WSJ summary 2

WSJ summary 2 - climb in years Banks are reluctant to lend...

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Due Date: 9/10/07 Name: FNCE 4030 FNCE 4030 Weekly Wall Street Journal Assignment Submission Form Article Title: Why Libor Defies Gravity Publication Date: 9/5/2007 page C1 1. What is LIBOR? LIBOR stands for the London Interbank offered rate. LIBOR is similar to the fed fund. It is the average rate that major international banks charge each other to borrow a specific currency. 2. Is the spread between LIBOR and Treasury yields large or small relative to historic standards at the moment? According to the article, the spread between the LIBOR and treasury yields is large. For the first part of the year the rates were between 5.34% and 5.36% and now the rates are at 5.7%, which is the fastest
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Unformatted text preview: climb in years. Banks are reluctant to lend out money so that is driving up the short term borrowing rate. 3. The yield on Eurodollars referred to in the linked webpage has been historically closely linked with LIBOR. The author indicated that the increase in the spread may signal what about market conditions (related to what we just covered in class)? The elevated levels in the Ted spread indicate that investors are currently in a state of risk aversion. Investors are looking for short term T-bills, which are risk free, to ease their investing tensions....
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