USD LIBOR Reset Rate

LIBOR reset rate

USD LIBOR Reset Rate

USD LIBOR Comes Home

It never made sense that USD LIBOR Rate reset at 11 AM London Time (5:00 AM New York Time) when most USD banks aren’t funding themselves yet.  Even in calm markets, this process created issues in cross-currency swaps.  

USD LIBOR Reset Rate During the Credit Crisis

During the 2007-2008, credit this time lag became particularly visible.  There were plenty of other problems to focus on during the credit crisis.  But at least the other manipulations put a magnifying glass on the USD LIBOR Reset Rate issue.  After interim changes, we can look forward to permanent changes.  

The LIBOR Reset Rate Crisis

The commonly held view is that the USD LIBOR Reset crisis resulted from the Britsh Bankers Association Panel banks reporting USD LIBOR Reset Rates that were too low relative to where the LIBOR Deposit rates were trading.  The presumption was that this caused the Reset Rate to be out of line with other rates trading in the market.  This misalignment brought to light the problems with USD LIBOR Resets Rate Manipulation.  

Just a Thought: Perhaps the Panel banks had no actual USD transactions to report.  After all, the USD  hadn’t begun funding ourselves yet.

But the Asian Markets and European Markets had the same type of manipulation.  the Basis swaps, the swaps between two floating rates:  i.e., Pay 3-month EUR and Receive 3-month JPY was also impacted and out of whack.  

Please view the videos on the LIBOR crisis, found on the sidebar of this page (VIDEO, Pt 1, Pt 2 & Pt 3)

USD LIBOR Rate Changes For Now

  • ICE will administer the process of setting the LIBOR Reset rates and Thomson Reuters is responsible for data collection.
  • LIBOR Rate observations will be actual transactions downloaded from the  Swap Execution Facilities (SEF)

 More Changes to Come



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