This page has been archived and commenting is disabled.

3 Month EUR Libor Joins Euribor At Year Highs

Submitted by Tyler Durden on 07/29/2010 08:11 -0400

Even as RBS attempts to once again soothe the frayed nerves of concerned investors with groundless Koolaidery, 3 Month EUR Libor has once again jumped to 2010 highs. As Market News reports, even as the overnight EUR LIBOR rate "plunged, and one and
two week rates fell markedly, ahead of the month-end" and ahead of eurodollar arbitrage settlements, "the 3-month
LIBOR continued its ascent." Which should be very concerning to all, especially RBS which once already burned its investors by outright prevaricating the truth about Greece in February when the bank refuted facts presented by Zero Hedge there was a bank run in the country. Alas, those who listen to RBS' unfounded optimism once again likely to be burned: "The “widening is very minimal,” says Jacques Cailloux, chief European
economist at Royal Bank of Scotland Group, who says this same rate
surpassed 5% at the height of the global financial crisis in 2008. “I
wouldn’t go so far as to say that it (the rise) suggests things are
getting worse. With both Euribor and 3 Month EUR Libor, not to mention top tier European Commercial Paper, at 2010 highs, to say that the European money market is getting better is simply idiotic.

- advertisements -

Thu, 07/29/2010 - 08:24 | 493820 jm

Eur LIBOR/OIS spread. Seeing that spread widen means something is not right with counterparty risk.

Thu, 07/29/2010 - 08:31 | 493824 kaiten

I dont get it. What´s the fuss about? 3 months EUR Libor is at historic lows this year. See the chart below:

http://www.homefinance.nl/english/international-interest-rates/libor/eur...

Thu, 07/29/2010 - 08:35 | 493830 Tyler Durden

The fuss is about the fact that with the ECB, IMF and EU backstopping everything, this number should be at 0.000%

Thu, 07/29/2010 - 08:44 | 493842 emsolý

should be at whatever interest rate the ECB pays on reserves (0.25%)

Thu, 07/29/2010 - 08:52 | 493861 kaiten

Sure, perhaps it should. But free money would only lead to another bubble. The sooner it gets to normal levels, the better, imho.

Thu, 07/29/2010 - 09:05 | 493871 jm

The spread against OIS is telling a story of counterparty trust breakdown. OIS is an onvernight swap rate, and isn't moving. Normalization (inflation, growth blah,blah) would mean OIS would move with 3M Euro LIBOR.

That it is only 3M euor LIBOR moving means that trust for even 3 months of unsecured lending among top tier banks is breaking down.

My question is whether wholesale funding (money markets) is more of a dollar LIBOR issue.

Thu, 07/29/2010 - 08:44 | 493849 morph