USD LIBOR
MacroVar monitors USD LIBOR current rates and provides analytics and data for USD LIBOR with maturities of: Overnight, 1 month, 3 months, 6 months and 1 year.
USD LIBOR it is being phased out by the end of June 2023 and replaced by a new benchmark rate called the Secured Overnight Financing Rate (SOFR).
| Date | O/N | 1M | 3M | 12M |
|---|---|---|---|---|
| 30-06-23 | 5,06 | 5,22 | 5,55 | 6,04 |
| 29-06-23 | 5,05 | 5,21 | 5,53 | 5,96 |
| 28-06-23 | 5,07 | 5,19 | 5,54 | 5,94 |
| 27-06-23 | 5,06 | 5,19 | 5,53 | 5,91 |
| 26-06-23 | 5,06 | 5,18 | 5,52 | 5,88 |
| 23-06-23 | 5,07 | 5,15 | 5,54 | 5,93 |
| 22-06-23 | 5,07 | 5,15 | 5,54 | 5,90 |
| 21-06-23 | 5,06 | 5,15 | 5,54 | 5,90 |
| 20-06-23 | 5,08 | 5,15 | 5,52 | 5,90 |
| 16-06-23 | 5,07 | 5,16 | 5,51 | 5,88 |
MacroVar also analyzes the LIBOR forward curve to monitor the market’s expectations in regards to central bank monetary policy (rate hikes/cuts), financial markets and economic outlook.
What is USD LIBOR
USD LIBOR (London Interbank Offered Rate) is a benchmark rate that some of the world’s leading banks charge each other for unsecured USD-denominated loans in the short-term money market. The USD LIBOR index is the adjustable interest rate referenced on hundreds of trillions of U.S. dollars’ worth of debt and derivatives. USD LIBOR is administered by the ICE Benchmark Administration (IBA) serves the following maturities: overnight, one week, and 1, 2, 3, 6 and 12 months. The most commonly quoted rate is the three-month U.S. dollar rate.
USD LIBOR contributors
The financial institutions which are contributors in calculating the USD LIBOR index are: Bank of America, 2. Bank of Tokyo-Mitsubishi UFJ, 3. Barclays Bank, 4. Citibank NA, 5. Credit Agricole CIB, 6. Credit Suisse, 7. Deutsche Bank, 8. HSBC, 9. JP Morgan Chase, 10. Lloyds Banking Group, 11. Rabobank, 12. Royal Bank of Canada, 13. Société Générale, 14. Sumitomo Mitsui Banking Corporation Europe Ltd, 15. Norinchukin Bank, 16. Royal Bank of Scotland, 17. UBS AG
What Is USD LIBOR and Why Is It Being Replaced?
If you have ever taken out a loan, a mortgage, or a credit card, you may have encountered the term LIBOR in your contract. LIBOR stands for London Interbank Offered Rate, and it is a benchmark interest rate that reflects the average cost of borrowing for major global banks in the interbank market. LIBOR is calculated and published daily by the Intercontinental Exchange (ICE) for five currencies (USD, EUR, GBP, JPY, and CHF) and seven maturities (overnight, one week, and one, two, three, six, and 12 months). The most widely used LIBOR rate is the three-month USD LIBOR, which affects the pricing of hundreds of trillions of dollars worth of financial products worldwide.
However, LIBOR is not without its flaws. In fact, it is being phased out by the end of June 2023 and replaced by a new benchmark rate called the Secured Overnight Financing Rate (SOFR). Why is this happening and what does it mean for you? Here are some key points to understand:
- LIBOR is based on estimates, not transactions. Unlike other interest rates that are derived from actual market transactions, LIBOR is based on what banks report they would charge each other for short-term loans. This means that LIBOR is not necessarily reflective of the true market conditions and can be subject to manipulation. In fact, several banks were fined billions of dollars for rigging LIBOR rates during the 2008 financial crisis, undermining the credibility and trustworthiness of the benchmark.
- LIBOR is losing relevance and liquidity. As the financial markets evolved over time, the interbank lending activity that underpins LIBOR has declined significantly. Banks now rely more on other sources of funding, such as deposits, repurchase agreements, and central bank facilities. This means that there are fewer transactions to support the calculation of LIBOR rates, especially for longer maturities and less popular currencies. As a result, LIBOR rates have become more volatile and less representative of the actual cost of borrowing for banks.
- LIBOR is being replaced by SOFR. In response to these issues, global regulators have decided to reform or replace LIBOR with alternative reference rates that are more robust and reliable. In the US, the Federal Reserve convened a group of market participants called the Alternative Reference Rates Committee (ARRC) to identify a suitable replacement for USD LIBOR. The ARRC selected SOFR as the preferred alternative rate in 2017 and has been working to facilitate the transition from LIBOR to SOFR since then. SOFR is based on the actual transactions in the overnight repurchase agreement (repo) market, where banks and investors borrow or lend cash secured by Treasury securities. SOFR is considered to be more transparent, stable, and representative of the US funding market than LIBOR.
What does this mean for you?
If you have any financial products that are linked to USD LIBOR, such as loans, mortgages, credit cards, derivatives, or bonds, you may be affected by the transition to SOFR. Depending on your contract terms, your interest rate may change when LIBOR is discontinued or replaced by SOFR or another fallback rate. This may have an impact on your payments, cash flows, and risk exposure. Therefore, it is important to be aware of the following:
- Check your contracts and contact your providers. You should review your contracts and identify any references to USD LIBOR and how they will be affected by its cessation. You should also contact your financial providers and ask them about their plans for transitioning from LIBOR to SOFR or another alternative rate. You should understand how your interest rate will be calculated after the transition, whether there will be any changes to your payments or terms, and whether you have any options or rights to renegotiate or opt out.
- Be prepared for potential differences between LIBOR and SOFR. You should also be aware that SOFR may not behave exactly like LIBOR in different market conditions. For example, SOFR tends to be lower than LIBOR because it is secured by Treasury securities and does not include any credit or term premium. However, SOFR may also spike during periods of stress or high demand for cash, as seen in September 2019 and March 2020. Therefore, you should monitor the movements of SOFR and how they may affect your interest rate and payments after the transition.
- Stay informed and seek advice. The transition from USD LIBOR to SOFR is a complex and ongoing process that involves many stakeholders and challenges. You should stay informed of the latest developments and milestones of the transition by following the official sources of information, such as the ARRC website (https://www.newyorkfed.org/arrc), the Federal Reserve Bank of New York website (https://www.newyorkfed.org/markets/opolicy/operating_policy_150506), and the ICE website (https://www.theice.com/iba/libor). You should also seek professional advice from your financial providers, advisors, or lawyers if you have any questions or concerns about how the transition may affect you.
The transition from USD LIBOR to SOFR is a historic and significant change for the global financial system. It aims to enhance the safety and soundness of the interest rate benchmarks that underpin a wide range of financial products and services. As a consumer, you should be aware of the implications of this change and take the necessary steps to prepare for it.