London Inter Bank Offered Rate
(LIBOR)
LIBOR
is the rate on dollar-denominated deposits, also know as Eurodollars,
traded between banks in London. The index is quoted for one
month, three months, six months as well as one-year periods.
LIBOR
is the base interest rate paid on deposits between banks in
the Eurodollar market. A Eurodollar is a dollar deposited
in a bank in a country where the currency is not the dollar.
The Eurodollar market has been around for over 40 years and
is a major component of the International financial market.
London is the center of the Euro market in terms of volume.
The
LIBOR rate quoted in the Wall Street Journal is an average
of rate quotes from five major banks. Bank of America, Barclays,
Bank of Tokyo, Deutsche Bank and Swiss Bank.
The
most common quote for mortgages is the 6-month quote. LIBOR's
cost of money is a widely monitored international interest
rate indicator. LIBOR is currently being used by both Fannie
Mae and Freddie Mac as an index on the loans they purchase.
LIBOR
is quoted daily in the Wall Street Journal's Money Rates and
compares most closely to the 1-Year Treasury Security index.
