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FTSE 100 Index Rallies as Interbank LIBOR Rates Continue to Tumble

Interest-Rates / UK Interest Rates Dec 20, 2007 - 10:28 AM GMT

By: Nadeem_Walayat

Interest-Rates FTSE 100 index rallied during the day, up more than 60 points at 6347 at 3pm GMT, as the 3 month sterling interbank LIBOR rate fell to 6.14% following continuing concerted central bank intervention that is starting to thaw the frozen credit markets.


However despite the sharp 0.5% drop in the 3 month LIBOR rate from 6.63% on the 12th of December to 6.14% today, the spread between the LIBOR rate and the base rate still stands at an elevated 0.64%. Whilst during a rate cutting cycle the expectations are for a neutral or even negative spread to the base rate. Therefore this clearly indicates that the banks are still reluctant to lend to one another and therefore the credit freeze remains intact.

It is expected that central bank intervention will continue to drive the spread lower towards 0.5% and therefore further easing in the LIBOR rate over the coming days is anticipated towards a target of 6%.

For further recent analysis on the interbank rate credit freeze see -

By Nadeem Walayat
Copyright (c) 2005-07
Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 100 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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