Interest Rate Roundup

Wednesday, September 24, 2008

LIBOR surging ... Buffett taking a bite out of Goldman ... Fed raining Mo' Money on the world

You know what's wrong with today's market? It's just too boring. There's nothing to write about and nothing to watch. Wake me up when something happens. (Just kidding, by the way)

A few things that caught my eye this morning:

* LIBOR rates are surging in the money market again. 1-month LIBOR rates jumped 22 basis points to 3.43%, while 6-month LIBOR surged 24 bps to 3.70%, according to the British Bankers Association. That's the highest since January and not so good news for those with ARM adjustments coming due. Many ARMs (and corporate loans, for that matter) use LIBOR rates as the benchmark to which their rates reset.

* Goldman Sachs is catching a bid this morning on news it's raising $5 billion from Warren Buffett's Berkshire Hathaway investment firm. Buffett is purchasing perpetual preferred shares yielding 10%, and getting warrants to buy another $5 billion in common shares at $115. Goldman also sold 40.65 million comon shares at $123 this morning, good for $5 billion total.

* Meanwhile, the Federal Reserve is setting up more swap lines with more foreign central banks. It will help rain $30 billion more dollars on the world to ease the global funding crisis. The new swap lines will be established in Australia, Denmark, Norway, and Sweden.

UPDATE: More chaos is evident in the credit markets this a.m. Yields on 3-month Treasury Bills, for instance, are plunging anew. They are down about 26 basis points to just 0.46%, BELOW the panic levels set last week (around 0.73%). Those swap spreads are also rising again, with 2-year swaps up around 142 bps this morning (vs. an intraday high of 157 on 9/18).


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