Shifting Libor fallback window jolts basis market

Fallback spreads widened more than 20% after UK regulator says Libor’s end could be announced this year

Short-term sterling and US dollar Libor spreads blew out this week on the surprise news that Libor’s death could be confirmed a year earlier than expected.

On June 22, Edwin Schooling Latter, head of markets and wholesale policy at the UK Financial Conduct Authority said an announcement could come as early as November this year.

The comments “caused an earthquake in the markets”, according to a risk manager at one European bank – spreads between three- and six-month Libor spreads in sterling