With a rate increase a foregone conclusion when the Federal Reserve concludes its two-day policy meeting on Wednesday, traders have been actively pricing it in. The three-month U.S. dollar London interbank offered rate, or Libor, which is one of the benchmarks for setting borrowing rates worldwide, has been on the rise since Feb. 7, reaching 2.25 percent, the highest since 2008 (and the financial crisis).
Meanwhile, its gap over similar-maturity risk-free rates, known as the Libor-OIS spread, has more than doubled since the end of January to 55 basis points, a level unseen since 2009.
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With The Fed taking its foot off the monetary brakes (at long last), Libor and the Libor-OIS are “born to run.” UP!
Here is my friend, Atlanta Fed’s President Raphael Bostic, and Fed Chair Jerome Powell.
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