Libor fallbacks set to split cash and swaps
Basis could appear when benchmark dies, with swaps, bonds and loans embracing different fallbacks
Rates market participants face the prospect of a split in how various instruments respond to Libor’s death, after a consultation of swaps users endorsed one approach to establishing a fallback rate, while US bond and loan markets appear to be heading in a different direction.
Any divergence would introduce basis risks between product sets that currently use identical benchmarks, making existing hedges less reliable.
“There’s lot of specificities about the floating rate note [FRN] and
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