A relatively obscure interest rate called the London Interbank Offered Rate, or LIBOR, has been in the news in recent months. You’ve probably read stories about how a handful of global banks manipulated the rate for quick profits at the expense of consumers. News broke just last week that NYSE Euronext (NYX) won a contract to administer LIBOR, replacing the British Bankers’ Association.
LIBOR is the rough equivalent of the U.S. federal funds rate— the basis for the interest rate that banks charge each other for loans. In theory, any given LIBOR rate is the average bank borrowing cost for unsecured funds, based on data supplied by participating lenders and representing market conditions.
Think of it as a daily temperature reading of the money markets. LIBOR affects the price of $300 trillion worth of securities and loans around the world, including a variety of U.S. mortgage products.Marketplace’s Paddy Hirsch recently posted an excellent Whiteboard discussion on how the LIBOR rate is set:
The post What is LIBOR and why it matters to you appeared first on Smarter Investing
Covestor Ltd. is a registered investment advisor. Covestor licenses investment strategies from its Model Managers to establish investment models. The commentary here is provided as general and impersonal information and should not be construed as recommendations or advice. Information from Model Managers and third-party sources deemed to be reliable but not guaranteed. Past performance is no guarantee of future results. Transaction histories for Covestor models available upon request. Additional important disclosures available at http://site.covestor.com/help/disclosures. For information about Covestor and its services, go to http://covestor.com or contact Covestor Client Services at (866) 825-3005, x703.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV