Libor breaches 1% for the first time since onset of pandemic

The three-month London interbank offered rate for dollars cracked 1% for the first time in almost two years, following the market selloff across the front end.

Libor rose for a third straight session, rising roughly 1 basis point to 1.006% to the highest level since April 2020. The benchmark has risen by about 50 basis points this month with traders betting on a more aggressive path of Federal Reserve interest-rate hikes and geopolitical turmoil driving borrower demand for precautionary funding.

Front-end yields have been surging, with the rate on US two-year Treasury rising by roughly 100 basis points in March to the highest level in more than three years. The Fed this month lifted rates for the first time since 2018 and signaled it will continue to raise them at all six remaining meetings this year, with Fed Chair Jerome Powell saying that bumps of 50 basis points are possible if warranted.

Commercial-paper costs, which are factored into the Libor calculation, reached the highest since the onset of the pandemic, but were tepid relative to past crises. Financial institutions scrambled to amass additional cash as a precaution because of rising geopolitical risks and the potential impact Russian sanctions may have on bank capital and earnings.

The three-month London interbank offered rate for dollars cracked 1% for the first time in almost two years, following the market selloff across the front end.

Libor rose for a third straight session, rising roughly 1 basis point to 1.006% to the highest level since April 2020. The benchmark has risen by about 50 basis points this month with traders betting on a more aggressive path of Federal Reserve interest-rate hikes and geopolitical turmoil driving borrower demand for precautionary funding.

Front-end yields have been surging, with the rate on US two-year Treasury rising by roughly 100 basis points in March to the highest level in more than three years. The Fed this month lifted rates for the first time since 2018 and signaled it will continue to raise them at all six remaining meetings this year, with Fed Chair Jerome Powell saying that bumps of 50 basis points are possible if warranted.

Commercial-paper costs, which are factored into the Libor calculation, reached the highest since the onset of the pandemic, but were tepid relative to past crises. Financial institutions scrambled to amass additional cash as a precaution because of rising geopolitical risks and the potential impact Russian sanctions may have on bank capital and earnings.

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