LIBOR
- London InterBank Offered Rate
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 Euromarket 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.