Here's where all of that excess cash went
- LIBOR has risen more than 30 basis points since January.
- The spread the US government pays to borrow has also risen in that time span.
- The cost of borrowing for foreign banks and the US have risen nearly in lock step together.
I’m sure you’ve heard by now, front end rates are on the rise. Not only because the Fed is hiking rates though. LIBOR (the rate that foreign banks pay to borrow 3-month money) has risen over 30 basis points in the past six weeks relative to base rates (known as the LIBOR/OIS spread). What you may not have heard is that the “spread” the US Government pays to borrow funds has also risen 15 basis points in the past six weeks (this is known in the dark corners of the money market as the Treasury/OIS spread). These two entities could not be any different from a credit point of view yet their cost of borrowing has risen nearly in lock step together (Figure 1). Why?
Bloomberg/J.P. Morgan Asset ManagementSee the rest of the story at Business Insider
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