behalf of the BBA by the Designated Distributor and the rates are made available simultaneously via a number of different information providers. Contributor panels are comprised of at least eight contributor banks. Contributor panels broadly reflect the balance of activity in the inter bank deposit market.

WHAT DR. ED SAYS:

The most obvious changes in LIBOR are reflected in many banks' loan portfolios; it is similarly tied to the prime rate and target rate of loans. It is generally accepted that the rate is offered to the best/most creditworthy customers, while additional points may be purchased or the rate may be increased to offset credit risk. Also, the cost of borrowing U.S. dollars in the interbank market falls as risk drops. With this in mind, the strength of the dollar and the perceived risk of the dealing in the dollar can be derived from the changes in the rate.

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