Libor under attack

Interest rates

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Libor has long been one of the anchors of the interest rate derivatives market, closely tracking base rates and acting as a reference for trillions of dollars of swaps contracts and structured products. Over the past 10 months, however, this previously stable benchmark has thrashed around frenziedly, causing spreads over base rates to repeatedly hit new highs. With banks increasingly reluctant to lend to each other, Libor has become more a measure of counterparty credit risk and interbank li