Libor rates fell across the board today, as stock markets in Europe and Asia continued to pick up and the US Federal Reserve announced a 50 basis point rate cut.
The Ted spread, the difference between US Treasury bills and three-month Libor, fell today for the first time since October 6, following the news of the planned European bank rescue package.
Perceived counterparty risk in the financial system reached new heights today as the Ted spread, the difference between three-month Libor and US Treasury bills, opened at a record 4.64%.
The daily record-breaking climb of the Ted spread, an index which tracks the difference between three-month Libor and US Treasury bills, continued today as world stock markets plummeted.
The Ted spread, which is used to measure perceived counterparty risk by tracking the disparity between three-month Libor rates and US Treasury bills, broke yesterday’s record high by 0.10%.
The Ted spread, which tracks the difference between three-month Libor and US Treasury bills, hit yet another all time high today, reaching 4.03% at 1400 BST.
Overnight Libor shot up today as a tumultuous morning dented confidence in the interbank lending markets.
Instability in the interbank lending markets continued today, despite the approval of the revised $700 billion bailout legislation by the US Senate.
The interbank lending markets remained unstable today, after the US Senate agreed to vote on an amended version of the rescue package.
Pressure on the interbank lending markets intensified today, after Congress rejected the US government’s bailout plan.
After a turbulent week, pressure on the interbank lending markets eased today as further injections of liquidity were announced and talks on the US financial rescue package resumed.
Strain on the interbank lending markets is easing as large infusions of liquidity start to take effect and market confidence improves.
Interbank lending markets remained under stress today, despite large injections of liquidity by the world’s central banks.
The risk management industry's increasing use of sophisticated models and technology – when coupled with poor modelling choices – can cause problems. Stephen Blyth calls for a return to to judgement and reasoning, and a halt to proceduralism.