Basis swaps spike amid US rates chatter

Budgetary wrangling and talk of Fed cuts spark Libor-OIS basis shift


Traded volumes of US dollar basis swaps surged to nine-month highs in July as firms reacted to rising uncertainty in the rates market, with one dealer said to have traded upwards of $30 billion in swaps alone.

Strategists point to recent statements from officials at the US Federal Reserve and news of a debt ceiling compromise as contributing factors to the widening basis between Libor and overnight index swap rates, which led to a subsequent surge in swap trading, but disagree on their relative

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