A few items about the place on the rising LIBOR
The WSJ with a graph on its gains recently (Journal may be gated):
So, warning sing or not?
Analysts say no.
From Bloomberg:
- The rise is ahead of reform of money market funds due to come into effect on October 14
- Funds will be required to float their net asset values (NAVs), adopt liquidity fees, and install redemption gates
- Deutsche Bank AG Analyst Steven Zeng. "Prime funds invest roughly 60 percent of their assets in commercial paper and certificates of deposit. For issuers relying on those instruments for funding, reduced participation from money funds means that their unsecured borrowing costs - which Libor is supposed to represent - have gone up."
- Zeng expects the spread between Libor and the Overnight Borrowing Rate (OIS) to rise from its current 30bps to settle somewhere in the region of 35-40bps. But, he cautions, "if there is any large sudden outflow from prime funds, compounded by further banking sector stress, the spread could easily shoot above our forecast."
Probably another reason for no rate rises from the Fed any time soon.
