Signal That The Fed Might CUT Their Target Rate?
One of the world’s most important borrowing benchmarks staged its biggest one-day decline in a decade on Thursday.
The three-month London interbank offered rate for dollars sank 4.063 basis points to 2.697 percent, the largest one-day slide since May 2009. The move may reflect a benchmark that’s making up ground following a repricing of short-end Treasuries and associated instruments in the wake of the Federal Reserve’s dovish pivot in recent weeks.
The 3-month LOIS spread (3-month Libor – Overnight Indexed Swap rate) has been receding … again as of Feb 5th (Libor rates on Bloomberg as not updating on Feb 7).
Typically, Libor rates rise ahead of Fed rate hikes. While the “catching up” explanation is likely, it is also possible that Libor is signalling a cut in the Fed Funds rate coming up.
The stock market is pleading for SLOWDOWN in monetary normalization.
Yes, it is possible that Libor is signalling that The Fed will try to give more oxygen to financial markets.