During the past two weeks, 1-month and 3-month dollar LIBOR (London Interbank Offered Rate) spiked off levels not seen since March 19, 2010. Yesterday (August, 3), 1-month and 3-month dollar LIBOR were set at 0.206% and 0.268% respectively, which are still very low compared to the levels hit during the 2008 financial crisis (3-month LIBOR spiked to 4.2% on 10/7/2008 after Lehman went bankrupt). From what I remember, and I may be wrong, LIBOR spiked in early 2010 when banks started getting nervous over Greek sovereign debt and demanded U.S. Dollar liquidity. I was just looking at LIBOR charts at the time; the U.S Dollar was already catching a bid. Is a Eurozone surprise ahead? Or is the move higher in LIBOR related to something else. I found a Bloomberg article that explains what's going on. View charts of $LIBOR and $LIBOR3 after the jump.
"Nomura Holdings Inc. advised betting that U.S. two-year interest-rate swap spreads will widen on renewed concern Europe’s sovereign debt crisis will increase demand for dollar-denominated funding in the region." (continue reading)
1-Month LIBOR (courtesy of StockCharts.com)
3-Month LIBOR (courtesy of StockCharts.com)