An important factor in the improved tone of the stock market over the past two days has been the improved functionality of the commercial paper market and declines in money market rates worldwide. In England, 1-month sterling-based LIBOR has fallen 6.625 basis points today to 6.599% and 3-month sterling-based LIBOR has fallen 5.6 basis points to 6.824% (the peak was 6.9025% on Wednesday). These rates nonetheless remain well above the 5.875% level that would be considered normal given the Bank of England's 5.75% benchmark rate.
Even larger declines have occurred in dollar-based LIBOR, with 1-month rates down 14 basis points to 5.614% and 3-month rates down 5 basis points to 5.65%. These rates stand above normal rates of about 5.375%.
Commercial paper rates have fallen sharply. Bloomberg data indicate that the 30-day rate on top-tier asset-backed commercial paper has fallen 17 basis points on the day to 6.09% after having fallen 9 basis points on Thursday from the peak of 6.35% on Wednesday. For overnight paper, asset-backed commercial paper rates fell 13 basis points Friday to 5.86%, a 33 basis point decline from Monday's close and 34 basis points below the peak last seen September 4th. These rates remain well above normal rates of closer to 5.30%, however.
Term
Today
Yesterday
Monday
1-day
5.86%
5.99%
6.19%
30-day
6.09%
6.09%
6.33%
Source: Bloomberg, Federal Reserve
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Tony Crescenzi Blog LIBOR Lower on the Day 9/13/2007 1:24 PM EDT Declining rates are emboldening investors.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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