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*** Regarding this morning's drop...>

US DOLLAR LIBOR: *** Regarding this morning's drop in 3M LIBOR settle (-0.0406
to 2.6970%, -0.0356/wk). Dealer research desks still at a loss to fully explain
one of the sharpest down-moves in approximately a decade. RBS strategists said
that while the move is "consistent with broader market fundamentals," the exact
reason why today is still unknown. "Declining financial CP rates had pushed the
differential between 3m financial CP rates and 3m LIBOR to its widest level
since 2018, and FRA/OIS spreads show markets have been pricing for further
narrowing in LIBOR/OIS for some time. Lagging CP issuance vs. prime fund inflows
and the self-fulfilling nature of forward pricing of LIBOR also point toward
further narrowing in LIBOR/OIS into the March expiry. However, none of these
factors alone neatly explains why we saw such a dramatic dip in LIBOR on an
otherwise uneventful Thursday in February."
MNI Chicago Bureau | +1 312-431-0089 |
MNI Chicago Bureau | +1 312-431-0089 |