Three-Month Libor Fixing Falls by the Most Since May 2009 (Signal That The Fed Might CUT Their Target Rate?)

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.

One of the world’s most important borrowing benchmarks staged its biggest one-day decline in a decade on Thursday.

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The three-month London interbank offered rate for dollars sank 4.063 basis points to 2.697 percent, the largest one-day slide since May 2009. The move may reflect a benchmark that’s making up ground following a repricing of short-end Treasuries and associated instruments in the wake of the Federal Reserve’s dovish pivot in recent weeks.

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The 3-month LOIS spread (3-month Libor – Overnight Indexed Swap rate) has been receding … again as of Feb 5th (Libor rates on Bloomberg as not updating on Feb 7).

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Typically, Libor rates rise ahead of Fed rate hikes. While the “catching up” explanation is likely, it is also possible that Libor is signalling a cut in the Fed Funds rate coming up.

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The stock market is pleading for SLOWDOWN in monetary normalization.

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Yes, it is possible that Libor is sigalling The Fed will try to give more oxygen to financial markets.

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