More Fun Facts With Crisis Period LI(E)BOR

Tyler Durden's picture

Via Peter Tchir of TF Market Advisors,

Some “Crisis” Period Libor

I figured it was worth looking at some more LIBOR data. I picked on 7 banks: Barclays, Citi, UBS, JPM, RBS, DB and BOTM, largely to get a cross section from different countries.

The first thing I did was look at the range of submissions for 3 month LIBOR. I took the difference between the higher and lowest submission from these 7 banks.

The range was miniscule for the first part of 2007, but by the summer, there started to be noticeable differences between the best and worst bank, but as the Fed started cutting rates and creating various funding programs and encouraging the use of others the range settled down. After the Bear Stearns bailout, the range moved lower and was reasonably stable right until Lehman.

Since early 2009, the range has been larger than the 2007 range, but still mostly under 20 bps. But it is the time immediately after Lehman that is the most interesting.

It took a couple of days for the bank to react. For the first few days, LIBOR barely moved higher and the range remained contained. Then on the 18th of September we got the first real “shock”. Barclay submitted 3.75% while JPM was only at 3%. The first really big change.

The range appeared to stabilize until the 30th as all the banks increased rates on a daily basis. Then suddenly the range popped to 110 bps. Barclay’s was all the way to 5% now while JPM was only at 3.9%.

On October the 1st the range was still 1.1% but somehow now Citi was the lowest rate. Citi posted a 3.9% rate on October the 1st. That, I have to admit, makes me laugh.

















1 Year CDS

















So those are the rates submitted by various banks on October 1st. I have also included CDS spreads, though it is important to remember that Barclays, RBS, DB, and UBS CDS all trade in Euros while Bank of Tokyo Mitsubishi trades in yen, so they aren’t directly comparable to Citi and JPM which trade in dollars.

So, assuming anyone was telling the truth about where they could borrow for 3 months in the interbank market, Barclay’s seems relatively honest, despite the settlement with the FSA.

Outliers seem to be Citi, RBS, and to a less extent UBS. I am going by memory now, but my perception was that RBS was viewed as a worse credit than Barclay’s. CDS seems to confirm that, yet they are posting LIBOR significantly tighter. UBS always seemed to have some decent government support, so while maybe a stretch that they were quoting LIBOR close to JPM and DB, it isn’t totally unreasonable. DB if anything looks conservative relative to other prices.

Citi just seems ridiculous. The CDS market was trading it as the worst of the credits, yet here they are with the best LIBOR. That looks consistent throughout the entire the period. Maybe there is something I’m missing and just don’t remember, but it does seem surprising that Citi thought they could fund at the same level as JPM at the time in the unsecured interbank market.

At this point it is all just speculation where the information Barclay’s has provided the FSA leads, but so many people have been talking about LIBOR so long, that I would be shocked if it ends at Barclay’s and there is enough data, in my mind, to warrant some much deeper investigation.

The big question is what will the lawsuits look like and what chances they have of winning anything.

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fonzannoon's picture

Anyone ever read "The long walk"?

These banks are kind of like the kids in that book.

David Fiderer's picture

The story about Citibank is very easy to explain. In the second half of 2007, there was a panic over SIVs, Structured Investmen Vehicles, which could not be refinanced in the CP market. Unlike Asset Backed CP, SIVs are not fully backstopped by committed bank lines, nonetheless Citi felt pressure to manage its reputation risk, and so it put about $80 billion worth of SIVs back on its balance sheet. 

Hence, the need to increase borrowing in the interbank market, and other banks' skittishness about the safety of Citi. 

Libor always spikes at quarter-end (banks want to limit lending and boost their capital ratios); never more so that  during 2008.

riley martini's picture

    From Rueters propaganda service ; Dymond mislead  parliament in LIBOR scandal . Translation Dymond committed perjury in LIBOR fraud.

diogeneslaertius's picture

one rate for you

and one for the banks




the rest is statistical inevitability


LI(E)BOR: n. the dildo used in an economic  rape scenario
diogeneslaertius's picture



"I would be shocked if it ends at Barclay’s and there is enough data, in my mind, to warrant some much deeper investigation.

The big question is what will the lawsuits look like and what chances they have of winning anything."


of course it doesnt.

the lawsuits will look like paper dragons.


see you in the pit

Mercury's picture

It's entirely possible that Barclays was actually the most honest of the lot given the CDS data (CDS has a pretty good record of reflecting financial health) and what the inter-bank lending market actually was at the time. At least one of those damning emails from a British official expresses displeasure that Barclays is coming in too high at a time when everybody should have been showing high rates.

Regulators/central banks bill LIBOR as a market rate but they want to use it as an official rate and policy tool during times of stress (when accurate market data is even more crucial).  Make it the former and tie it to repo or CDS something...or make it the later and stop the charade already.  The mechanisms for determining ("fixing") LIBOR are, at best (and charitably described) antiquated, not transparent and not very useful.  Besides, if all submitters are TBTF, what difference does it make what some trader's guestimate of a would-be rate for an unspefied sized loan from an unspecified counterparty is?

knukles's picture


Has nothing to do with Citi having been bailed or owned by the Fed/UST on and off over the last 40 years... or that one of the biggest owners is a member of the Saudi Royal Family.


Citi's had more fucling heart transplants that Dick Cheney