Across the Curve

Libor: Liquidity Trap or Pushing on a String

Today 0.36063

Yesterday 0.37188

Here is an excerpt from the morning note issued daily by economist Chris Low at FTN Financial. He has some interesting thoughts on Libor.

“The WSJ points out 3-mo dollar LIBOR has now fallen lower than 3-mo yen LIBOR, meaning it’s cheaper to borrow in the US than in Japan for the first time in 15 years. The drop in LIBOR since October has been hailed as a good thing, because the spike in LIBOR then reflected an unwillingness to lend to US borrowers. But it’s not good if the rate falls too much, because a very low rate indicates an unwillingness to borrow. As for market implications, they are not likely to amount to much. The two borrowing rates have been close for some time, making the US a source of carry-trade borrowing for months.”